Bitcoin mining is an incredibly dynamic part of Bitcoin’s ecosystem and functionality. It is a constantly changing landscape that’s shaped by the motivations and strategies of its participants, each characterized by unique incentives and behaviors. Different people obviously have different motivations for mining which creates a few different types of bitcoin miners. The 3 types of bitcoin miners that I have identified are fiat miners, hybrid miners, and pleb miners.
Types Of Bitcoin Miners
When I was doing some research for my article on the game theory of bitcoin mining, I gained a deeper understanding of how miners operate and as far as I can tell, every miner in the world is one of 3 types of bitcoin miners. You either mine to get more fiat, mine to get more bitcoin, or a combination of both. Each one is important to bitcoin in their own way but not all of them are actually helping to make hyperbitcoinization a reality.
1. Fiat Miner: Mine bitcoin and sell 100% of it for fiat (fiat mindset).
2. Hybrid Miner: Mine bitcoin and sell some for fiat to cover operating costs.
3. Pleb Miner: Mine bitcoin and hodl all of it. Few understand this.
As I highlight the nuances of all 3 different types of bitcoin miners, hopefully you gain some insight into the incentives that motivates each of these different types of bitcoin miners and why not all of them provide the same value to the bitcoin ecosystem even though they all produce hashes that are the same as the others.
Fiat Miners
The first type of bitcoin miner is the fiat miner. Fiat miners are exactly what they sound like. They mine bitcoin exclusively to sell and generate revenue and profit in fiat currency. They are only interested in mining bitcoin to sell 100% of it with the intent of generating a fiat profit. They use fiat money to finance their bitcoin mine and then sell all of the bitcoin with the intention of generating more revenue than they spent on their bitcoin mine. They are fiat-minded from start to finish just like any traditional finance company.
Fiat miners are nothing more than zombie companies that attach themselves to bitcoin to call themselves a “bitcoin business”. What’s even worse about these types is that they may even use their bitcoin mines to offset other fiat scams like ESG incentives or promoting some green energy narrative to gain clout amongst bitcoiners.
All fiat miners care about is mining bitcoin to immediately sell for fiat to make money for their investors and shareholders. Fiat miners are often backed by venture capital firms with a board of directors, shareholders, are motivated by a conventional fiat wealth accumulation mindset. They do not mine to get more bitcoin. They are not humble and they do not stack sats. They only mine to get more fiat to grow their bottom line and generate fiat revenue and profits for their fiat-minded owners and shareholders.
Fiat miners are not bitcoiners in any sense of the word. They are cantillonaires who are all in close proximity to the money printer and regulators who want to control bitcoin. These fiat miners are all too eager to get in bed with politicians in an attempt to corner as much of the bitcoin mining market as possible via regulatory capture so they can omit transactions from the blockchain for their fiat masters at various governments and central banks.
Motivations
Fiat Miners are motivated by their primary focus on generating and maximizing fiat gains. For them, Bitcoin serves as a means to an end, a tool for wealth accumulation rather than a revolutionary financial shift. The allure lies in the quick returns offered by bitcoin mining.
Some common motivations for fiat miners might be tax incentives, mitigating oil well flaring fines, or the new ESG narratives being pushed by the cantillonaire institutions that own the mainstream media. Fiat miners use regulatory incentives and tax credits to gain an advantage and maximize revenues to dump for more fiat. While fiat miners technically mine bitcoin, they do nothing to further bitcoin adoption. All they care about is fiat.
Behavior
Fiat miners promptly sell their freshly mined bitcoins for traditional fiat currency. Profitability is assessed in fiat terms, emphasizing short-term gains and liquidity over the long-term potential of holding Bitcoin. Fiat miners are often the first to capitulate when the block reward drops below operating costs because they are unable to sustain long-term losses to continue mining.
When the time comes for miners to censor and omit bitcoin transactions that are deemed “unacceptable” or “criminal”, fiat miners will be the first to comply because they are nothing more than zombie companies that rely on fiat funding via government subsidies, tax credits, handouts, regulatory capture, and more.
Characteristics
With a short-term mindset, fiat miners don’t have an incentive to hold bitcoins during market fluctuations. While recognizing Bitcoin’s potential for wealth accumulation, their perspective is only aligned with traditional financial strategies, viewing bitcoin as a means to an end rather than an end itself.
Fiat miners use fiat to mine bitcoin, calculate all of their costs in fiat and then sell their newly mined bitcoin to “take profit” in fiat. How many more times can I say “fiat” in a single sentence?
The objective of a fiat miner is to spend fiat money to buy mining hardware and electricity and then sell all of the bitcoin for more fiat money than they invested on the mining hardware and electricity. Fiat miners are zombie bitcoin companies that are completely reliant on the fiat money system.
Hybrid Miners
In contrast to the fiat miner, the hybrid miner strikes a balance between both bitcoin and fiat, recognizing bitcoin’s value as the best money in history but also understanding that they may need to sell some bitcoin to cover their fiat operations costs and overhead.
Hybrid miners understand that we haven’t achieved hyperbitcoinization yet and that we still live in a fiat world. As a result, hybrid miners may have to sell some bitcoin to pay their overhead in their local fiat currency (operating costs like electricity bills, power purchasing agreements, payroll, land, lease agreements, etc). These are companies with leadership that care about bitcoin and are building a more bitcoin centric economic system but they also understand that they need to work within the established financial system to make that a reality.
Hybrid miners can be both large companies and/or small operations running in a closet, garage, or basement. They are probably the most common type of bitcoin miner.
Motivations
Hybrid Miners recognize that bitcoin is the greatest money in the world and they want to accumulate as much bitcoin as possible. They also understand that mining comes with fiat operational costs and that they may need to sell some of their bitcoin to pay for some of their overhead with fiat currency. Their motivations revolve around striking a rational balance between accumulating bitcoin as a store of value and covering the operating costs.
One of the largest motivations of hybrid miners is the rush to mine with stranded energy such as oil well flared gas or using surplus energy from solar and wind farms to reduce or eliminate energy curtailment while also balancing the grid load.
Behavior
Hybrid miners strategically sell a portion of their mined bitcoins to cover operating costs while retaining a significant portion as long-term savings. They actively participate in the broader bitcoin ecosystem as both miners and hodlers. In order to balance their operating costs and maximize their bitcoin stack, they sell the least amount of bitcoin when it comes time to pay their overhead. This might mean that they sell their newly mined bitcoin via P2P platforms at a premium in order to maximize their bitcoin holdings.
Hybrid miners understand the tradeoffs between buying bitcoin and mining it so they may even divert resources to buy bitcoin when the block reward is less than their operating costs.
Characteristics
With a more balanced mindset, hybrid miners understands the value of bitcoin as a long-term store of value on its way to becoming a medium of exchange and finally a unit of account. They may strategically sell bitcoin for fiat during favorable market conditions, recognizing the role of fiat for both short-term operational sustainability and maximizing bitcoin holdings for long-term wealth preservation.
Hybrid miners may be characterized by a team that is passionate about bitcoin mining yet may also have investors or a board of directors to answer to.
Pleb Miners
The final and most resilient type of bitcoin miners are the pleb miners. Pleb miners don’t sell any of their newly mined bitcoin for fiat because they know that fiat is a scam and they are looking for bitcoin without KYC and plan to HODL long into the future. Pleb miners are incredibly innovative and constantly searching for ways to lower their operating costs and increase their bitcoin stack.
Some of the ways they gain an advantage is by harnessing surplus heat from their bitcoin mining hardware to heat their homes, offices, and even their hot tubs. pleb miners might even resort to sell their newly mined bitcoin at a premium for old bitcoin because they understand that some users may be willing to pay extra for newly mined bitcoin.
Motivations
Pleb miners are motivated by the bitcoin ethos and philosophy, viewing Bitcoin as a revolutionary form of permissionless money and a hedge against inflation. Their motivation extends beyond short-term gains to a commitment to financial sovereignty. They don’t mine bitcoin because they want more fiat. They mine bitcoin because they want less fiat and to create a bitcoin standard.
Behavior
Pleb miners hodl all of their newly mined bitcoin without plans to sell because they see bitcoin mining as a way to stack sats and support the Bitcoin network. Their approach aligns with a long-term understanding that bitcoin will come to dominate global trade. Pleb miners will often mine at a loss because they are willing to pay a premium to stack sats and support the decentralization of the bitcoin network
In the event that they mine at too great a loss, they may turn down their hardware and divert those resources to buying bitcoin P2P until the price rebounds to a point that they can justify their operating costs again.
Characteristics
Committed to decentralization and financial sovereignty, pleb miners aren’t concerned with short-term market fluctuations. They understand that bitcoin is the apex asset class and the greatest long-term store of value ever discovered. They are often very humble and help others to learn how to mine themselves by attending local meetups and producing educational content both online and offline. Pleb miners are the intolerant minority of bitcoin miners, highly resilient, incredibly innovative, and the most convicted of all of the bitcoin miners in the world. They are the “few” who truly understand bitcoin ethos and the inner workings of bitcoin mining.
Conclusion
As bitcoin mining continues to evolve, different motivations from different types of bitcoin miners becomes more and more apparent. The fiat miner zombie companies will continue to mine bitcoin in an attempt to maximize fiat gains but they will ultimately be driven out of business if the price of bitcoin doesn’t increase in relation to their rising operating costs every difficulty adjustment and diminishing return via the halving every 4 years. To offset these losses, fiat miners rely on fiat market distortions in the form of subsidies, bailouts, tax credits, and every other bogus fiat incentive there is.
Hybrid miners will continue to make bitcoin mining more efficient as they find the balance between generating revenue amidst difficulty adjustments, bitcoin halvings, and the fluctuating price of bitcoin. The more bitcoin they can hold, the more they support the price of bitcoin. When they sell, they may rely on P2P markets to maximize returns and prevent putting downward pressure on the price at centralized exchanges.
Pleb miners are laser focused on stacking sats and building a free and open monetary future. They mine no matter what the price of bitcoin is because they never sell. If the difficulty adjusts high enough and they don’t mine as many sats as they would like relative to their operating costs, they turn down their miners and divert those resources to buying bitcoin P2P.
Bitcoin mining is a diverse landscape that encompasses all of the different types of bitcoin miners mentioned above. While each type of miner plays a crucial role in the network’s security and functionality, they are not all committed to the core ethos that bitcoin was created around. Understanding the motivations, behaviors, and characteristics of each type of bitcoin miner may help you to better understand which miners are working toward a bitcoin standard and which ones are working to undermine bitcoin and bring it under the control of the traditional fiat system.
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