Marathon Digital Holdings, the leading publicly traded Bitcoin miner by market capitalization, announced its expansion into altcoin mining late Wednesday. This strategic move aims to diversify its revenue streams following Bitcoin's most recent halving event.

The altcoin Marathon has chosen to mine is Kaspa (KAS), deploying its first Kaspa application-specific integrated circuit (ASIC) miners in September 2023. Marathon has acquired approximately 60 PH/s of Antminer KS3, KS5, and KS5 Pro ASICs from Bitmain. These units boast profit margins of up to 95%, considering the current network difficulty and the price of KAS.

Currently, half of Marathon's Kaspa hashrate is operational at its Texas facilities, with the remainder expected to be active by Q3. As of June 25, Marathon reported mining 93 million KAS, valued at around $15 million. In contrast, Marathon mined $176 million worth of Bitcoin in Q1 this year and holds 17,857 BTC, equivalent to approximately $1.1 billion as of May 31. This places Marathon as the largest public miner in terms of holdings and the second-largest corporate holder overall, behind MicroStrategy’s 226,331 BTC, valued at $13.8 billion according to Bitcoin Treasuries data.

Kaspa, a relatively lesser-known cryptocurrency, ranks as the fifth-largest proof-of-work cryptocurrency behind Bitcoin, Dogecoin, Bitcoin Cash, and Litecoin. According to CoinGecko data, Kaspa has a market cap of $4.2 billion and a 24-hour trading volume of $128 million. Its circulating supply is approximately 24 billion KAS, with a total supply capped at 28.7 billion KAS and a current block reward of 103.83 KAS.

Kaspa employs a proof-of-work consensus mechanism but differentiates itself from Bitcoin by using a BlockDAG (Directed Acyclic Graph). This technology enables the simultaneous production of multiple blocks, allowing for one block every second, compared to Bitcoin's average of one block every 10 minutes. This faster block time potentially allows Kaspa miners to earn more block rewards within the same timeframe.

Adam Swick, Marathon's Chief Growth Officer, emphasized the benefits of diversifying into Kaspa mining. "By mining Kaspa, we create a revenue stream diversified from Bitcoin and directly tied to our core competencies in digital asset compute," Swick stated. He highlighted Marathon's advantageous position due to its existing infrastructure, relationships with hardware manufacturers, strong balance sheet, and team expertise, enabling the company to capitalize on the higher margins available in Kaspa mining. Swick expressed enthusiasm for continuing to support innovation in proof-of-work ecosystems.

Following the announcement, Marathon’s stock closed up 0.6% at $19.37 on Wednesday and rose an additional 2% to $19.75 in pre-market trading. Despite these gains, the stock is down 27% year-to-date according to TradingView.

Bitcoin's fourth halving occurred on April 20, reducing block rewards from 6.25 BTC to 3.125 BTC, impacting miners' revenues and profit margins. Bitcoin halvings, which happen approximately every four years, reduce the block subsidy by 50%. This recent halving means miners collectively produce around 450 new bitcoins daily, down from 900 bitcoins previously. Despite the reduction in block subsidies, miners continue to earn transaction fee rewards for each block mined.

Marathon Digital's venture into altcoin mining represents a strategic diversification of its revenue streams in response to the challenges posed by Bitcoin's halving. By mining Kaspa, Marathon leverages its infrastructure and expertise to generate additional revenue, demonstrating its commitment to innovation and growth within the proof-of-work cryptocurrency ecosystem.