Compass Mining customer Eng Taing
Eng Taing
Eng Taing is in the business of making money.
He runs his own private equity firm with $250 million under management (according to his website), invests in real estate, and has worked at Apple in data science and analytics — and he got into Bitcoin way back in 2013, well before it became 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 making money,” Taing told CNBC.
“I invest in many things. I have many apartment buildings, I have retirement homes. I have GPU mines,” Taing continued. “I just like looking at where I can get a good arbitrage advantage, and I figured bitcoin mining represented both by just saying, ‘Hey, I could get more bitcoin by mining than Buying bitcoin, especially to the extent that I can get in it – but also that I firmly believe in the future of bitcoin.’”
Bitcoin works on a proof-of-work mining model, which means that miners around the world run high-performance computers to simultaneously create new bitcoins and validate transactions. The process requires expensive equipment, some technical know-how, and a lot of electricity. Taing decided to outsource most of this work by enlisting the help of Compass Mining, a service that hosts, supplies and operates mining rigs for retail miners who don’t deal with the logistics of physically handling mining equipment themselves would like.
So far, Taing says the experiment is working pretty well. Of its 261 mining rigs, including Canaan AvalonMiners, Bitmain Antminer S19 Pros and Whatsminer M30Ss, 200 are hosted by Compass in Nebraska and Canada. They generate about 2.8 bitcoin per month, or about $111,000, according to digital receipts he provided to CNBC.
Taing also earns revenue by buying and selling mining hardware to retail customers on Compass’ marketplace. They usually buy one or two at a time and aren’t that price sensitive.
CNBC spoke to several Compass clients to better understand the appetite for small-scale mining as they increasingly compete with large industry players with massive operations. But Compass CEO Whit Gibbs says that’s the point: to capture market share for retail miners and put the network in the hands of the people.
“It will effectively give small miners a significant share of Bitcoin’s 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 to 10-15% in the coming years.”
Gibbs says he’s noticed that many people who would normally invest in real estate are putting those dollars into mining instead because they’re able to see a faster return from mining than if they were to buy a rental property, especially as private equity steps in to buy homes and drive up prices.
Eng Taing is evaluating an ex-GV rig to reuse for bitcoin mining.
Eng Taing
From mining plebs to billionaires
Compass’s customers range from self-proclaimed “plebs” who stack the smallest denomination of bitcoin known as satoshis or “sats” to Bitcoin billionaire Jack Dorsey.
One of those plebs is Jon McClellan, a Texas-based lobbyist for AT&T. He currently has a single Bitcoin miner with Compass in Oklahoma, which he purchased in late 2020. For him, the desire to mine is part ideological and part financial.
“I wanted to do my part to help secure the Bitcoin network — have my own hashrate on my own,” McClellan said, referring to his share of the collective computing power of miners worldwide.
“I knew that if I bought a miner I would be buying bitcoin literally every day, every minute, every second, every hour regardless of what’s going on in my life budget wise,” McClellan continued, calling the process an “easy way to convert dollar cost average to bitcoin.”
According to McClellan, 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 their website, then locates them in partner data centers and takes care of the physical logistics and subsequent maintenance.
The return on investment for personal mining depends on a few key factors, including the upfront cost of purchasing equipment, the number of mining machines you operate, the cost of electricity and hosting, and pool fees that allow an individual miner to combine their hashing -Power up with thousands of other miners around the world to increase their chances of mining Bitcoin.
McClellan, who took out a $10,000 bitcoin-backed loan at an 8% interest rate through Coinbase to buy his single miner, says his ROI is about two years. He currently makes about $400 a month, although he has to pay $150 in hosting fees, so he makes about $250 net. But McClellan plans to expand its operations in Texas, Oklahoma or Wyoming this year, as all three states are favorable to the bitcoin mining industry.
Taing says he has about 18 months to achieve ROI with profit margins of about 65% to 70% to cover operating expenses. However, unlike other customers, Taing has a special 0% pool fee rate through Foundry.
Compass CEO Gibbs says their customer base is primarily retail, which he defines as miners buying one to five machines and investing between $10,000 and $50,000.
“That’s really where the majority 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 set up a large-scale Bitcoin mining operation in hopes of bringing it to the public market.
“They make it really easy,” Bannister said. “They’re a great turnkey option. They help you buy the machines, hook them up for you and keep the whole operation running.”
To date, Bannister has purchased 6,000 rigs with 1,500 operating. Most are housed in Oklahoma and they have close to a hundred in Canada.
While Bannister didn’t disclose his monthly earnings, he did tell CNBC that each facility should produce around 0.015 bitcoin per month. With 1,500 rigs, that hypothetically produces 270 Bitcoin per year, or $10.7 million.
“I’m a serial entrepreneur. I’ve had several companies that I’ve sold and I just love learning new things,” continued Bannister, who says on his LinkedIn page that he’s founded startups that have sold for a combined value of over $800 million. “It’s like getting on the Internet in the early days.”
Ultimately, Gibbs believes institutional buyers like Bannister will be a good thing for the smaller miners, as their investment will help drive down costs overall and free up more space for retail clients.
Compass Mining customer Eng Taing’s bitcoin mining setup.
Eng Taing
Jack Dorsey also leans forward
Jack Dorsey’s payment company Block (formerly Square) also wants to make it easier for the little guy to start mining bitcoin.
In a series of tweets earlier this year, Block’s general manager of hardware, 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 aspect “from purchase to setup to maintenance to mining.”
To that end, the company solves a major barrier to entry: mining facilities are hard to find, expensive, and delivery can be unpredictable. Block says it’s open to manufacturing a new ASIC, which is the specialized equipment used to mine Bitcoin.
Compass Mining customer Eng Taing’s bitcoin mining setup.
Eng Taing
Templeton writes that Block is also looking to improve mining reliability and user experience.
“Common problems we’ve heard with current systems are heat dissipation and dust. They also stop working almost every day, requiring a time-consuming reboot. We want to build something that just works,” Templeton tweeted. “They’re also very loud, which makes them too loud for home use.”
Democratizing access to bitcoin mining is a big part of the mission statement of this project.
“Mining is not for everyone,” Dorsey wrote in October, just months after the US eclipsed China as the world’s top Bitcoin mining destination for the first time ever. “Bitcoin mining should be as easy as plugging a rig into a power source. There are not enough incentives today for individuals to overcome the complexities of running a miner for themselves.”
Gibbs says he welcomes another player in the bitcoin mining retail space.
“It’s going to be hugely beneficial for Bitcoin and ultimately for us,” Gibbs told CNBC.
“My understanding of what they are coming out will be more of a low power DIY, probably more of a low yield product, but it will give people a first taste of bitcoin mining,” Gibbs continued. He reckons that if individuals get the blunder of boosting their hashrate, they will turn to Compass or rival River Financial to expand their operations.
“I really think that in line with Jack’s mission, he wants to see mass adoption for bitcoin in general, and he’s going to throw dollars behind anything that he thinks will get more people’s attention,” Gibbs said.
WATCH: Texas crypto miners shut down to ease grid pressure