Tag Archives: kncminer

The Sweden bitcoin mining company called KnCMiner announced its bankruptcy.

KncMiners was one of the greatest mining company who raised $15m in venture funding from Accel and Creandum, among the other investors back in 2015 after only two years of life.

One of the possible reason of this bankruptcy could be the three class-action lawsuit KnCMiner had to face recently. 

But CEO Sam Cole denied any relationship between their bankruptcy and these recent lawsuits.

Cole, in fact, argues that the main reason for KnCMiner bankruptcy is the decrease of the bitcoin transaction rewards for miners.

“Effectively our cost of coin – how much we produce the coins for – will be over the market price. The price is now [roughly] $480. With all of our overhead, after July, the cost will be over $480. All of the liabilities we’ll have after that time will be too high”, explained Cole.

In a centralized economic system currency is issued by central banks who control the emission and the value.

Conversely, in a decentralized economy currency is not controlled by any central authority and this is the reason why – in the Bitcoin case, for example, in his whitepaper Satoshi Nakamoto suggested an algorithm to define when and how many new bitcoin can be created.

According to this algorithm the number of new bitcoins is set to decrease with a 50% reduction every 210000 blocks, or almost 4 years.

As a result, the number of bitcoins will not exceed 21 million.

As the number of bitcoins is set to decrease the same thing happens to the miners reward.

Thanks to a process called halving, the rewards drop down, as it happened back in 2012 when it took down from 50 to 25 BTC.

Now it is set to become 12.5 BTC in July. 

For this reason the miners work is not so convenient anymore, so the number of miners is decreasing. Ans this means that the Bitcoin price will grow.

Also, a Bitcoin value is roughly $500, and miners cost of a new Bitcoin is more than $480 in energy and computer tools, so under that price it’s not worth doing it.

As for any scarce product, like gold or oil, the cost of extraction is one of the main elements that determine its price. If it increases, then the miners stops to do their jobs.

As a result the offer is reduced and its value rises.

Read here another interesting article about halving and watch here the countdown to the next reward drop.