North American mining is on the rise: Core Scientific and Bitmain reach a large-scale S19 mining machine transaction

A major player in North American bitcoin mining has just signed a deal to import a large batch of next-generation bitcoin mining equipment from Malaysia, a move that suggests the region’s bitcoin mining companies are taking steps to scale up to compete with their Chinese counterparts.

Core Scientific has ordered about 17,595 s19-series Antminers from Chinese ASIC chip maker Bitmain. Some of the new, state-of-the-art mining equipment has already been installed in Core Scientific’s data centers, with the rest of the machines coming online between now and the end of September. According to the mining company, this is the largest number of s19-series Antminers ever shipped to the United States, as the COVID-19 pandemic disrupted the supply chain for launching new models in the first quarter of 2020.

The transaction has been in progress since early 2020, and Core Scientific will not disclose the final purchase amount due to the terms of the agreement.

The company operates five bitcoin mining farms in the U.S., four of which are evenly split between North Carolina and Georgia, and one in Kentucky. Between the five data centers, which can run on about 381 MW of power to run its machines, Core Scientific Chief Customer Success Officer Russell Cann said, "They have the infrastructure to quickly scale to 450 MW of power in their current locations."

Much of this power comes from local coal and natural gas energy sources, which Core Scientific claims can be "46 percent carbon-free."

Bitcoin mining is becoming increasingly decentralized

Historically, Bitcoin mining has been highly concentrated in China. This is largely a side effect of the infrastructure footprint left by the 22,000 dams built by China since the 1950s. Bitcoin miners are seen as the best use of these idle dams, most of which generate excess electricity and therefore create demand in an energy market where demand lags.

These Chinese miners can generate electricity at very little cost. Most of these miners who rely on Chinese dams have a minimum cost of no more than $0.03 per kilowatt-hour of energy extraction (for the United States, the average electricity cost is about 0.12 yuan per kilowatt-hour).

Since Bitcoin requires a lot of energy to mine, the cheaper the electricity, the more profitable your operation. Since China has so much cheap electricity just waiting to be mined, it has become a hub for Bitcoin mining.

But that may not last long. As evidenced by Core Scientific’s large purchase, investment in North American bitcoin mining operations is heating up. With multiple high-capacity projects breaking ground, such as Blockstream’s own mining facility and Germany’s Northern AG’s expansion into the U.S., 2019 has been a groundbreaking year for North American bitcoin mining.

As new generation mining hardware from China flows to North American miners and investment capital continues to trickle into the mining sector, industry professionals expect North America to continue to eat into China’s share of global hash rate.

Core Scientific believes this trend is also developing, as the company has not only noticed an increase in North America’s share of computing power (hash rate), but also an increase in capital investment in the mining industry.

“We are actively tracking this interest in growing hashrate through North American mining operations as part of our market monitoring efforts. In fact, our team’s growth is based on this,” Cann said.

“Our view is that this increased interest, and the rise in capital allocations and investments, can be attributed to the growing acceptance of crypto and/or digital assets as an investment asset class, as well as North America’s favorable investment characteristics; specifically, a stable geopolitical and regulatory environment, suitable climate conditions, and diverse energy sources,” he concluded.