Acquisitions and Partnerships Fuel Bitcoin Mining Sector Expansion
Published on August 25, 2014 at 21:05 BST
Consolidation is not uncommon in new, emerging industries and bitcoin mining is no exception. However, like all things bitcoin, it is moving at a somewhat faster pace than consolidation in traditional industries.
The sector of the industry is becoming increasingly diverse and competitive as it responds to new challenges, accommodates enterprise-level customers and seeks to improve its existing services for bitcoin's frustrated hobby miners.
For example, the relative stability of the price of bitcoin in recent months is prompting many companies to look for alternative ways of boosting their competitiveness and reducing costs. Likewise, systemic problems with pre-ordered mining hardware – from delays to damaged deliveries – have forced mining companies to develop their existing services.
Perhaps unsurprisingly given the industry's turbulence, mining companies have announced or finalized a number of high-profile acquisitions and investments in recent months, in part to move their businesses to new verticals that might position them for long-term success.
Below, we examine some of the recent news events that highlight this trend.
GAW's shopping spree
Earlier this month, mining hardware specialist GAW Miners bought a controlling stake in cloud mining provider ZenMiner for $8m. GAW CEO Josh Garza told CoinDesk that the purchase was made following a period of “close collaboration” between the two companies, but a closer analysis reveals its strategic relevance.
ZenMiner will provide cloud hashing services as part of a broader partnership between the companies. At the same time, it will give GAW customers the opportunity to have their mining rigs shipped, or to start hashing using the company's hosting service.
GAW also recently bought premium domain BTC.com at a record-making price for the bitcoin industry. It is still unclear what the Connecticut-based company plans to use the domain for, but it is promising to deliver something “amazing”.
Still, if Blockchain's use of bitcoin.com is any indication, GAW could be well-positioned to use the site as a customer onboarding tool.
PeerNova spawned by merger
CloudHashing and HighBitcoin merged to create a new company called PeerNova in May, in an example of a deal that expands both companies into new verticals.
PeerNova will now sell mining infrastructure at an enterprise level, using HighBitcoin ASICs, while CloudHashing lives on as a brand selling mining contracts.
Effectively, the move allowed CloudHashing to take advantage of HighBitcoin’s expertise with ASIC hardware design for its consumer mining services, while freeing it from the added cost of addressing its hardware needs through an outside partner.
DigitalBTC's moves toward specialization
DigitalBTC, the first publicly traded bitcoin company in Australia, has also seen its market strategy shift.
The company was acquired by Macro Energy Limited earlier this year and inked a strategic partnership with CloudHashing.com in March.
Under the terms of the agreement, practically all digitalBTC mining operations are managed by CloudHashing. In return digitalBTC handles the sale of CloudHashing's bitcoin to the market through its trading desk.
The move allows both services to specialize in specific needs, while leveraging their shared expertise so that both companies benefits.
BitFury seeks market expansion
Of course, not every bitcoin company is seeking to secure its future by expanding to another vertical within the mining space.
For example, BitFury launched BitFury Capital in July, a VC fund and subsidiary of BitFury Group that will seek to support other segments of the bitcoin market.
As a leader in the industrial mining space, BitFury makes millions each month by mining bitcoins, and expanding to this new service may help the company use this money to secure substantial returns.
Notably, BitFury Capital recently completed its first investment, investing an unknown amount in an unnamed bitcoin wallet service. In the future, the firm said it would seek to invest in bitcoin startups, peer-to-peer projects and innovations in the field of renewable energy.
CoinTerra's software grab
Rather than investing in the long-term growth of another company, some decide to make investments by acquiring a firm for key pieces of software or talent.
Last month, CoinTerra scooped up software developer Bits of Proof (BOP), a Hungary-based firm whose protocol can be used for a number of different applications built on the block chain.
Quite how this software may be employed is still unclear, but the move still illustrates how bitcoin's mining firms are increasingly looking to diversify in new and novel ways in order to find a competitive advantage.
Image via Shutterstock
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