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.
The post Mining Service Provider Compute North Becomes the Latest Casualty of Market Downturn appeared first on BeInCrypto.