Mining is what keeps many blockchain networks working. If years ago, when there were only a few cryptocurrencies out there, this statement was true then today it is slowly fading away. Investing in expensive cryptocurrency mining hardware is simply not worth it anymore, especially when the blockchain comes as an investment gateway to bring in the opportunities that made the rich richer to individual investors.
In this article we’re going to understand why crypto-mining is not sustainable in the long term and how projects like Blue Hill Foundation, Propy, and MicroVentures are offering an alternative investment: co-ownership in traditional market sectors that stayed exclusive for qualified investors for decades. No more!
Cryptocurrency mining is becoming obsolete
The first cryptocurrency ever invented, Bitcoin, is based on a validation system that needs a sustained process in order to keep its network alive. This process is called Proof of Work. Physical hardware is working (mining) day and night to produce bitcoins. Electricity is 90% of the cost of producing bitcoin, so it’s safe to assume that “mining” in cryptocurrency means producing a digital asset by consuming electricity.
While Proof of Work is powering Bitcoin’s network even today, the majority of projects are replacing it with a new validation system: Proof of Stake. We’re not going to dive into the technical differences between the two here, but one change is important to highlight: No miners exist under the Proof of Stake model.
10 years have passed since blockchain technology was invented, and without even mentioning the difference in energy consumption between the two, it’s clear that the technology is evolving and moving toward new innovations. Actually, Ethereum, the second largest cryptocurrency which started as a Proof-of-Work network is already planning on making the transition to Proof of Stake.
Cryptocurrency mining is not only as profitable as it was years ago, but it is also soon to become extinct. Investing in such hardware in 2019 comes with huge risks and no tempting profits.
You might even consider investing in real mining operations that, instead of producing a digital asset they are actually extracting tangible, valuable metals from the earth’s crust. Once being considered a tough and dirty activity is nowadays a high-technology operation that uses computerized remote-control equipment and complex machinery handled by highly trained personnel.
Cryptocurrency mining and mineral mining are brought together only by a naming similarity. However, as a cryptocurrency user, investing in such a traditional sector is becoming a reality thanks to the same blockchain technology that you’re passionate about.
Blockchain: the gateway for new investment opportunities
If the early Internet assets were intangible, such as emails or articles that were just a support for the valuable information, the modern Internet deals with digital assets holding immediate value: cryptocurrency. The new addition of encoded data on a blockchain network simplifies business, quickens operations, reduces errors, and removes the middleman.
The decentralized way of handling data is moving beyond the “geek era” of mining your own coins behind a computer, toward becoming a gateway for the global population (you) to new investment opportunities. This is the kind of investment that made the rich richer during the previous decades.
The Blue Hill Foundation is a co-owner of the Blue Hill Mine, a real mining operation located in Mongolia, and it’s forecasted to have one of the largest copper reserves in all of Asia.
The B.H.Foundation owns 24% of the mining operation and it is looking to offer a co-ownership opportunity by issuing a cryptocurrency with divided benefits: the BHM-Token. Traditionally, this operation should have been done in the old fashion way, on paper. By leveraging blockchain technology, however, they are moving the entire process in the digital space with a limited, asset-backed, infinitely scalable token; each token having the rights to (0.00000004%) co-ownership of the Blue Hill Mine.
We’ve seen more and more of such companies offering new decentralized investment opportunities to individuals lately.
Propy may be new to the space, with its initial coin offering (ICO) having just concluded in 2017, but it’s clear that as an international real estate marketplace this company is changing the way we perceive property ownership.
Their use of the blockchain allows anyone to break into real estate investing by getting fractional ownership of a property with a token. These tokens can represent ownership in the underlying physical asset, equity in a legal structure that owns the asset, an interest in debt secured by the real estate, or a stream of income based on the cash flow from the asset.
MicroVentures is another story but with the same goal. This company specializes in regulation crowdfunding, which refers to a form of equity crowdfunding that allows everyone to invest, not just accredited investors. That’s possible if the company is registered as a certified “broker-dealer”.
It might not use the blockchain at its core, but through the startups and small businesses they helped to raise capital, there are numerous companies actively using the blockchain in their platforms and distributing their tokens through ICOs. While there are many other crypto investment platforms online, that doesn’t mean they are fully legal. MicroVentures differentiates itself from the crowd by being certified from various relevant authorities.
That’s a pretty big step toward financial inclusion. While cryptocurrency mining is slowly dying, attractive profits can be accessed from other sources via the blockchain.
Securities (tokens) available to everyone!
Blockchains are where digital relationships are being formed and secured. Initial coin offerings allow startups to raise funds in exchange for cryptocurrencies. And with the 2017 crypto hype and many companies looking to score in funds without any intention to develop a real product, this relationship lost the trust of the users.
The traditional sector has the Simple Agreement for Future Equity (SAFE), through which qualified investors can buy future equity in a company similar to a warrant. In crypto, there are Simple Agreements for Future Tokens (SAFTs) which allows investors to buy tokens that will be received at a later date and use them as utilities on the project’s platform. For the latter, even if the tokens were distributed, in most cases the underlying platform failed at implementation. What value do these tokens have in this situation?
That’s where security tokens come in to help investors. Any tokens backed by external, tradable assets may be classified as securities and, of course, be regulated as securities. In our case, if the token is issued by a company whose valuation can grow over time (depending on its performance), the owners of these digital assets inherit programmable ownership rights of the underlying company. An investment that is now protected by the securities laws.
“When investors are offered and sold securities, they are entitled to the benefits of state and federal securities laws and sellers and other market participants must follow these laws,” as stated by Jay Clayton, Chairman of The U.S. Securities and Exchange Commission.
MicroVentures has its own internal filtering process, listing only those projects who are considered the safest investment opportunities to its investors. The process is so selective that “it’s easier to get into Harvard than it is to get listed on MicroVentures.”
Propy, once a pre-product company running an ICO, now has a fully functional marketplace where its users can spend their tokens on investing in real estate opportunities. However, from the three examples that we explored in this article, Blue Hill Foundation seems to be the one closest to what could be the future of investing.
The B.H.Foundation is managing a PRE-STO. As stated before, the BHM-Token is the digital proof of co-ownership of the Blue Hill Mine. It’s a security, a fully regulated, asset-backed token. And by securities law, it is available only to qualified investors, right? Exactly. That’s why, for you as a mainstream investor, the B.H.Foundation comes with another token, BHF-Token, an unregulated yet asset-backed token digitally available to purchase by anyone on their website prior to the exclusive STO via Blue Hill Mining. At the STO launch, BHF-Tokens can be exchanged (1 to 1) to the BHM-Tokens. Best of both worlds!
However, like any investment, it comes with its own risks. BHM-Tokens are unregulated. Even if the B.H.Foundation comes with the promise of exchange, until you become the owner of the fully regulated BHM-Tokens, as an investor you are not protected by any of the securities laws. For you to legally become part owner of the Blue Hill Mine, the B.H.Mining-STO should happen under the approval of FINMA (the Swiss Financial Market Supervisory Authority). If B.H.Mining-STO doesn’t receive the required license by FINMA or any similar authority, based on their terms and conditions every investor will be reimbursed 0.00000004% for each BHF-Token as the result from the sale of the Blue Hill Mine to the stock market. That’s the worst-case scenario but you should make sure you are aware of all risk factors of your possible investment.
The blockchain as a financial tool opens up huge opportunities to individual investors, including access to areas once closed, such as the traditional sectors like mining, real estate, or stocks. This new process, as well as the STO model, allow investors more liquid opportunities and, in the future, might even make the accreditation system obsolete or unnecessary.
Investing is not a simple process and it requires ample counsel and guidance from professionals with both legal, tax, auditing, and technology experience. It’s good to see more openness and globalization in the process but, in the end, you will need to do your own research and never invest money that you can’t afford to lose.