Binance Launches $500 Million Lending Pool To Support Bitcoin Miners During Market Downturn
Binance, the world’s largest cryptocurrency exchange by volume, today announced the launch of a $500 million lending pool for bitcoin miners to help companies during an industry downturn led by rising energy costs and low bitcoin prices.
The loan project was launched by Binance Pool, the company’s dedicated service platform for miners as part of the ecosystem that provides technology, capital and industry resources to increase cryptocurrency mining revenue.
Bitcoin mining is the process by which new bitcoins are introduced into the economy. It involves a computationally intense system known as “proof-of-work,” in which multiple computers called “nodes” race to attempt to solve complex puzzles to add the next block of transactions to the bitcoin blockchain. The first computer to solve the puzzle gets to add the next block and wins a bitcoin reward.
Bitcoin miners only need to provide collateral with physical or digital assets to secure an 18- or 24-month loan with interest rates ranging from 5% to 10%.
Market conditions have been extremely tough for bitcoin miners with a massive downturn occurring for bitcoin during 2022. The cryptocurrency’s value fell over 70% to below $20,000 from its all-time high of over $68,000 in November.
Rising energy prices have also seen many cryptocurrency mining facilities see a further reduction in profits. PoW mining itself is energy intensive, meaning that as energy prices rise, the cost of mining bitcoin increases.
The shares of listed mining companies have also shown significant losses, such as mining company Riot Blockchain has fallen 70% so far this year and Marathon Digital Holdings is down 65% in the same period.
Over the past few months, a number of crypto miners have started to scale back production or become insolvent. Mining hosting company Compute North filed for bankruptcy in September owing $500 million in assets to creditors, Compass Mining shut down its Georgia sites and bitcoin mining pool Poolin froze withdrawals.
Other firms have also started offering miners loans amid the market downturn, including Maple Finance, a decentralized finance platform, which set up a lending pool with an interest rate of 10%. Jihan Wu, the founder of crypto mining company Bitmain, also launched a $250 million fund to buy assets at a discount from distressed mining companies.
