El Salvador launches its bitcoin mining pool


It’s official: Yesterday, El Salvador launched its bitcoin mining pool. 

It’s called Lava Pool because it’s part of the Volcano Energy project, which aims to use the geothermal energy available around the country’s two volcanoes to generate electricity to mine BTCs.

Volcano Energy: Innovative Bitcoin Mining in El Salvador

The aim of the Volcano Energy project is to use an abundant and sustainable natural resource to generate clean energy, positioning El Salvador as a world leader in bitcoin mining.

At the same time, it aims to promote energy competitiveness, diversification and geographical expansion of the Bitcoin network. 

In addition to geothermal mining, they are also looking to add solar and wind power generation to create a true renewable energy generation park in the Metapán region.

They plan to generate 169 MW of photovoltaic power and 72 MW of wind power, for a total capacity of 241 MW. 

All this energy will be used to power one of the largest mining farms in the world, with a capacity of more than 1.3 EH/s. 

Given that the total global hash rate is currently less than 400 EH/s, this means that if the El Salvador mining farm meets its targets, it alone will account for more than 0.3% of the world’s hash rate

The Salvadoran government will play a crucial role in this project, as it will receive 23% of the profits. 27% will go to investors, while the remaining 50% will be reinvested.

Bitcoin Mining: El Salvador’s new pool

Lava Pool is already mining BTC through a partnership with Luxor Technology. 

Specifically, Luxor is providing its Hashrate Forward Marketplace, which is designed to mitigate the risks of market volatility through automated risk management strategies used by other major bitcoin mining operators.

So the Volcano Energy project as a whole is not yet complete, but at least it has started. 

However, it is not yet clear how much hashrate will be used by this pool. 

According to Luxor’s Chief Operating Officer, Ethan Vera, countries with abundant renewable energy sources can use bitcoin mining to improve the economics of new energy projects. 

In fact, BTC mining can provide a kind of “flexible buyer of first and last resort” for energy producers, generating alternative revenue especially when selling the energy produced is uneconomical.

Other miners can also join the lava pool, because it is a pool.

El Salvador

Of course, behind all of this is the government of El Salvador, the same government that made bitcoin legal tender in the country in 2021. 

Since they did this, the positive effects on the economy of the small (and poor) Central American country have been significant. 

They will be even greater if they actually succeed in bringing the Volcano Energy project to fruition. 

In fact, it would not only be a major mining operation, but also a real turning point in El Salvador’s energy policy. Not only would it dramatically expand the business in the country, but it could even provide the government itself with a new source of funding. 

As Volcano Energy’s Chief Strategy Officer, Gerson Martínez, explains, the pool’s aim is to decentralise mining, in particular by taking advantage of El Salvador’s regulatory clarity in this area. 

The country aims to become the main crypto hub in Latin America, attracting crypto companies to implement its economy. 

It should not be forgotten that it ranks 114th in the world in terms of GDP per capita, ahead of countries such as Cuba, Jamaica and Iraq.

The yield problem

It should not be forgotten, however, that the profitability of bitcoin mining has plummeted since the end of August. 

While in May it was possible to earn more than $0.09 per THash/s per day thanks to the boom in Ordinals, which drove up fees, in recent months it has fallen to $0.06. In 2021, at the height of the bull run, it rose to over $0.40, so current values are almost seven times lower than at the peak. 

In such a situation, only those who can afford very efficient machinery and very low electricity costs can continue to mine successfully, and the availability of local renewable energy certainly helps. 

It is therefore essential that El Salvador’s power generation facilities work very well in order to be able to mine BTC profitably. 

Finally, it remains to be seen what the government will do with the mined BTC. It is possible that the 23% of profits that go to the government will first be converted into dollars, although it is by no means impossible that the government will cash in the BTCs directly and perhaps keep some aside as a form of investment.