We started in 2017 as a mining pool and never stopped bolting things on. LuxOS
firmware. An ASIC brokerage desk. Hashrate derivatives. Fleet management. We also
went and got a retail electricity license in Texas so we can sell miners their power
directly and net it against their pool payout. And we publish Hashrate Index.
Which means I spend my days on the unglamorous half of mining. Fee compression.
Why your S21 doesn't hit spec. What a curtailment credit actually pays out. Who's
sitting on the other side of a hashrate forward.
Things I can actually answer:
- pool economics. FPPS vs PPLNS, why fees keep grinding down, why txn fees are
currently a rounding error - firmware. autotuning, undervolting, and why manufacturers would prefer we didn't exist
- the ASIC secondary market. what machines really trade for, not what the press
release says - selling hashrate forward: who buys it, how it gets priced, what happens when
difficulty moves against you - ERCOT. 4CP, ancillary services, and whether the guys claiming 2 cent power are
lying to you - pool centralization and template construction. I know where this crowd stands and
I'll give you my honest read - the AI/HPC pivot everyone is announcing. Some of it is real
- yes we run altcoin pools. Come at me
Customer names and anything under NDA I'll skip. Otherwise ask the ugly questions,
those are the fun ones. Zap whatever you want answered first and I'll work down the
list.
What do you think of bip110?
I don't think about it at all
Hahaha
What is your favourite wallet?
Do you use Lightning?
Uso a Aqua.
I use Rabby and Xverse
I do not use lightning
@hashbender When will you support lightning payouts please? It would help me a lot.
It's liquidity. Our payout flow is one directional. We only ever send, we never receive over Lightning, so channels drain in one direction and someone has to sit there rebalancing them forever. That's a standing operational job, not a feature. And our larger accounts get payouts that don't fit comfortably in a channel anyway, so for most of our volume Lightning is the wrong rail.
OK understood, it is a cost to rebalance liquidity. I know it's not a charity, but my situation is I have some sats stranded in my Luxor account below the payout threshold. I would be willing to pay the TXN fees, but no way to get them out.
In five years, how much of your business do you expect to be AI/HPC?
Really tough question - Something has to give. We've seen just so much investment in that space that there has to be a cool-off at some point
Based on current trajectory, I'd be forced to say at least 50% of business is AI-related.
I am a bit of an AI doomer myself, so take this with a grain of salt. But the question I ask myself is "is there infinite demand for intelligence? And I think the answer is yes. So, with that mindset, it naturally leads me to think that all economic activity will become AI-dominated.
Intelligence isn’t a demand problem it’s a supply and distribution problem.
I don’t think LLMs solve this.
whether or not LLMs solve it, several hundred billion dollars of capex is being spent as though they will, and that capex is bidding for the same megawatts I am. I have to plan around the spending regardless of whether the thesis is right.
Or reap the rewards when they are wrong.
Like going all in on mining in 2021! now miners are so cheap!!
What's the most surprising thing you've learned starting and running one of the largest bitcoin pools?
That almost nobody who points hashrate at us cares about anything this website cares about.
In eight years I can count on one hand the customers who have asked me a question about template construction, transaction selection, or censorship. It is not a purchasing criterion. It has never once come up in a competitive deal. What comes up is fee, uptime, payout timing, and whether a human answers at 3am when a site trips. That's the whole list.
I don't say that to dunk on anybody. I say it because it explains the thing people keep looking for a conspiracy to explain. Pool concentration isn't a plot. It's an absence of demand. Nobody is suppressing miner-selected templates. Miners aren't asking, so nobody builds it, so it stays hard to use, so miners don't ask. That loop has been running for years and it will keep running until somebody's revenue depends on breaking it.
The second surprise, smaller: how little of this job is cryptography and how much of it is plumbing and customer service. I thought I was getting into Bitcoin. I got into industrial ops with a payment processor attached.
Is that feasible? How do you manage the risk?
It trades today
The shape: a miner sells forward the output of some hashrate over a tenor, usually 30 days out to a year, a few EH at a time, and takes cash or BTC up front. For the miner that's funding. Cheaper than equity, no lien on the fleet. On the other side is a fund or a treasury company that wants hashprice exposure without buying machines, hiring an ops team, or explaining a datacenter to their board. Both sides get something they actually want, which is the only reason the trade exists.
Difficulty risk sits with the buyer by construction, because what's sold is hashrate over time and not a fixed quantity of coin. Difficulty rips, buyer gets less BTC. That's what they're paid to take and it's precisely the risk the miner wanted off the books. The price leg gets handled separately with a non deliverable forward so the miner can lock fiat.
The risk that actually keeps me up is performance. A miner who loses a site or goes bust mid contract can't deliver, and there's no exchange standing behind this. We manage it with collateral, with sizing, and with the structural advantage that the seller mines to our pool. We're the ones paying them, so delivery comes out of a stream we can see and net against.
That was one of my concerns regarding the risks.
By the way, how liquid is this market?
It's tenor dependent. Inside ninety days there are enough counterparties that you can usually get a price in a day or two. Past six months it's bespoke, one buyer at a time, and the price is a negotiation rather than a quote.
Spreads are wide. Single digit percentages wide, not basis points. Clip size is low single digit exahash, so you can't move a large fleet's production in one ticket. There's no order book, no clearing house, no screen. It's a chat market with a broker in the middle, and a lot of the time the broker is us.
So the useful way to think about it: liquid enough that a miner who needs funding can reliably get funded. Not liquid enough to treat as a hedge you can exit quickly. Put a position on expecting to hold it to maturity, because unwinding early means calling the same small number of people and telling them you need out, which is not a negotiating position.
What part of the state of Bitcoin right now makes you most worried?
Complete and total lack of onchain activity. The reasons are up for debate.
This is an existential problem for Bitcoin and there is no workaround. All the BIPs, future challenges, etc... are meaningless without transaction fees onchain.
Just replied to a "fee-pocalypse is nigh" article about this
TLDR is that Bitcoin is not divisible and supply is concentrated such that there will never be enough users to generate meaningful fee market demand... for-profit mining is a waning anomaly, and that this is a good thing
#1534856
Thoughts appreciated
PS: Do you have a testnet4 pool? Devs could use more testnet4 faucets to experiment with cool stuff, especially with more people vibe coding Bitcoin apps.
I'm glad you are spreading the concept of competing RBF attackers burning the hourglassed coins into fees (I was the one who mentioned it during Hunter Beast's Q&A at OP_NEXT 2025).
I haven't checked how Luxor spends its pool rewards, do you coinjoin them before paying out pool participants? Or open Lightning channels?
We do a regular, vanilla onchain transaction - no lightning or coinjoin prior.
Our payment processor runs every hour, so anyone who meets their threshold gets paid out at that time. We amortize the transaction fee across all of the outputs equally.
Right now, it's not much of a burden, but during high transaction fee times, it's our biggest single expense.
Are you running Cluster Mempool on your operation's node? (Bitcoin Core v31+)
I was really surprised that we got sub 1 sat/vB fees last summer. I kind of thought that miners would want to defend that as a valuable interval. Prior to last summmer, weren't we all kind of going along with increasing fees in increments of 1 sat/vB and now we can feebump by fractions of a sat/vB. This seems like it would lead to lost revenue for miners. Am I misunderstanding things? How did you feel about the sudden appearance of sub 1 sat/vB transactions?
You've got the mechanics right and the premise wrong. The 1 sat/vB floor was never
a price floor. It was a relay default in Core, minrelaytxfee, and a floor only
earns you money if there's demand you're turning away. Blocks haven't been
reliably full. The space under that floor was going out empty. A 0.1 sat/vB
transaction isn't taking a slot from a 1 sat/vB transaction, it's taking a slot
from nothing.
Second, you couldn't defend it even if it were worth defending. It's a cartel with
no enforcement mechanism. Any single pool that relaxes its floor out earns every
pool holding the line, submission paths around the public mempool exist, and there
are enough of us that somebody defects on day one. Fee floors need unanimity among
competitors who don't much like each other.
Your bidding ladder point is the good part of the question, and it's correct.
Fractional bumping does compress the increments. It only costs miners money during
congestion, though, and during congestion the clearing rate is 20 sat/vB and what
happens down at 1 is irrelevant. Sub 1 sat/vB is a symptom of a slack market, not
a cause of one.
How I felt about it: fine, we reconfigured. It cuts our costs too, since our own
payout transaction is our single largest expense when fees run hot.
The thing worth being annoyed about isn't the floor. It's that we're arguing over
tenths of a sat while fee revenue is a rounding error in the security budget. No
relay policy manufactures demand for block space.
The free market decides the minimum fee. F2Pool tried to enforce a 5 sat/vbyte minimum in 2018, and had to concede to the 1 sat/vbyte floor allowed by their competitors: https://mempool.space/block/00000000000000000019f48d2b138c03afb5741479c59b808c42e352a5011ff6
Luxor has a lot of product/service offerings. Personally, as in money is no object, if you had to choose only one product/service for Luxor to continue providing, what would it be? And from a business standpoint, which would you choose?
Different answers, which is the interesting part of the question.
Business: firmware. Best margin thing we do and the hardest to copy. Plenty of
people have taken a run at serious third party mining firmware and there are two
left standing. It's also the control layer, so if I keep firmware I can rebuild
most of the rest of the stack on top of it later. Keep the pool and I can't
rebuild firmware.
Personal, money no object: the pool. Which is the worst business of the bunch.
Fees only move one direction, customers switch over a basis point, and what we add
over the next pool is close to nothing on a spreadsheet. I'd still keep it.
Running a pool means being in the chain instead of selling picks to people who
are. I don't want to be a vendor to Bitcoin. The pool is also where I learn
things. Every problem in mining shows up in pool logs before it shows up anywhere
else.
Ask me this in 2019 and I'd have given the same two answers and been wrong about
the business half, so grade accordingly.
I've been pretty interested in stranded energy lately (or energy that doesn't have a market buyer).
I was looking into what are called peaker plants in the US, small power plants that run in shoulder seasons to help balance things, but it sounds like their permitting prevents them from generating for commercial purposes.
I could almost be convinced that the future of bitcoin mining is mostly stranded energy or maybe more broadly waste energy. What are some of the most creative energy sources used to power bitcoin mining that you've come across?
Scoresby, always with the interesting bits!
Where is innovation happening Bitcoin mining? What new things in Bitcoin mining are you most excited about?
been working on a new bitcoin full-node based on libbitcoinkernel: https://bitcoinbackbone.org/
would Luxor be interested to experiment with new full-nodes architecture and generally if there is anything that could be done to improve mining operations ? faster relay, etc
Let me take a look - there isn't much to optimize right now so it's hard to prioritize a change like this. The reason is that orphan rate is already basically 0, and the only other optimization to make would be transaction stuffing, but since blocks are basically empty now anyway, they all fit and there isn't much knapsacking to do.
We'll stay in touch and if things start to develop we can take a look
I read some of your interview with Stephan Livera. Is any of your earlier work on AI still relevant?
Some of it, none of the technical parts. I was on Einstein at Salesforce before
this. Models from that era are museum pieces and none of that code would survive
contact with 2026.
Two things stuck. First, the model is never the bottleneck. It's the data
pipeline, the labeling, and getting the thing running in production without a human
babysitting it. Still true, and still most of why enterprise AI projects quietly
die.
Second, and I didn't appreciate this until much later, compute demand is a physical
business. Someone has to buy the machines, find the power, get the interconnect,
and move the heat. Mining learned that the hard way about a decade before the AI
people had to. It's most of the reason mining companies ended up holding the power
and not the other way around.
I left AI to go mine Bitcoin and AI came and found me anyway.
If there is a chain split after block 961632, how do you think about which tip to mine on?
We'll stay on whichever tip is paying the most, which will almost assuredly not be LukeChain
Will you spare some hashrate for mining eCash blocks when they start next month?
Have not heard of it - taking a look now
Ah the Drivechain fork.
If there is a market with economic activity, there's a world where miners will split some hashrate.
The most recent example of this was Fractal Bitcoin, where miners were arbing it against the motherchain
Are all the Bitcoin miners going to pivot to AI?
More seriously, do you think the days of endless increases in hash rate are over?
We actually just posted about this on Hashrate Index this morning! https://hashrateindex.com/blog/bitcoin-difficulty-is-down-year-over-year-for-the-second-time-ever/?ref=weekly-roundup-newsletter
tl;dr, this is only the second year in history where difficulty is down YoY.
This is because of AI demand for watts alongside the deepest mining bear market we've ever experienced.
Cool! I hadn't seen that yet! Looking forward to reading it.
what's the optimal economic size of a pool? And if it's the entire network, why are we surprised that pools centralize...?
Variance absorption gets cheaper as you get bigger, engineering cost is basically fixed, and the marginal cost of onboarding another exahash rounds to zero. The economically optimal pool is the whole network.
The only things holding it apart are customer preference for not having a single vendor, counterparty caution, and jurisdictional convenience. Those are preferences. They aren't economics, and preferences lose to cost curves over long enough periods.
Which is why shaming the big pool is a losing strategy. You cannot moralize your way out of a cost curve. If you want pool size to stop being frightening, make it stop mattering, which means separating the accounting function from the block building function. A pool that doesn't build the template is a payment processor, and nobody loses sleep over how big Stripe is.
Since you mention it, do you think that FPPS inevitably leads to miner centralization?
Between AntPool and Friends and Foundry, it seems like mining is pretty centralized and a lot of the talking heads seemed to be saying that this is because of FPPS. I'm sure it's not that simple, but I'd love to get your read on payout schemes and how they can support decentralization rather than break it.
Yes
FPPS is heroin for miners. Once they are on, they never get off.
That said, FPPS naturally dies over time. As the coinbase reward goes to zero, transaction fee volatility (as a percentage) increases and makes the "F" part of "FPPS" vary significantly day to day and week to week.
Pools that want to keep "PPS" will have to switch to "PPS+" which eventually just evolves to PPLNS.
So... bitocin fixes this?
If you host mine are you still considered a miner?
I have a S9 I bought off eBay long time ago. Due to the noise I havent plugged it in for a long time! Should I sell it or could I mine with it and make it silent? On residential power paying about $0.14per KWH.
I think your point is that since you don't control the miner phsyically, do you have agency over it's hashrate?
You can take the analogy further - if you don't own your power source, do you actually mine?
At the end of the day there is coordination that needs to occur, and you inject yourself into that stack at some layer. I don't think it's possible to be a completely sovereign miner.
Also, your S9 will look great in a museum or on your bookshelf :)
An S9 is only useful as a demo/training model, there's no power source cheap enough to make it profitable.
How big of a thing is selling heat in the current mining industry?
You mentioned elsewhere that as of now fee revenue is a rounding error. I have heard elsewhere that this will "have to" change at some point, as the block reward continues to be halved.
Do you agree with this, and if so, how do you see us getting there?
#1534983
Posted here basically the same response i'd give you here
FPPS has tremendous market-fit. When viewed alongside your derivatives marketplace, it seems like markets will pay handsomely for reduced volatility. I can't imagine that changing. PPLNS seems like it will always payout to a minority of hash. Is there reason to believe otherwise? In what kind of future might markets prefer PPLNS-like payouts?
What happenings are you most excited about (wrt bitcoin mining) over the next year?
We had Michael Schmid on last week #1530763 and he talked about their mujina firmware they are working on. Are you aware of this project? What do you think of it?
If you only look at X, it seems like bitcoin mining (especially pool operators) are siloed from the bitcoin users just as the ETF guys seem to be siloed from the rest of us.
How much do you think this is a product of the distorted way that X presents the Bitcoin community, versus a real separation between miners and users?
@hashbender I would love to hear more on the history of Luxor and company management. I have so many questions. Also on your view of Bitcoin.
Did you bootstrap? If not, how did you find and approach investors? Is it just a numbers game? Is it all about who you know or is it about having a great product? Both? Any unconventional advice there? Do you think that bringing in investors robs you of your vision by giving you another boss to work for or do you think of them mostly as a means to an end?
Any tips on growing the company? Is it easier after you get to a certain size or harder? Different? How?
These days, how do you ensure you're not stagnating? Being the CEO, how do you decide what to focus on next? How do you ensure you get original ideas? How do you ensure you're not surrounded by yes-people?
What do you think is the main job of you as the CEO? What do you actually do day to day? How do you decide what to delegate? If people you delegate to or hire do not have the same standards, how do you avoid thinking that you might be dragging the company down?
Do you get depressed sometimes thinking that you're just in a rat race? Why not retire today? What is driving you today? Is it harder or easier than in the early days? Do you work every day? What do you do when you do not work? How often do you exercise, for example?
What do you think of the "Bitcoin is bad for the environment" claims? Are you actively fighting that or just ignoring that? Are you a Bitcoin believer or do you do this mostly because it's a profitable business?
What would you like to do to support Bitcoin? It seems like these days it is extremely unpopular. Are you worried about Bitcoin failing? Reflecting on the past 10 years, is Bitcoin progressing, regressing, or stagnating? Do you even care?
Pool concentration keeps coming up as a censorship/centralization worry — what would actually move the needle on decentralizing hashrate across pools
I'd really love to increase the dialog between average bitcoiners and bitcoin miners. We've had Bob Burnett and Rapha Zagury on, can you recommend another miner that might be interested in doing an AMA here?