Compass Mining Client Eng Taing
Eng Taing is in the business of making money.
He runs his own private equity firm with $250 million in assets under management (according to his website), invests in real estate, has worked in data science and analytics at Apple – and entered bitcoin in 2013, long before it was popular to even make a passive bet on the crypto asset class.
Now, Taing operates 261 personal mining machines that generate the world’s most popular digital token.
“I just like to make money,” Taing told CNBC.
“I invest in a lot of things. I have a lot of apartment buildings, I have nursing homes. I have GPU mines,” Taing continued. “I just like to see where I can get a good arbitrage edge, and I thought bitcoin mining featured so much with just, ‘Hey, I could get more bitcoin having miners than buying bitcoin, especially on the scale I can get on it, but Also, that I’m a big believer in the future of bitcoin.
Bitcoin operates on a proof-of-work mining model, which means miners around the world run high-powered computers to simultaneously create new bitcoins and validate transactions. The process requires expensive equipment, some technical knowledge, and a lot of electricity. Taing decided to outsource most of that work by enlisting the help of Compass Mining, a service that hosts, supplies and operates mining rigs for retail miners who don’t want to deal with the logistics of physically handling mining equipment themselves.
So far, the experiment is working quite well, according to Taing. Of its 261 mining rigs, which include Canaan AvalonMiners, Bitmain Antminer S19 Pros, and Whatsminer M30Ss, 200 are hosted through Compass in Nebraska and Canada. They generate about 2.8 bitcoins a month, or about $111,000, according to digital receipts he provided to CNBC.
Taing also earns income by buying and selling mining hardware to retail customers on the Compass marketplace. They usually buy one or two at a time and are not as price sensitive.
CNBC spoke with several Compass clients to better understand the appetite for small-scale mining as they increasingly compete with major industry players with massive operations. But Compass CEO Whit Gibbs says that’s exactly the point: capture market share for retail miners and put the network in the hands of the people.
“Effectively, it will give small miners a substantial chunk of the bitcoin network hashrate, which ultimately has always been our goal,” Gibbs said. “We want 5% of the network to be controlled by retail miners and then increase that 10% or 15% in the next few years.”
Gibbs says he has noticed that many people who would normally invest in real estate are instead bringing those dollars into mining, because they can see a quicker return on mining than if they were buying rental property, especially as equity. private. intervenes to buy houses and drive up prices.
Eng Taing evaluates a former GM plant for reuse for bitcoin mining.
Compass customers range from the self-proclaimed “commoners,” who accumulate the smallest denomination of bitcoin known as satoshis or “sats,” to Bitcoin billionaire Jack Dorsey.
One such commoner is Jon McClellan, a Texas-based lobbyist for AT&T. He currently has a single bitcoin miner with Compass in Oklahoma, which he bought in late 2020. For him, the desire to mine is part ideological, part financial.
“I wanted to do my part to secure the bitcoin network — to have my own hash rate, under my own power,” McClellan said, referring to his share of the collective computing power of miners around the world.
“I knew that if I buy a miner, I will literally buy bitcoin every day, every minute, every second, every hour, regardless of what’s going on in my life, budget-wise,” continued McClellan, who calls the process a “way easy to convert dollar cost averaging to bitcoin.”
McClellan says that Compass was the only retail mining company that seemed accessible to the average person. Compass Mining allows customers to purchase mining machines (new or used) for between $4,500 and $25,800 on its website, then places them in partner data centers and handles physical logistics and post-maintenance.
The return on investment for personal mining varies depending on a few key factors, including the initial cost of purchasing equipment, the number of mining machines you are running, the cost of electricity and hosting, plus pool fees, which allow Have a single miner combine their hashing power with thousands of other miners around the world to increase your chances of earning bitcoins.
McClellan, who took out a $10,000 bitcoin-backed loan through Coinbase at an 8% interest rate to buy his sole miner, says his ROI is about two years. He currently earns about $400 a month, though he has to pay $150 for hosting fees, for which he earns about $250. But McClellan has plans to expand his operation this year to Texas, Oklahoma or Wyoming, as three states are favorable to the bitcoin mining industry.
Taing says he has about 18 months until he achieves ROI with profit margins of about 65% to 70% to cover operating expenses. However, unlike other clients, Taing has a special 0% rate for group rates through Foundry.
Gibbs, the CEO of Compass, says his customer base is primarily retail, which he defines as miners buying one to five machines, investing between $10,000 and $50,000.
“That’s where most of our business has been for the last six months,” Gibbs said, though he notes that Compass is starting to serve more institutional clients.
Nevin Bannister, for example, is using Compass to build a large-scale bitcoin mining operation in hopes of taking it to the public market.
“They make it really simple,” Bannister said. “They’re a great turnkey option. They help you buy the machines, they hook them up for you, they keep all the operations going.”
So far, Bannister has purchased 6,000 rigs, 1,500 of which are operational. Most are housed in Oklahoma with just under a hundred in Canada.
While Bannister didn’t disclose his monthly income, he told CNBC that each platform should produce about .015 bitcoin a month. With 1,500 platforms, that hypothetically yields 270 bitcoins a year, or $10.7 million.
“I’m a serial entrepreneur. I’ve had several companies that I’ve sold and I love learning new things,” continued Bannister, who says on his LinkedIn page that he has founded startups that have sold for a combined value of more than $800. millions. “This is like getting on the internet in the early days.”
Ultimately, Gibbs believes institutional buyers like Bannister will be a good thing for smaller-scale miners, because their investment will help lower costs overall and make more space available to retail clients.
Compass Mining client bitcoin mining setup, Eng Taing.
Jack Dorsey bows too
Jack Dorsey’s Payment Company Block (formerly Square) is also looking to make it easy for small businesses to start mining bitcoin.
In a series of tweets earlier this year, Block’s hardware general manager, Thomas Templeton, laid out the company’s plans for next steps.
Templeton says the goal is to make bitcoin mining, the process of creating new bitcoins by solving increasingly complex computational problems, more distributed and efficient in every way, “from buying, setting up, maintenance and mining.
To that end, the company is solving a major barrier to entry: mining rigs are hard to find, expensive, and delivery can be hit or miss. Block says he is open to making a new ASIC, which is the specialized equipment used to mine bitcoin.
Compass Mining client bitcoin mining setup, Eng Taing.
Templeton writes that Block is also looking to improve the reliability and user experience of mining.
“The common issues we’ve heard with current systems have to do with heat dissipation and dust. They also crash almost every day, requiring a time-consuming reboot. We want to build something that just works.” Templeton tweeted. “They are also very loud, which makes them too loud for home use.”
Democratizing access to bitcoin mining is a big part of this project’s mission statement.
“Mining is not accessible to everyone,” Dorsey wrote in October, just a few months after the US first eclipsed China as the world’s top destination for bitcoin miners. “Bitcoin mining should be as easy as plugging a rig into a power source. There’s not enough incentive today for people to get past the complexity of running a miner on their own.”
Gibbs says he welcomes another player to the bitcoin retail mining space.
“It’s going to be hugely beneficial for bitcoin and ultimately for us as well,” Gibbs told CNBC.
“My understanding of what they’re putting out is going to be more of a low-power home-based product, probably more of a low-performance product, but it’s going to get people trying bitcoin mining for the first time,” Gibbs continued. He guesses that as people get the bug to grow their hash rate, they will look to Compass or rival River Financial to expand their operation.
“I really think in line with Jack’s mission in general, he wants to get mass adoption of bitcoin, and he’s going to spend dollars behind anything that he thinks will get more people to pay attention to him,” Gibbs said.
WATCH: Texas Crypto Miners Shut Down to Ease Network Pressure