Head of Content and Research
4 January 2024
Happy New Year to all of our business partners and fellow miners!
We had a productive and fulfilling year in 2023. Our build-fast mindset continued to accelerate our position as market leaders across a range of software and financial services products that are value-adds to miners across the globe. A big thank you to all of our partners that have helped support us on this journey and continued feedback for product iteration.
Over the year, we’ve seen:
Now, let’s have a quick recap of Luxor’s 2023 by the news and numbers.
Luxor fosters a culture that prioritizes building. To achieve this, we attract high-value talent and give our team members the opportunity to flourish, which begets further high-value talent acquisition. We have a strong team of software and firmware engineers that span 15 countries. This is complemented by battle-hardened business leaders whose experience spans decades of work across financial, energy, and hashrate markets. This year we added many talented people to the team (+ 15) a 35% increase in headcount. We brought in experience from large-scale mining operators to complement our existing team’s knowledge.
We set out to build custom firmware for Bitmain ASIC miners in Q2-2021 after our institutional mining partners requested a viable after-market firmware from a US-based company.
Fast forward to 2023 and now we have a robust product in the market with performance and features that are out-performing incumbents that have been building firmware for 7+ years. With an accelerating product trajectory, we are shipping new updates for LuxOS every 7-10 days and iterating quickly. Our knowledge of hashrate and power markets is driving the roadmap for a much more robust tuning method to maximize miner revenue. In addition, we’ll be happy to announce our SOC2 Type 2 compliance certification for LuxOS in Q1-2024, which would be a first for the firmware industry.
The volume for our hashrate derivatives markets grew exponentially in Q3 and Q4 2023 as miners look to more sophisticated risk management tools and investors look for alternative products to gain exposure to bitcoin mining. We now have well over 50 participants and are settling close to 1 EH daily.
From the product side, our Deliverable Forward Contract was the biggest launch of the year. Miners can use these new contracts as an additional method for financing as the miners receive notional up front. When pair-traded with the Non-Deliverable Forward contract, the Deliverable Forwards offers institutional traders the ability to generate fixed BTC-denominated returns (not available for retail).
We iterated on our Non-Deliverable Forward contract to include up to six months duration, in addition to daily settlement, two features which were highly desired by market participants. In addition, the derivatives team launched an order book for forward market contracts. This new tool allows market participants to see current bids and offers, as well as the forward curve of the market.
From the regulatory side, we received approval from the NFA and CFTC to become an Introducing Broker. This designation will allow us to extend our hedging products to include exchange-listed Bitcoin and energy derivatives including futures, options, structured products, and more, making Luxor a one-stop shop for traders Implementing these trading options into the Luxor Derivatives Desk will be a big focus for the team in 2024.
Heading into 2024, we are committed to expanding the suite of derivatives products we offer in addition to increasing liquidity, size, and duration of our existing products. Building an entirely new derivatives market takes time and commitment, and we are in the process of building the first compute-power-based derivatives.
In 2023, our ASIC Trading Desk worked around the clock, trading $177mm worth of hardware – an average of $480k per day – representing 13.7 EH/s or ~6% of the total hashrate growth in 2023. Our trading team grew over 2023 and we now cover all major markets from Shenzhen to Texas to Dubai.
In February 2023, we launched the first Request-for-Quote (RFQ) platform for ASICs. This platform allows ASIC traders to place buy and sell orders transparently and efficiently on an open auction marketplace. ASIC brokers have been acting as market-makers on the platform, providing liquidity to the books and executing trades quickly with industry-leading pricing. We expect this platform to grow over time as it becomes the go-to venue for trading ASICs.
In November of 2023, we launched a shipping and logistics business for ASICs, rig parts, and other mining infrastructure. Since the inception of the ASIC Trading Desk, we have delivered over 155,000 Bitcoin mining ASICs to 30 countries across 5 continents. We now offer these services to any companies who need to move mining equipment, regardless of the vendor or broker they use. We specialize in dealing with local importation, customs clearance, insurance advisory, air and sea freight, in-land trucking, and warehousing solutions.
This year, we launched version 5.5 of our pool dashboard, offering novel features that help institutional miners manage their operations in a more sophisticated manner. In addition to v5.5, the highlight for the year of our mining pool was hashrate expanding to 16.9 EH/s by end of year, representing a growth of 73% in 2023. We mined 1,633 Bitcoin blocks over the year, a total of 10,939 Bitcoin and $326mm equivalent in USD.
As our product suite has expanded we are building product bridges to better integrate the mining pool with our Deliverable Forward contracts and LuxOS. This bridging will provide miners with a seamless platform for monetizing hashrate, hedging revenue, financing operations, and increasing the performance of their machines.
While Luxor is domiciled in the US, we believe it is critical for the network to support mining in many jurisdictions, so we have spent a considerable amount of time helping miners expand in South America, Europe, Africa, and Asia.
To further our support for miners in Latin America, we have opened an office in Montevideo, Uruguay. We are consistently focused on attracting foreign investment into Paraguay, Argentina and other countries in the region. We believe that these countries have great untapped potential for Bitcoin mining, as well as a plethora of entrepreneurial talent. We are excited by our partnership with Volcano Energy, a public-private entity in El Salvador that aims to leverage the country’s expansive geothermal energy to mine Bitcoin.
2023 was the first year we focused material energy on Bitcoin Mining in Africa. We work with more than a dozen companies operating across Nigeria, Ethiopia, Kenya, Zambia, Malawi and other countries. We have sent our own machines into Africa and are learning first-hand how to navigate the complex landscape and capitalize on the many opportunities for monetizing stranded sources of energy on the continent.
In Asia we are bullish on Bitcoin mining growth in the Middle East and South East Asia. In the Middle East, we made our first hire out of the UAE and expect both private and public institutions to continue to deploy significant capital in UAE, Saudi and Oman. In South East Asia we announced a partnership with Crypto Drilling, and we work with miners across Laos, Thailand and Malaysia.
For 6 years, we have offered novel mining-related data to the industry through Hashrate Index. In 2023, we took this experience a step further by launching Hashrate Index Premium. This offering is geared towards miners and investors in the space and offers API access to our data services, forward estimates on key mining metrics, clearing prices for ASICs, comprehensive coverage of public mining equities and more. We have created custom reports for a handful of public and private mining companies, including go-to-market strategies, infrastructure appraisals for 10Ks, S1/F1 work for aspiring public companies, and forecasting/valuation work for bankruptcy processes.
Subscriptions to our free mining newsletter grew by 68% to over 13,000 readers, and we sent 90 newsletters in 2023. Additionally, we published four quarterly reports that offer a comprehensive view of the Bitcoin mining sector; three forward projection reports for hashprice, difficulty, and hashrate; and an H1-2023 report on Bitcoin mining stocks which covered financial data, valuation metrics, and analysis on operations.
Coming into the year, Ordinals weren’t on our Bingo card, but Luxor saw the opportunity and moved quickly on it. We believe that increasing the usage of Bitcoin blockchain is a net positive and that miners will continue to invest capital in the sector as transaction fee revenues increase.
We inscribed the first-ever 4MB transaction for Taproot Wizards. Shortly after in February 2023, we acquired Ordinal Hub the premier platform for ordinal data and inscription services. We followed this by inscribing and mining 4MB blocks for the Bitcoin Magazine May Edition, Bitcoin War Bonds, and ScrillaVentura. We then worked with NFT companies such as Yuga Labs and DeGods on inscribing and auctioning their first ordinal collections.
In September 2023 we launched our inscription tool to the public, adding to our broad suite of Ordinals products and services which includes advanced analytics, API services, as well as rare satoshi scanning and extraction – all catered to builders in the growing industry.
This year will be Luxor’s second halving and many team member’s third. The halving is an event that presents challenges and opportunities. We believe it's crucial for miners to harden their operations through the use of firmware (improving mining efficiency) and hashrate derivatives (hedging forward hashprice risk). In that regard, we are excited to see our suite of products benefit our mining partners and give them a competitive advantage before and after the April 2024 halving event.
We are more bullish than ever on Bitcoin and compute power. We believe both are fundamentally going to change our society and Luxor is in a prime position to build the underlying infrastructure to support both industries.
Happy Hashing, and Happy New Year!
-Luxor Tech Team
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