Bitdeer Creates First-Generation Bitcoin Mining Chip In Major Step To Becoming The First Fully Integrated Miner

April 03, 2024 at 08:45 AM EDT

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by Austin DeNoce, Benzinga

Bitdeer Technologies Group (NASDAQ: BTDR) just announced a significant milestone with implications for the entire Bitcoin mining industry by introducing its first-generation Bitcoin mining chip, the SEAL01, which is specifically designed for its new SEALMINER A1 mining rig.

This launch represents a crucial development for Bitdeer, as it aims to position itself as the first fully integrated Bitcoin miner.

Introducing Bitdeer’s SEAL01 Chip

The SEAL01 chip is a result of Bitdeer’s collaboration with a leading semiconductor foundry, utilizing advanced 4-nanometer process technology. This innovation has led to a power efficiency of 18.1 J/TH. Jihan Wu, Bitdeer’s CEO, emphasized the chip’s role in enhancing the company’s mining capabilities as well as its alignment with the future demands of Bitcoin mining. It is also important to note that Mr. Wu was the co-founder of Bitmain, the world’s largest manufacturer of chips and hardware used in Bitcoin mining.

The SEAL01 chip’s development underscores Bitdeer’s commitment to leading through technology and represents a major step toward the company becoming the only Bitcoin miner with complete control over its hardware supply chain.

Bitdeer’s Vertical Integration Strategy

Bitdeer’s strategy encompasses a move toward full vertical integration, where it owns the entire mining process from chip manufacturing to data center operations. This approach is aimed at improving efficiency, reducing costs and maintaining tighter control over production and overall operations.

Unlike competitors that rely on third-party equipment, Bitdeer says its integration efforts will allow for a streamlined and optimized mining process, mitigating common industry challenges such as supply chain disruptions or lack of chip customization.

Bitdeer’s venture into chips developed in-house for its mining operations directly addresses some of the big challenges faced by the broader mining industry, most notably the dependency on a limited number of external suppliers of application-specific integrated circuits (ASICs) uniquely designed for Bitcoin mining rigs.

By manufacturing its own ASICs and mining equipment, Bitdeer can reduce operational costs, enhance supply chain reliability and adapt more swiftly to technological advancements that improve its mining efficiency. This self-reliance and enhanced efficiency could be a meaningful differentiator for Bitdeer heading into the upcoming Bitcoin halving where block rewards will be cut in half.

Vertical Integration Is A Key Advantage

Bitdeer's move toward vertical integration with the introduction of its SEAL01 chip contrasts with strategies employed by other miners like Riot Platforms Inc. (NASDAQ: RIOT) and CleanSpark Inc. (NASDAQ: CLSK). These companies are entirely dependent on third-party chipmakers and face the inevitable limitations of off-the-shelf solutions that lack customization and pricing transparency. Meanwhile, Marathon Digital Holdings Inc. (NASDAQ: MARA) recently became an investor in chip designer Auradine, but it currently does not appear to have any plans to directly involve itself in developing the technology.

Mining efficiency is one of the biggest advantages for Bitcoin miners, and without integrating chip development into their operations, miners will likely struggle to achieve the same level of capital efficiency as Bitdeer does. The reliance of these and other miners on third parties for a critical element of the Bitcoin mining operational inputs also introduces counterparty risk that could leave them vulnerable to supply-chain disruptions and other inefficiencies.

Bitdeer’s approach, emphasizing in-house chip and mining machine development, showcases a strategic pivot toward self-sufficiency, opening the door to significant advantages in customization, cost reduction and overall operational efficiency. This method also seems to favorably position Bitdeer ahead of the halving, potentially inspiring the industry to adopt a more integrated strategy.

Implications For Bitdeer’s Growth

The introduction of the SEAL01 chip and Bitdeer's shift toward vertical integration are both critical elements to Bitdeer’s growth. In February, Bitdeer said it saw a 64% year-over-year increase in total bitcoin mined, but after the Bitcoin halving later this year, mining rewards will be cut in half, meaning advancements in efficiency could become a deciding factor in which miners stay afloat. Once Bitdeer’s new mining chips are integrated into its machines, the company is likely to see a notable uptick in efficiency to keep its growth moving in the right direction. Ultimately, Bitdeer’s move reflects a prudent strategy that could redefine industry emphasis on in-house technology development and encourage other companies to consider greater integration to mitigate risks and improve their own efficiency.

Featured photo by Dmytro Demidko on Unsplash.

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