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Iris Energy Fails to Service $100 Million Loan, Cuts BTC Mining Hardware

2 mins
Updated by Ryan Boltman
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In Brief

  • Sydney-based miner Iris Energy said it is prepared to default on a loan that will see it shut down 3.6 EH/s of mining capacity.
  • The company will instead look to buy new miners and may allow third parties to use the newly-vacated data center capacity.
  • According to one analyst, bitcoin miner selling has increased 400% in the last three weeks, which spells trouble for the mining industry as continuous selling depletes a key source of revenue.
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Australian Bitcoin miner Iris Energy is set to lose 3.6 Exahashes/second of mining power after defaulting on a $108 million loan.

Iris Energy will not pay loans taken against the equipment operated by two wholly-owned vehicles of the company, choosing instead to build out its other business operations.

Iris Energy says entities do not provide enough cash flow

According to the Nasdaq-listed miner, the two entities do not provide enough cash flow to service the credit lines after other subsidiaries using the equipment pulled out of hosting deals. According to a collateral agreement with the creditor, Iris Energy will shut down operations at these two facilities.

Accordingly, Iris Energy will look to acquire mining equipment from Bitmain to self-mine and may also avail its data center capacity to other hosting companies.

Aside from the mining machines used as collateral, Iris Energy operates 1.1 EH/s of mining power and expects to deploy a further 1.3 EH/s.

Mining is the process of securing any blockchain network that uses the proof-of-work consensus model. A consensus model is a set of rules governing a blockchain’s transition from one state to another.

Miners accumulate “confirmed” transactions into a transaction block and then “mine” the transaction block to add it to the blockchain. Included in the mined block is the solution to a complex mathematical problem that the miner needed to use significant computing power to solve. Miners earn coins by proving that they expended computing power. Multiple miners compete for the right to publish a new block of transactions. It becomes increasingly difficult to mine cryptocurrencies like bitcoin as the number of miners on the network increases.

Iris Energy amongst heavy-hitters fighting to stay profitable

Once the playground of hobbyists, mining has more or less shifted into the realm of large corporations that operate specialized data centers. While these companies benefit from economies of scale, increasing energy prices caused by the war in Ukraine and the decline in bitcoin prices have seen several miners struggle to service debt.

The price of producing new BTC, also known as the Production Cost Floor, has also been rising, meaning that miners are finding it increasingly difficult to remain profitable. Crypto market analyst Charles Edwards predicts that if the Bitcoin price falls below the production cost floor, many miners will become unprofitable and unable to repay debts.

Reports from London-based Argo Blockchain indicate that it mined only 204 BTC in October 2022, making it unable to pay back debt. Despite selling 579 BTC with 138 BTC left over, coupled with the number of coins it will mine in Nov. 2022, the company may not cover operational costs. Additionally, it sold almost 4,000 mining computers to CleanSpark, another mining company, on Oct. 31, 2022.

Another major player, Core Scientific, told the U.S. Securities and Exchange Commission that it might be unable to repay its debts at the end of Nov. 2022, sparking fears of bankruptcy.

Additionally, Edwards said Bitcoin miner selling had risen 400% in the last three weeks. Increased selling will put further downward pressure on the price of BTC and deplete a key source of revenue.

After the news of Iris Energy’s default hit the wires, its stock price fell over 12% in intraday trading to $1.64.

Iris Energy stock price
IREN/USD | Source: TradingView

For Be[In] Crypto’s latest Bitcoin (BTC) analysis, click here.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...
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