The KYC Trend
The end of mining privacy?
Gm miners,
Congratulations.
We crossed into $100k territory this week. The all-time high is now $103,900.
It seems like this is just the beginning.
We are 225 days in this epoch.
This epoch is underperforming previous epochs at the 225-day mark:
2012 scaled: $382,568.52
2016 scaled: $101,404.02
2020 scaled: $174,616.26
The majority sentiment predicts a top at some point in 2025.
This would make sense, assuming we continue the “cycle” trend.
But now we have ETFs, corporate adoption, and a massive catalyst in the potential BTC stockpile.
The white swan of nation-state competition for more Bitcoin could drastically change the support and resistance levels for the price.
Regardless of what happens in the next year, you shouldn’t try to trade your Bitcoin for more and time tops and bottoms.
You will more than likely end up with less BTC.
Seriously.
Follow the fundamentals of investing and have a low-time preference.
“Time in the market beats timing the market.”
The best way to remove emotions from this is through a DCA (Dollar-Cost Average).
Automate a set amount to convert into BTC on a set schedule.
But there is a downside.
Bullish price action reduces conversion purchasing power.
Your dollar buys 125% less BTC today than it did one year ago.
This is why mining is a great hedge against price appreciation.
Price is up 30% in the last month, mining difficulty is up 3% in the last month.
Your spot buy gets 30% less BTC, and your miner only gets 3% less BTC.
This is why it pays to have a miner plugged in during extreme volatility to the upside.
Every miner should be paying attention to the relationship between Price and Hashrate.
This will have HUGE implications for how your stack grows over the next decade.
The KYC Crackdown
Don’t know what KYC is or why it’s important?
We made a video:
KYC ties your Bitcoin to your identity.
If you value privacy, this is not ideal.
Traditionally, miners are rewarded with freshly minted Bitcoin that is not associated with any identity.
Pools have somewhat changed this.
Many mining pools require you to submit documentation to confirm your identity in order to mine in their pool:
This is subject to change and depends on jurisdiction. This rubric is based on U.S. residents.
Under current mining pool industry standards, all pools are drifting toward KYC requirements.
However, one of these pools stands apart from the rest: Ocean
They have 3 unique ways of handling the mining pool:
They are a non-custodial pool. Miners are paid directly by the Bitcoin network.
Miners using OCEAN can create their own templates using DATUM.
They use TIDES, so miners are paid the full and exact portion of their contributed hashrate.
This almost seems too good to be true.
How can miners be paid directly by the Bitcoin network?
Let’s break it down:
The main factor in determining whether a pool will need to KYC in the future is the control of the coinbase.
What is the coinbase?
The coinbase is the first transaction in a newly mined block.
It outlines how the block reward will be distributed.
Here is a picture to show what this looks like:
In a traditional mining pool, the pool coordinator allocates the coinbase based on shares contributed by participating miners.
Pools can be subject to regulations (KYC) if they are coordinating this payout.
This is where DATUM comes in.
Ocean allows miners to create their own templates for coinbase transactions using a tool called DATUM.
How does this work?
OCEAN sends a verifiable list of payouts due under the TIDES algorithm to miners.
Miners use this input in the block template prior to hashing.
When the miner finds a block, any miners on the list will be eligible for a payout.
This makes each individual miner a coordinator of the pool.
It’s a clever solution, and it will be interesting to see how the industry responds to this innovative disruption.
Anything that makes Bitcoin more decentralized, distributed, fair, and accessible is a win in my book.
Feel free to reply to this email if you have any questions or insight on this topic; I’m still articulating the technicals of how this works.
Hope this helps.
Have a good weekend✌️