Luxor Technology is committed to making bitcoin mining more accessible. As such, the company has launched a range of products (mining pools, hash rate derivatives, data analytics, ASIC brokerage services) to help bitcoin miners of all sizes grow their businesses.
Aaron Forster, the company’s director of business development, joined the company in October 2021 and has seen the team grow from about 15 to 85 people in three and a half years.
Before entering the bitcoin mining space, Forster spent a decade in Canada’s energy industry, which is one of the reasons he discussed the future of mining in Canada and the United States at this year’s Consensus Bitcoin & Mining Summit. Stay tuned for full coverage of Consensus 2025, which takes place May 14-16 in Toronto.
Ahead of the event, Forster shared with CoinDesk his thoughts on bitcoin miners’ shift to artificial intelligence, the growing complexity of the mining industry, and how Luxor’s products can help miners hedge against various forms of risk.
This interview has been condensed and edited for clarity.
CoinDesk: Mining pools allow miners to combine their computing resources, thereby improving their odds of winning a bitcoin block reward. Can you explain how Luxor’s pool works?
Aaron Forster: Mining pools are essentially aggregators that reduce the variance of individual mining. Solo mining is like buying a lottery ticket, which means you could plug in your mining machine today and win a block reward tomorrow or 100 years from now. But in the meantime, you still have to pay for electricity. When mining on a small scale, this is not a big deal because you can scale up and create a business around it.
The most common type of mining pool is PPLNS, which stands for Pay Per Last N Shares. In simple terms, this means that miners don’t get paid unless the pool mines successfully. This is also due to the luck factor, so it’s no different than the situation of a single miner. However, this can introduce revenue volatility to large industrial miners.
As a result, we’ve seen the emergence of so-called “pay-per-share” (FPPS), which Luxor is operating for our bitcoin mining pool. With FPPS, whether we find a block or not, we still pay miners based on the number of shares they submit to the pool. This provides miners with certainty of income, assuming the hash price remains constant. We have effectively become an insurance provider.
The problem is that you need a very deep and strong balance sheet to support this model, because while we reduce the variance of the miners, the risk now falls on us. So we need to plan for this. But this can be calculated over a long enough period of time. We have different partners in this regard, so we don’t take the risk entirely on our balance sheet.
We have become one of the leading hardware suppliers in the secondary market. The main business is concentrated in North America, but we have shipped to more than 35 countries. We work with all types of customers, from public companies to private companies, from institutions to retailers.
We are primarily a broker, which means that we mainly match buyers and sellers in the secondary market. Sometimes we interact with ASIC manufacturers, and in some cases, we hold proprietary positions, which means that we buy ASICs with funds from our balance sheet and then resell them on the secondary market. But most of our trading volume comes from matching buyers and sellers.
Luxor also launched the first hash rate futures contract.
We are trying to move the needle in the Bitcoin mining space. We are a hash rate market, depending on how you look at our mining pool. We want to take a big step and bring hash rate into the world of traditional finance (TradFi).
We want to create a tool that allows investors to invest in the price of hash rate without actually owning mining equipment. The price of hash rate refers to the amount of money miners get paid per hour or per day, and it fluctuates a lot. For some, it’s a hedge, and for others, it’s speculation. We are creating a tool for miners to sell their hash rate forward and use it as basic collateral or to finance growth.
We say, “Let’s allow miners to basically sell prepaid hash rate, get Bitcoin upfront, and then they can use it to do whatever they need to do, whether it’s buying ASICs or scaling up.” It’s basically collateralizing hash rate. So they are obligated to provide us a certain amount of hash rate every month for the term of the contract. Before that, they receive a certain amount of Bitcoin upfront.
There is an imbalance between buyers and sellers in the market. We have a lot of buyers, which means both individuals and institutions want to earn a yield on their Bitcoin. The price at which you lend Bitcoin is effectively your interest rate. However, you can also think of it as buying that hash power at a discount. This is important for institutions or individuals who don’t want to actually participate in Bitcoin mining, but want to keep an eye on the hash price or hash power. They can do this in a synthetic way by buying Bitcoin and putting it into our market, effectively lending it, earning a yield, and buying that hash power at a discount.
What do you think is most exciting about Bitcoin mining right now?
The acceptance and natural progression of our industry in other markets. We can’t ignore the transformation of high-performance computing (HPC) for AI. Large mining farms are no longer just building large buildings and doing high-power density Bitcoin mining operations, but are starting to become power infrastructure providers for AI.
For me, using Bitcoin mining as a stepping stone to larger, more capital-intensive industries like AI is exciting because it kind of gives us more recognition because we’re looking at this from a completely different perspective. I think the most classic example of this is the Core Scientific/CoreWeave deal structure, how they brought these two companies together. They complement each other. It’s really exciting.
Looking at our own product roadmap, we have no choice but to follow a similar roadmap as Bitcoin miners. Many of the products we build for the mining industry are similar to the needs of AI at different levels. It is important to note that our industry is much simpler than the AI industry. We are just entering the field of high-performance computing (HPC) and are still in the early stages.
