Key Takeaways
- Loka Mining has launched a new protocol which allows Bitcoin miners to sell future mining rewards to institutional investors at a discount, providing them with immediate liquidity.
- In collaboration with Hashlabs, which operates in Ethiopia, Finland, and Kazakhstan, the initiative emphasizes environmentally friendly and cost-effective Bitcoin mining practices.
- The protocol uses ckBTC and the Internet Computer’s Chain Fusion technology for low-cost, transparent transactions and non-custodial management of mining contracts and rewards.
The recent Bitcoin halving has slashed daily mining revenues from $78 million to $26 million, creating an urgent need for liquidity to prevent the risk of capitulation. To address the issue, decentralized Bitcoin (BTC) mining pool Loka Mining has launched a new DeFi protocol designed to provide immediate liquidity to miners. The initiative, developed in partnership with sustainable energy mining provider Hashlabs, aims to bring immediate liquidity for Bitcoin miners via forward hashrate contracts.
How does it work? The newly launched protocol allows miners to sell their future mining rewards to institutional investors at a discount, ensuring immediate liquidity. This is achieved through forward hashrate contracts, which are overcollateralized at 110% and tokenized for secondary market trading.
By providing a mechanism to sell future mining rewards at a discount, the protocol reduces financial risks associated with Bitcoin’s market fluctuations and enhances token liquidity. Notably, an estimated 10% of the total Bitcoin supply, valued at around $50 billion, is held in wallets controlled by miners.
“We’ve seen tremendous interest from larger investors seeking better ways to access Bitcoin,” said Andy Fajar Handika, Founder of Loka. “Thanks to Hashlabs’ supply of hashrate and access to Miners, we’re providing that— with no counterparty risk. This protocol provides non-custodial, trust-minimized access to Bitcoin that rewards miners for the work they do providing a necessary service for the network.”
Hashlabs, which operates in Ethiopia, Finland, and Kazakhstan, contributes approximately 500 petahashes to the network, accounting for 0.08% of the total Bitcoin mining capacity. The company emphasizes its commitment to sustainability and cost-effectiveness in its mining operations, aiming to reduce the environmental footprint of Bitcoin mining.
“We’re proud to bring more liquidity into DeFi through a mining pool that gives investors much-needed access to Bitcoin futures,” stated Hashlabs co-founder Alen Makhmetov. “Just as important, we’re able to provide this service by supporting the most sustainable ways of mining Bitcoin worldwide. By ensuring the financial health of miners, we’re simultaneously improving Bitcoin’s environmental well-being.”
The protocol leverages ckBTC, which uses the Internet Computer’s Chain Fusion technology to interact directly with the Bitcoin network. This technology enables Loka to verify mining contributions and manage rewards transparently.
ckBTC, a 1:1 Bitcoin-backed digital twin, facilitates low-cost transactions and non-custodial management of mining contracts and rewards.
This initiative introduces a novel model to the $10 billion annual Bitcoin mining industry, allowing miners to access immediate liquidity to expand operations or hedge against price volatility.
Read Also: How Bitcoin Halving Influences the Crypto Market Dynamics?