On the 14th of October, Binance, one of the world’s largest cryptocurrency exchanges, announced the launch of a $500 million lending pool for Bitcoin miners to overcome the market downturn. The market goes down by rising energy costs and low bitcoin prices, and to assist companies during this situation, Binance took this step.
Binance said about its pool project that it was designed to provide secure debt financing services to the public and private blue-chip Bitcoin (BTC) mining and digital asset infrastructure companies globally.
According to Binance, the conditions for loan access are that the borrowers will have access to loans on an 18- to 24-month term, with 5% to 10% interest rates. Moreover, the borrowers will have to provide security in the form of physical or digital assets that will have to be deemed satisfactory to Binance.
In the current industry context, it has become more difficult for miners to turn a profit, and in this situation, Binance’s step of making a lending pool makes sense. The mining industry has been under pressure for several months, as in the last month, Iris Energy sold $100 million in equity to generate cash, and Compute North filed for bankruptcy.
This time, the mining difficulty rose around 14%, which is an all-time high, and as a result of that, it became difficult for miners to turn a profit. At this time, miners need more resources to continue to turn a profit, such as users having to go through that many hashes or guesses.
Bitcoin, which still relies on an intensive proof-of-work validation model, its mining became difficult and more expensive to run due to soaring energy costs. Ethereum recently switch to a proof-of-stake validation model, which made them profitable by lowering the network’s energy usage.
At the start of the month, Maple Finance also announced a $300 million lending to overcome the market downturn for miners, but it was with up to 20% interest rates. This shows that the Binance lending pool is better than Maple’s lending pool.
