It’s no secret that the Bitcoin boom has rapidly evolved to transform the way we imagine global currency in a digital world. As cryptocurrency continues becoming a normalized alternative to cash, coins and credit cards — more merchants are accepting this digital money as a viable payment method.
Bitcoin transactions are made directly between users, without the need for physical currency. Additionally, Bitcoin can be exchanged for other forms of money, products or services. These transactions are verified by a network of nodes and recorded in a publicly distributed ledger, or Blockchain, that functions to authenticate bitcoins as legitimate currency. Bitcoin mining refers to bitcoins that are created as a reward, in which users verify and record transactions in the Blockchain. Users who mine successfully receive payments per transaction in the form of new bitcoins.
Founded by Marco Streng and a smart team of early Bitcoin investors, Genesis Mining currently stands as a global leader in cryptocurrency cloud mining, attracting over one million customers and employing hundreds of full-time staffers around the world. The company built their first large-scale Bitcoin mining facility in 2014, followed up in 2016 with the construction of the world’s largest Ethereum mining facility. In March of 2016, Genesis Mining also launched the Logos Fund catering to top-tier venture capitalists, which has raised over $100 million in assets.
Aiming to accelerate the development of the Blockchain sector, Genesis Mining partnered with Foire Group to go public and launch HIVE Blockchain in 2017. Establishing the largest listed blockchain infrastructure company, HIVE operates miners that power various types of cryptocurrency, providing the backbone for Blockchain use cases. The company has raised $115 million in funding to date.
I spoke with HIVE Blockchain CEO Harry Pokrandt about the vision behind his company, the evolution of Blockchain mining, and how cryptocurrency is defining the future.
What is the specific void or opportunity you saw that inspired the partnership and launch of HIVE?
Harry Pokrandt: When you look at the cryptocurrency industry, there’s a lot of excitement. But, a lot of this buzz simply comes from the price gains. Bitcoin, for example, grew over 12,000% in 2017 and Ethereum grew over 7,000%. The entire market cap of all cryptocurrencies is now nearly $270 billion. This is impressive considering that it didn’t even exist 10 years ago. But, if you dig a little deeper, you’ll find there is far more to be excited about than just short-term price increases. At the core of what makes cryptocurrencies possible is a technology known as Blockchain. Without Blockchain technology, cryptocurrencies simply couldn’t exist. Today, people are realizing that Blockchain technology has use cases far outside of just currency. Currency is simply one use case, as email is simply one use case for the internet. Blockchain has the power to decentralize nearly every industry in the world and that’s what’s creating all the buzz. Despite all of the buzz and excitement, the industry is still in its infancy. Cryptocurrencies can be confusing to buy, hold, and use. There are also very few opportunities to invest directly into Blockchain technology infrastructure. This leaves a lot of investors stuck on the sidelines and missing out on one of the most disruptive technologies we’ve seen in decades. Seeing this need and realizing there was an opportunity to make investing into Blockchain infrastructure more accessible to investors, we created HIVE Blockchain in the fall of last year. Today, HIVE is a blockchain infrastructure company that is publicly traded on the TSX Venture Exchange , and we bridge the gap from the cryptocurrency world to the traditional capital markets.
Describe your business model and what makes HIVE an innovative or disruptive force in the space?
Harry Pokrandt: What makes Blockchain technology possible is a process known as mining. Mining is essentially a distributed network of computers spread out across the world that work together to maintain integrity and trust within the network. Instead of your bank confirming how much money is in your account, how much you’ve sent out, and how much you’ve received — a decentralized network of computers does the confirmations and verifications. In return, the computers are compensated in cryptocurrency. At HIVE, we own several cryptocurrency mining farms, which are large data centers filled with thousands of computers all working to confirm the transactions taking place for various cryptocurrencies such as Ethereum and zCash. We have an exclusive partnership with Genesis Mining, who is the largest cloud mining provider in the world. Genesis Mining has developed proprietary mining software, machines, and systems, providing a major competitive advantage. By combining the technological expertise of Genesis Mining and the HIVE team’s understanding of the capital markets, we offer unique way for investors to gain exposure to the cryptocurrency markets by investing on the core blockchain infrastructure that powers them. As our mining computers work to generate cryptocurrency, the majority of what’s generated is held as part of our long-term investment strategy. This gives investors exposure to the operating margins of mining, along with exposure to our ever-growing portfolio of cryptocurrencies.
Describe the current landscape of Blockchain mining and in what ways has the industry grown this point?
Harry Pokrandt: Marco Streng, the CEO and co-founder of Genesis Mining, didn’t start mining in a warehouse—he actually started in his college dorm room back in 2013. At the time, dorm rooms, basements, and spare bedrooms were where a lot of cryptocurrency mining took place. You would order a mining rig (a computer dedicated to mining), set it up, and you were officially a cryptocurrency miner. Today, that’s changed, and the industry has gone from dorm rooms to an industrial scale. Millions of dollars in cryptocurrency are rewarded each day to the computers powering the network, making mining a multi-billion dollar industry. This has increased the technological barriers and created an arms race, as mining companies compete for technology and location. Scale is now extremely important, and the companies with the most access to capital and low-cost energy sources will emerge as the dominate industry players.
It’s been reported that Blockchain mining consumes very large amounts of energy — How does HIVE address these environmental concerns?
Harry Pokrandt: There are certainly a lot of reports highlighting energy consumption. But, we believe it’s extremely important to understand that not all mining is created equal. China, for example, is the largest country for cryptocurrency mining. However, they are also the largest consumer of coal-powered energy in the world. We believe there needs to be a distinct line drawn between mining companies operating their facilities on clean energy and those who are not. At HIVE, we are proudly powered by 100% clean energy at both of our locations. Our Iceland facilities are powered entirely by geothermal energy and our Swedish facilities are powered entirely by hydropower. We also just recently completed an acquisition of Kolos, which owns 64 hectares of property in Norway. Kolos is perfectly positioned for rapid expansion and has near term access to 30 MW of clean energy.
How do you see the industry evolving in the next 3-5 years and what role do you see HIVE playing in leading this shift?
Harry Pokrandt: Over the next few years, we’ll see Blockchain technology evolve far outside of just currency and financial services. It will disrupt and decentralized nearly every industry that exists and truly will change the world. This new decentralized world is being referring to as the ‘web 3.0’, and it’s something we’re very excited about here at HIVE. Our vision is to truly be the backbone of this new web 3.0 decentralized world by building, operating, and acquiring the critical infrastructure that will be required to power it.