Mining Service Provider Compute North Becomes the Latest Casualty of Market Downturn

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Cryp­tocur­ren­cy min­er Com­pute North files for Chap­ter 11 bank­rupt­cy in Texas as the extend­ed cryp­to win­ter puts increas­ing pres­sure on min­ing revenues.

The Min­neso­ta-based com­pa­ny owes cred­i­tors $500 mil­lion, while its assets are esti­mat­ed to be worth between $100 mil­lion and $500 million.

By fil­ing for Chap­ter 11 bank­rupt­cy, the com­pa­ny vol­un­tar­i­ly declares itself unable to pay its debts and buys itself time to restruc­ture while con­tin­u­ing to oper­ate in the hopes of becom­ing profitable.

Found­ed in Nov. 2017 as a pri­vate­ly held cryp­tocur­ren­cy min­ing com­pa­ny, Com­pute North became a colo­ca­tion ser­vices provider, which involves rent­ing out min­ing hard­ware to oth­er com­pa­nies. It has secured con­tracts with many min­ing large min­ing com­pa­nies, includ­ing Marathon Dig­i­tal, Com­pass Min­ing, Chi­nese min­er The9, Hive Blockchain, and Bit Dig­i­tal. It has deployed 40MW of its 280MW Upton Coun­ty facil­i­ty in West Texas as part of an agree­ment with min­ing giant Marathon Dig­i­tal. It also start­ed deploy­ing 75MW of its 1.1GW Granbury, Texas data cen­ter fol­low­ing a July 2022 agree­ment with min­ing host­ing and bro­ker­age firm Com­pass Mining.

Operations are unaffected for now

The deci­sion to file for bank­rupt­cy was due, in part, to delays in bring­ing Marathon’s min­ing machines online, while the pow­er provider con­firmed that the wind-farm pow­er­ing Com­pute North’s West Texas facil­i­ty was exempt from pay­ing tax.

While under the filing’s pro­tec­tion, the com­pa­ny will also mull a plan to repay its more than 200 cred­i­tors, says Kristyan Mjol­snes, Com­pute North’s chief mar­ket­ing executive.

In response to the fil­ing, Com­pute North client Com­pass Min­ing tweet­ed, “We are aware of the bank­rupt­cy fil­ing by our host­ing facil­i­ty part­ner, Com­pute North, and are review­ing the bank­rupt­cy peti­tions that have been pub­licly filed with our legal team.” It added, “we are con­tin­u­ing to mon­i­tor the sit­u­a­tion and will pro­vide fur­ther updates as they become available.”

Marathon Dig­i­tal tweet­ed, “Today, a fil­ing relat­ed to one of our host­ing providers was pub­lished. Based on the infor­ma­tion avail­able at this time, it is our under­stand­ing that this fil­ing will not impact our cur­rent min­ing operations.”

The news of Com­pute North’s fil­ing comes as the White House mulls a proof-of-work min­ing ban, fol­low­ing a report by the White House Office of Sci­ence and Tech­nol­o­gy Pol­i­cy released Fri­day, Sep. 9, 2022. The report called for low­er water use, reduced noise from min­ing rigs, and trans­par­ent ener­gy use. “Should these mea­sures prove inef­fec­tive at reduc­ing impacts, the Admin­is­tra­tion should explore exec­u­tive actions, and Con­gress might con­sid­er leg­is­la­tion to lim­it or elim­i­nate the use of high ener­gy inten­si­ty con­sen­sus mech­a­nisms for cryp­to-asset min­ing,” the White House said.

Proof-of-work is the ener­gy-inten­sive con­sen­sus mech­a­nism used to val­i­date trans­ac­tions and add them to a trans­ac­tion block on a blockchain. Bit­coin, and until recent­ly, Ethereum, use proof-of-work as a con­sen­sus mech­a­nism. The process of val­i­dat­ing trans­ac­tions is del­e­gat­ed to min­ers using pow­er­ful com­put­ers called ASICs. Min­ers’ rev­enues come from trans­ac­tion fees and block sub­si­dies award­ed for val­i­dat­ing trans­ac­tions. Any leg­is­la­tion ban­ning proof-of-work min­ing could be dev­as­tat­ing for the cryp­to industry.

Revenues under pressure since May

Min­ing rev­enue is under pres­sure from low­er bit­coin prices and Ethereum’s migra­tion to a proof-of-stake con­sen­sus model.

Rev­enues dipped sharply fol­low­ing the col­lapse of the Ter­raUSD sta­ble­coin in May 2022, reach­ing fig­ures around $20 mil­lion before drop­ping to $14.4 mil­lion around June 17, 2022. At the time, a report released by Arcane research sug­gest­ed that Argo Blockchain, CleanSpark, Strong­hold Dig­i­tal Min­ing, Marathon Dig­i­tal, and Riot Blockchain were best posi­tioned to sur­vive the cryp­to winter.

At press time, rev­enues were slight­ly up from their June lows, hov­er­ing around $15 million.

The bank­rupt­cy case is Com­pute North Hold­ings Inc., 22–90272, US Bank­rupt­cy Court, South­ern Dis­trict of Texas.

For Be[In]Crypto’s lat­est Bit­coin (BTC) analy­sis, click here

Disclaimer

All the infor­ma­tion con­tained on our web­site is pub­lished in good faith and for gen­er­al infor­ma­tion pur­pos­es only. Any action the read­er takes upon the infor­ma­tion found on our web­site is strict­ly at their own risk.



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