3. Bitcoin Mining Firm Poolin Latest to Halt Withdrawals
- Poolin, one of the largest providers of Bitcoin mining-pool services, has suspended all withdrawals, flash trades and internal transfers within their system, citing the need to preserve liquidity.
- The liquidity crunch comes at a time when Poolin is completing the costly process of moving its mining operations to Texas since China banned crypto mining last May.
For the uninitiated, the role of a Bitcoin mining pool is intended to be relatively straightforward – pool computing resources to increase the odds of solving the mathematical puzzle that allows a miner to secure the blockchain and receive the block reward.
Because of the competitive nature of Bitcoin mining in particular, pooling resources ensures that a miner receives their share of the block reward, based on their contribution towards the total mining pool’s computing power.
Mining pool companies have become an integral part of the Bitcoin mining industry with software that aggregates computing power from miners to increase the probability of winning the token rewards by securing the Bitcoin network charging a fee for providing such services.
Many miners including Marathon Digital Holdings (-2.28%) and Riot Blockchain (-3.47%) use mining pool services as a single miner has a very slim chance of winning the Bitcoin rewards.
The miners would rather combine their power and receive a share of the rewards if their pool wins and pools allow miners to withdraw Bitcoin rewards through a wallet owned by the pool.
However, Poolin, one of the largest providers of Bitcoin mining-pool services, has suspended all withdrawals, flash trades and internal transfers within their system, citing the need to preserve liquidity.
The Chinese firm has seen a significant drop in computing power in its mining pool over the last three days.
Poolin representative said that this imperative is to serve their goal of preserving assets, stabilizing liquidity, and operations in the midst of the dull crypto market.
According to btc.com, Poolin is the sixth-largest Bitcoin mining pool by computing power.
The liquidity crunch comes at a time when Poolin is completing the costly process of moving its mining operations to Texas since China banned crypto mining last May.
But the recent suspension of withdrawals by Poolin raises questions as to what the mining pool was doing with mined cryptocurrency that miners did not withdraw from the system.
When lending cryptocurrencies was very much in vogue, it’s entirely possible that Poolin lent out the assets of pool contributors, promising them a higher return if they were not to withdraw their pool stakes.
For the most part, mining pools allow Bitcoin rewards to be withdrawn from pool wallets every 24 hours, ensuring liquidity for miners.
But some mining pool companies incentivize miners to leave their mining rewards in pool wallets for longer, enticing them with attractive yields and other lending products.