As MARA Holdings and Riot Platforms expand into artificial intelligence and global energy deals, independent Bitcoin miners are struggling to remain operational. This contrast highlights a troubling truth: Bitcoin’s long-term viability is at risk. While Bitcoin’s rising hash rate is often touted as an indicator of network health, it tells only half the story. Far more troubling is the distribution of that hashpower.
As the bear market drags on, small to mid-sized Bitcoin miners are grappling with the skyrocketing costs, ongoing geopolitical tensions, and fierce competition from well-financed industry giants. Under these circumstances, merged mining—a method that enables miners to secure other blockchains using the same infrastructure—has become a critical lifeline. Merged mining protects the independent miners’ profitability by providing additional revenue with no extra hardware, energy, or energy costs, thus helping maintain the decentralized network Bitcoin relies on.
Larger firms of mining vs. Smaller mining operators
Larger mining firms seem to have an easier time operating at scale than independent miners and smaller firms, particularly when it comes to traversing difficult market conditions. Independent miners and small firms often find it difficult to make ends meet, while bigger corporate firms have the capital and scale to weather market storms and profit.
MARA Holdings, a mining giant, is a perfect example. The firm has aggressively expanded its use of renewable energy by acquiring a facility in Texas and entering a landmark partnership with the government of Kenya to enhance renewable energy production and establish a renewables-powered mining operation. Smaller mining firms would be obliterated under the energy price shock that Marathon can withstand due to its diversified renewables-powered mining and the energy access it has.
Some firms have gone even further, branching out into completely different sectors. In February, Riot Platforms announced plans to build AI data centers, thus pivoting into the artificial intelligence industry. These new revenue streams provide Riot with extra resilience during downturns, and for Riot, mitigate the company’s dependency on the price performance of Bitcoin.
Expanded opportunities through direct contracts with energy companies grant larger mining companies a competitive edge. Independent miners, by contrast, lack this bargaining power. In numerous instances, large companies can capture favorable energy rates or receive tax credits from the local government to attract advanced technology infrastructure. Riot Platforms, for example, has gathered nearly $136 million in power credits from the Texas grid operator since 2022. Such industries can deal with the strategic lulls, which would be devastating for independent miners with limited alternatives and tighter margins.
Independent miners don’t enjoy such luxuries. These steep costs are being amplified through the ongoing market instability and impending trade war, posing a serious threat to independent miners. The result is devastating: a concentrated hashpower controlled by a small, strategically located firm, undermining the claim of Bitcoin’s decentralization.
Merged mining provides a lifeline to independent miners.
Merged mining has emerged as a potent avenue for independent miners to sustain competitiveness. Merged mining permits miners to reclaim the computational work done to secure Bitcoin for mining other Bitcoin-compatible blockchains at no added expense in energy or hardware. In essence, this enables a parallel income stream where miners can be rewarded from multiple networks concurrently.
For independent and small-scale miners, this added income can mean the difference between staying operational and shutting down. It mitigates the financial sting from Bitcoin’s volatile block reward systems and provides an anchor during protracted downturns or post-halving squeezes. Merged mining increases income without increasing operational costs, increases competitiveness, and keeps the smaller miners in the game, in a landscape dominated by larger firms.
Along with this, smaller miners have an operational advantage. They tend to be quicker with less nimble larger corporate counterparts, and thus, adopt the merged mining strategy more freely. While major mining firms have to navigate a complex web of infrastructure, independent miners can pivot more quickly and reconfigure their systems to test new strategies.
Often, smaller players tend to actually get their hands dirty, experimenting with the details, and are efficient with extracting value. That nimbleness allows capture of value where larger firms might miss, fine-tuning merged mining strategies, and generating returns faster than larger operations.
In a decentralized network such as Bitcoin’s, the renewed resilience of smaller, independent miners emerges as significant in the context of competition and the overall health of the ecosystem. Their degree of independence is advantageous not just for healthy competition, however.
This is perhaps the best form Bitcoin has to defend itself, as it mitigates centralization. Whenever the control of mining is put in the hands of a few large, corporate bodies, the network is at a dire risk of cyber attack, censorship, or politically motivated manipulation.
It’s time for the Bitcoin community to rally behind the merged mining strategy. Developers, miners, and advocates alike can all do their part to position merged mining as a fundamental strategy for the Bitcoin network. Long-term, the system, as a decentralised, global, trustless network, relies on defending and rallying for small miners, as they do not represent mere sentimentality.
