Marathon Celebrates Record Earnings With New Bitcoin Layer 2 Anduro

Key Takeaways

• Marathon Digital reported annual earnings of $423 million in 2023.
• The Bitcoin miner marked the record income by announcing a new Bitcoin Layer 2 – Anduro.
• Anduro consists of a network of Bitcoin sidechains, which could provide additional revenue streams for BTC miners.

Marathon Digital published its 2023 earnings statement on Wednesday, February 28. The Bitcoin miner reported a 229% increase in annual revenues, which surged to $388 million. After registering a loss of $543 million the previous year, it marked its return to profitability by announcing a new platform – Anduro.

Described by Marathon as a “multi-chain, layer 2 network on Bitcoin” Anduro, at least in theory, supports complex applications while leveraging Bitcoin’s consensus mechanism for security. 

Why Does Bitcoin Need Scaling Solutions?

Because of its proof-of-work consensus mechanism and well-established ecosystem of miners and users, Bitcoin is widely regarded as the gold standard of blockchain security. But unlike the generation of blockchains that followed in its wake, it wasn’t designed to support complex applications. 

At heart, Bitcoin will always be about payments. In line with Satoshi Nakamoto’s original vision, the network’s fundamental purpose is to transfer a single asset (BTC) between users in a secure and trustless manner.

In recent years, however, alternative Bitcoin use cases have proliferated. From NFTs to memecoins, the network now supports a host of additional functions, with users drawn by the prospect of inscribing transactions on the world’s most trusted blockchain.

At times, this has been to the detriment of the platform’s primary role as a peer-to-peer payment network. For example, Ordinals transactions have been known to cause major spikes in gas fees, making Bitcoin impractical as a means of payment.

In light of this problem, the need for Bitcoin scaling solutions has become increasingly apparent.  Popular Layer 2 solutions include Rootstock, Liquid Network and Bitcoin Lightning, each designed to scale the blockchain’s capacity and functionality.

Anduro: the Latest Bitcoin L2

According to Anduro’s creators, the new L2 should “revolutionize the future of blockchain innovation”. 

As well as helping to lower transaction fees and speed up finality, the platform will function as an application layer that “creates new forms of programmability, but also makes this functionality accessible,” they claimed . 

Initially, the network consists of two sidechains: Alys and Coordinate. Alys is an Ethereum-compatible chain designed for issuing and trading tokenized real-world assets. Coordinate, on the other hand, is geared toward scaling Ordinals.

Going forward, Marathon anticipates third-party developers launching their own Anduro chains. 

Securing Marathon’s Revenue Ahead of Halving

For Marathon, the central appeal of Anduro lies in the concept of merge mining. This process sees multiple cryptocurrencies mined at the same time without expending additional resources.

The company said the new L2 will help “sustain the long-term incentives of Bitcoin Proof-of-Work”. It claims it will do this by providing additional revenue streams for miners. As their native token, sidechains use Anduro BTC, which is pegged to Bitcoin and exchangeable on a one-to-one basis with BTC.

Although Marathon made record profits last year, by promoting a technology that will help it diversify its revenues, the firm seems to be acknowledging that the good times might not last.

With Bitcoin block rewards set to reduce by 50% in April, miners may see their income drop off a cliff, at least in the short term. In a sector known for razor-thin profit margins, the looming halving threatens to put some mining companies out of business. 

For mining to remain profitable, the price of BTC needs to keep rising. But history suggests that each bull is inevitably followed by a bear. During those periods when crypto markets tank, alternative sources of income could help companies like Marathon weather the storm.