The following post is#nbsp;a#nbsp;curated version of#nbsp;our weekly Telegram channel Q&A session.
Max Matrenitski, Cyberian Mine’s CEO, addresses the most important questions that arise in#nbsp;our community, with an#nbsp;emphasis on#nbsp;navigating the current geopolitical context that affects our mining operations.
Telegram Question: How long is#nbsp;the contract with the miner? What if#nbsp;the BTC supply reaches 21 million? What would happen to#nbsp;my#nbsp;miner?
Max, Cyberian Mine CEO:
"Our contracts have no#nbsp;time-period limitation (virtually, forever) and we’re providing some real hosting and mining power with physical devices, our fleet, that we#nbsp;manage and maintain in#nbsp;our facilities. Our mining contracts correspond with 1 identified physical unit at#nbsp;the time of#nbsp;contracting: each mining unit has an#nbsp;underlying piece of#nbsp;hardware with a#nbsp;specific serial number. We#nbsp;host and use those units to#nbsp;produce all the hashrate. No#nbsp;maintenance costs. Your miner will never fail.
Your contract will run:
—#nbsp;As#nbsp;long as#nbsp;you cover your hosting costs, you can mine with us#nbsp;for an#nbsp;undetermined period. There is#nbsp;no#nbsp;contract period, there is#nbsp;no#nbsp;limitation,
—#nbsp;Or#nbsp;until you decide to#nbsp;quit and to#nbsp;sell your Miner at#nbsp;our Internal Marketplace; then you can refund the sale price to#nbsp;your bank account.
Remember, Cyberian Mine doesn’t touch your coins: the mining rewards in#nbsp;BTC arrive directly on#nbsp;your personal wallet address from the BTC Network. We’re not an#nbsp;Exchange, and we#nbsp;don’t touch your coins.
When the 21 Million BTC supply gets produced, then the miners will keep on#nbsp;working, but will only get rewarded for their work from the transaction fees on#nbsp;the Network.
This should happen in#nbsp;2140."
Context: Miners do#nbsp;the work of#nbsp;processing new transactions and securing the network, a#nbsp;process for which they are rewarded with each new block added to#nbsp;the blockchain. The block reward is#nbsp;made of#nbsp;the transaction fees paid by#nbsp;users and the newly created bitcoins that are put into circulation. Currently, there are 6.25 new bitcoins issued with each block, but once every four years the reward is#nbsp;cut in#nbsp;half. This leads to#nbsp;a#nbsp;total supply of#nbsp;21 million bitcoins, after which miners will only be#nbsp;rewarded transaction fees for doing the work.
Telegram Question: What are the measures (economic) for#nbsp;CM if#nbsp;the BTC price falls below 10,000 dollars? What are the measures in#nbsp;this case? Can#nbsp;CM survive this period (rent of#nbsp;the hall, personnel costs, other running costs)?
Max, Cyberian Mine CEO:
"That is#nbsp;a#nbsp;very good question.
Hypothetically, if#nbsp;mining per se#nbsp;dies, or#nbsp;if#nbsp;Siberia dies as#nbsp;a#nbsp;place to#nbsp;mine, there will be#nbsp;no#nbsp;more Cyberian, there will be#nbsp;no#nbsp;Mine. By#nbsp;definition. 🙂
But this chance is#nbsp;quite low. There are a#nbsp;few reasons for that:
The system is#nbsp;self-balancing. If#nbsp;most miners are switched off, the difficulty will drop, hence those who have the most efficient machines will still mine profitably.
Long-term miners. We#nbsp;have quite a#nbsp;few clients that mine always no#nbsp;matter what, even with "unprofitable" units. Because the overall result of#nbsp;mining depends more on#nbsp;when you sell your mined coins. And most patient ones wait out the winter, and then later from a#nbsp;perspective of#nbsp;new ATHs for them all this time they will have mined super-profitably.
Our running costs and expenses are rather small, most of#nbsp;the expenses are volume-dependent. I#nbsp;believe we’ll be#nbsp;able to#nbsp;survive any crypto-winter. We’re Siberians, after all. That’s our thing 🙂
Siberia will always mine. Russia has immense electric capacity from soviet legacy hydropower stations, that otherwise would be#nbsp;wasted, so#nbsp;there’s a#nbsp;political and economical will to#nbsp;ensure mining is#nbsp;fine. Especially now, when it’s one of#nbsp;the ways to#nbsp;survive sanctions for Putin’s regime. They are already working hard on#nbsp;new regulations that are long overdue.
Anyway, eventually, we#nbsp;plan to#nbsp;expand to#nbsp;different locations across the world, some of#nbsp;them will stay profitable for as#nbsp;long as#nbsp;Bitcoin is#nbsp;of#nbsp;any worth."
Context: The bitcoin network is#nbsp;designed to#nbsp;process a#nbsp;new block of#nbsp;transactions every ten minutes, on#nbsp;average. In#nbsp;order to#nbsp;compensate for the fluctuations in#nbsp;processing power contributed to#nbsp;the network, there is#nbsp;a#nbsp;difficulty target adjustment that occurs once every 2016 blocks. If#nbsp;more hashing power is#nbsp;contributed to#nbsp;the network, the difficulty goes up, making mining less profitable.
But in#nbsp;periods of#nbsp;price drops in#nbsp;bitcoin, some of#nbsp;the oldest miners stop being profitable and are forced to#nbsp;shut down. This leads to#nbsp;a#nbsp;decrease in#nbsp;hashing power and lower difficulty which makes the most efficient miners more profitable.
Telegram Question: A#nbsp;lot of#nbsp;locations in#nbsp;the USA will be#nbsp;cheaper in#nbsp;electricity costs than Cyberian Mine for the moment. Should we#nbsp;stick on#nbsp;the Siberian side? I#nbsp;believe the big American miners will have some wiggle room to#nbsp;at#nbsp;least float along the break even point. But with rising interest rates this will become increasingly harder, as#nbsp;the biggest operations most likely are heavily financed with credit and therefore the cost of#nbsp;said credit is#nbsp;a#nbsp;major factor in#nbsp;their cost calculation.
Max, Cyberian Mine CEO:
"Thank you very much. Yes, the business model is#nbsp;rather robust, and it#nbsp;actually came to#nbsp;life through some iterations in#nbsp;the first years of#nbsp;CM. At#nbsp;first it#nbsp;was rather messy and very operationally inefficient. Over time we#nbsp;developed the platform along with our current approach step by#nbsp;step. Still, any system fails when such force majeure events happen. Hopefully, in#nbsp;the future we’ll be#nbsp;able to#nbsp;diversify such risks across different locations, countries, and continents. Then we’ll be#nbsp;unstoppable. :)"
Telegram Question: I#nbsp;understood that the relationship between us#nbsp;customers and Cyberian Mine is#nbsp;not affected by#nbsp;the sanctions, as#nbsp;Cyberian Mine is#nbsp;a#nbsp;German entity. Still, I#nbsp;am#nbsp;wondering how it#nbsp;constitutes the relationship between Cyberian Mine and its suppliers. Could it#nbsp;become an#nbsp;issue for you to#nbsp;pay the local energy supplier, for example?
Max, Cyberian Mine CEO:
"We pay for energy as#nbsp;a#nbsp;Russian legal entity, that should not be#nbsp;a#nbsp;problem. Only if#nbsp;something comes up#nbsp;regarding that#nbsp;CM Rus is#nbsp;fully owned by#nbsp;German#nbsp;CM. But as#nbsp;I#nbsp;see it, it’s too common to#nbsp;own even the biggest of#nbsp;local companies by#nbsp;some offshores or#nbsp;any other companies. I#nbsp;don’t think the Russian authorities would restrict the activities of#nbsp;all foreign-owned companies, as#nbsp;long as#nbsp;we#nbsp;pay taxes in#nbsp;Russia.
As#nbsp;for our relation with customers, CB (Central Bank) is#nbsp;in#nbsp;desperate need for extra liquidity, especially in#nbsp;foreign currency, and all their actions aim to#nbsp;get as#nbsp;much money from export. So#nbsp;we#nbsp;are helping reach their goals and I#nbsp;believe we’re on#nbsp;the safe side of#nbsp;things."
Telegram Question: My#nbsp;Bitcoin exchange is#nbsp;now testing their Lightning deposit/withdrawal functionality, it’s working great so#nbsp;far. Will Cyberian Mine also start accepting Lightning payments for hosting costs? It#nbsp;would significantly lower transaction costs on#nbsp;hosting payments.
Max, Cyberian Mine CEO:
"We’ve enabled Lightning Network options already for our BTCPay server, and we’re in#nbsp;the test phase so#nbsp;far. We#nbsp;are still facing a#nbsp;few technical difficulties at#nbsp;the moment, but we#nbsp;feel like we’ll be#nbsp;able to#nbsp;announce that new functionality opening very soon."
Context: Lightning network is#nbsp;a#nbsp;layer two solution that is#nbsp;developed on#nbsp;top of#nbsp;the Bitcoin blockchain. It’s designed to#nbsp;enable the faster and cheaper processing of#nbsp;a#nbsp;large volume of#nbsp;transactions while preserving security and privacy.
The goal of#nbsp;these sessions is#nbsp;to#nbsp;be as#nbsp;transparent as#nbsp;possible so#nbsp;that our clients can make informed decisions. We#nbsp;are fully aware that these are troubling times in#nbsp;the real world, as#nbsp;well as#nbsp;in#nbsp;the crypto world, and want to#nbsp;work with our clients to#nbsp;best address their needs in#nbsp;this period of#nbsp;uncertainty.
If#nbsp;you have any questions, please feel free to#nbsp;ask us#nbsp;or#nbsp;other community members on#nbsp;our Telegram Community Channel, or#nbsp;jot a#nbsp;line in Support Tickets on#nbsp;the platform, we#nbsp;are always happy to#nbsp;help.