The advantage of bubbles, when they pop, is that they make it possible to do a big spring cleaning. And, on the side of the mining services provider, we can say that the purge was severe.
Let’s go back a few months ago…
– The sector has been the target of many scams (it has been highly targeted, as have been the exchange and blockchain projects).
– The price of cryptocurrencies has fallen sharply, making unprofitable most of the mines that had been built in a hurry, with machines that are not very efficient and use a huge amount of energy.
In short, 2018 was not a very successful year for mining companies and left the sector with a sulfurous reputation and a lot of closed doors.
THE ART OF TIMING
If there’s one thing I’ve learned from seeing talented investors, it’s that you have to buy when it goes down. Get in the markets when everyone is not interested. Because that’s where you do the best business.
It is not when something is in the spotlight that you have to buy (hello, BTC buyers from December 2017!) , it is when everyone is running away from it that you should do it.
And that is exactly what is happening, for crypto in general and for mining in particular.
All the crypto investors of 2017 and 2018 have lost their stake, investing without looking, blinded in pure FOMO.
The market is at its lowest.
Social networks are silent.
Everyone believes crypto is dead.
This is typical of a phase of despair, well known from the economic cycles at the end of the crash.
This is the best time to buy.
Because the only projects that remain in the running are those that really have faith.
Who wants to launch a scam when the most hyped projects are struggling to raise a few million (let’s leave aside the Launchpad masquerade) and where the few remaining investors are ultra-suspicious?
Who wants to spend energy setting up a project in such an uncertain context, without being intimately convinced that the project is truly exceptional… (and not just an opportunity to surf the hype wave to make easy money, as in 2017)?
So this is the time I choose to focus on second-generation mining services projects.
The context in which these projects are launched is radically different from the one experienced by their elders.
1. It is necessary to be profitable with a much lower crypto price.
Manage your resources intelligently. Optimize everything that can be optimized (equipment, location, electricity prices, teams, etc.). Possibly find solutions to make the round back during the hardest periods… and start mining again once the bad weather has passed.
2. The carbon footprint must be taken into account.
It is well known that the PoW system is an ecological disaster. It is more than likely that regulations will quickly emerge to reduce them, either by financially penalizing companies (as is already the case in many countries for the most polluting cars, which are overtaxed at the time of purchase or restricted in their uses) or by simply prohibiting them. Thinking today of a mining business without asking the question of sourcing its energy is today irresponsible and proof of a very short term vision.
3. It is necessary to take into account a market that is regulated
More and more countries have now defined laws governing either the activities of crypto projects or their taxation. It is no longer the far west but a civilized country (well, okay, not quite…). Projects will have to start to be accountable and not do anything stupid anymore.
These 3 major changes are forcing projects to strive for excellence.
Radically different from their elders, they are better thought out, more reliable, more built.
I, therefore, investigated the projects in the process of being launched, which I considered to be the most interesting and which correspond to the following criteria:
– an ICO/STO/IEO project in progress or to come,
– focusing on revenues from cryptocurrency mining,
– and a resolutely green approach.
Among all the projects I have been able to analyze, I have selected 5 that seem to me to stand out from the crowd. 5 quality projects that I analyzed and contacted the teams in order to refine my understanding of their approach. You will find for each of them a description of their strategy as well as what I find interesting (or less interesting) in their way of doing things.
A summary table will conclude this comparison.
Disclaimer: this list is purely personal and subjective. It does not pretend to be exhaustive (you can also send me other links to projects of this kind if you have one). It is in no way investment advice. I have tried, as far as possible, to validate with the projects their information but some errors may have sneaked into it.
Batmine is a European company based in Bulgaria (in order to benefit from a 10% tax advantage) that plans to open mining centers in the Czech Republic.
They will offer a wide range of services: classic cloud mining, custodial services (they manage a customer’s equipment and power supply), hardware sales. Access to these services will be possible via payment in BATE, their token.
The project seems well advanced: a deal is already defined to guarantee a supply price at 4 cents per Kwh, and the locations of mining farms are identified.
They co-construct their miners with a specialist, for high performance and adaptability. It’s gonna be really fast (they announce 55 Th/s). They are also developing a fluid cooling process that reduces energy costs for cooling by 95%.
In their business plan, they plan to invest heavily in R&D (20%) and equipment renewal (25%). This is reassuring because it is a key element in this market where everything can quickly become obsolete, and it is often forgotten in projects.
Batmine returns 100% of the profits from cloud computing to the miners (including transaction costs included in the mined block, historically captured by mining companies but not redistributed) which is the most honest.
They will contractually transfer 30% of their profits over 10 years to investors through a Silent Partnership. The investment title will be transferable if you want to sell or resell it. If the token itself remains a utility, investors partially benefit from the advantages of a security with a profit-sharing scheme. During the ICO, you buy investment titles and get free tokens as a bonus.
The team is reassuring and the WhitePaper very complete.
It remains a Utility token (which gives them more flexibility to launch quick) where a Security token would have allowed them to go further (with no limited duration of 10 years) and with more peace of mind (increased level of transparency required before, during and after the issuance of tokens, legal sustainability, etc).
The 4 cents of euros per KwH announced are surprising because they correspond to the price of the cheapest country in Europe (Iceland) where the Czech Republic would be more around 20 cents. But a direct deal could explain this price.
No strong alternative option in case of falling crypto to find new outlets, which increases the risk of the project.
Based in Estonia, Venus Energyy is one of those mining companies that want to be an actor of profound change. Rather than simply supplying itself with green electricity, Venus Energy wants to produce it. The company is, therefore, planning to build wind turbines on the windy Lithuanian coast near the Baltic Sea. Its objective: to be able to install 2 to 6 wind turbines (soft/hard cap) capable of producing electricity at less than 0.32 cents / Kwh. This price, if actually achieved, will be very attractive (for comparison, the official price in Iceland, the cheapest in Europe, is €0.04).
The company will offer cloud mining only, based on its low cost of access to electricity.
A project that develops its own green energy production solution instead of just buying it.
The project for the installation and maintenance of turbines seems serious: they have a quotation, contacts already established with an installer partner (Jegaines.lt), etc.
The token will be distributed via an exchange (IEO) which show they convinced/were able to pay for the listing.
The possibility of interrupting mining and selling electricity in the event of too low a price for crypto money has clearly being considered. This provides resilience in the event of a permanent drop in crypto, even if the resale price for the investor will be limited (0.007€ / kWh).
I had a hard time understanding the project. In truth, I’m not even sure I fully understood the final operation on the user side (and it’s not for lack of interaction with the team, and I don’t think I am stupid.). The white paper is generic, talks a lot about context (mining operations…) and very little about their service offer, and in an unclear way. I had to exchange at length to get answers. It scares me a little: either the project is not clear, or the teams have difficulty explaining it and will have difficulty selling it.
The token will allow access to the platform at a lower cost, but the platform will still take 20% commission on each block found. Let’s see if this does not make its access cost too expensive for minors.
The team claims to be qualified in mining and crypto-currencies, but this is not mentioned in the WP and LinkedIn profiles are mostly empty or without experience in the field. If the KYC of the executives has been passed on the ICO bench, it is impossible to get an idea of their real expertise.
Minedblock is a mining company with a very simple proposition: they will build a great mining company whose people can become shareholders. No cloud mining plans, no hardware renting: people pay to buy some shares and then enjoy their monthly revenues and participate in the decisions about the company growth. They are the first mining company which is SEC compliant.
The team plan to build in Iceland (low energy cost and 100% green) after testing all its systems in the UK.
STO : 75% of the company revenues will be shared among holders. Companies and holders have the same interest: getting strong and sustainable revenues.
Transparency and ethics: They got the best grade (AA) by the transparency organisation Inwara, openly refuses to pay for advisors or reviews, kept their words with the airdropers after switching from Utility to Security, plan to create a voting system for investors participate to the growth decisions…
Startup mindset: small team to save money, capacity to go big fast when possible/if needed, strategy of iteration in their roadmap (test before getting bigger), which is clever in a bear market and avoid burning cash.
Planning to build solar panel in a second phase, to lower the dependency to crypto price and being able to sell electricity if the bear market stays.
Experienced both in building huge data centers and engineering cooling facilities.
Token buyback scheme to help an increase of future value (5% monthly, up to buy back 50% of all tokens)
The Whitepaper is quick and stays on the surface of the project. I learned a lot speaking with the team and had much more info that was shared at first in the document. If they seem to be good engineers, they may increase their communication skills if they want to have a stronger reach in the crowdsale. They are really confident in their project but should spend more time sharing it to everyone 🙂
The backside of the “startup spirit”: all is still in an early stage right now, as they wait for the investment to start building things. No MVP / dashboard (), no electricity deal, no precise location defined, etc. You need to trust the team that will start finishing all the process when the investment is done (hence the importance of the Security!).
When we talk about green electricity, we don’t really know if it’s that green. A little like electric cars, whose batteries are actually very polluting. Hydromining is betting on hydraulics electricity that is considered cleaner and more predictable than other sustainable sources. I like that.
They do not directly produce electricity but rent facilities directly in Austria and plan to do so in Armenia. They use sea transport containers to create mining modules that are deposited near dams.
The project has already been launched for several months, their mining centers exist. Their token is already exchanged and listed on exchanges, but they will very soon launch a Security version of their token, the reason for the presence of the project in this list.
Project launched, they already raised 7346 ETH last year during their ICO.
Willingness to switch to Security Token, the most committed form in crypto in my opinion.
R&D on miners and cooling (partnership with Novec liquids from 3M).
Seem very technically advanced: Hydrominer’s technical team is specialized in designing the physical infrastructure for mining facilities and deploying the mining hardware. Tuning and optimizing individual miners and GPU´s is part of their routine as well as managing replacements and upgrades of hard- and software.
They charge per kWh consumed, not per hash. The basic idea is interesting, but it depends on the efficiency of their miners (power, breakdown, improvements…) and this makes it very difficult to compare the rental of their equipment with that of their competitors, where we know what we are buying.
LinkedIn profiles not accessible and poor news given for several months, which can always be a little scary…
They seem to experience a delay in their switch to Security and meanwhile had to stop mining for legal reasons. It brings a real risk on the whole project.
Azultec is a little bit on the side in this selection, but I find their complementary approach very interesting.
Coming with a very strong expertise in hardware cooling (via two of the founding companies) they know what they are talking about. Their knowledge will be really useful while everyone tries to reduce the energy consumption and the increase the hardware performance, which often places the issue of cooling at the heart of the discussions.
Their strategy is not necessarily the use of green electricity. It is rather about reusing the electricity used by machines to make something of it. In short, rather than losing the heat produced by the machines, Azultec recovers it (up to 72%) and gives it a second life (house heating, water heating…). It’s another way of looking at ecology that I also appreciate.
To do this, they rely on miners entirely designed by them.
Azultec’s project focuses on the sale of hardware (which they already do) and the construction of a cloud computing center (the purpose of their ICO).
Unlike other projects that are 100% focused on crypto-currency mining, Azultec equipment will be used for different tasks to maximize profits and occupancy rates: mining, cloud rendering, cloud storage… Thus, the equipment acquired by a private individual will be able to make 3D renderings for 3 hours in the morning and then spend its time mining, waiting to get a new mission… while heating the water of the house water heater.
Highly versatile product: cloud storage, cloud rendering… very adaptable in case of a crypto drop.
A team with extensive experience in technology and communication (it takes both to emerge) from the founding companies.
Advanced equipment: their 300 cubes received the CES Innovation Honoree award in 2019.
Probably a very good strategic plan: they decentralize computing centers through mini-modules that are very adaptable and quick to repair, which may interest a lot of people… and they reuse the thermal waste produced by these modules to invent a second life for them which is highly trendy.
Deflation mechanism integrated into the token (all tokens used to pay will be burned), which can help support prices.
The whitepaper is very thorough and reassuring.
The usefulness of the token is to be demonstrated. “Customers can use their Tokens to obtain discounts when purchasing mining hardware. Furthermore, rendering farm or cloud storage services can also be purchased at a discount.” This will lead to a high velocity of use but provides little incentive for its conservation. I would have preferred a Security token.
Little information on expected profitability, and hard to forecast.
So we have:
– 2 pure mining projects: Batmine and MinedBlock
– 2 projects that manage both mining and their local electricity production, whether wind for Venus Energy (which produces it) or hydraulics for Hydrominer (which leases it, for the moment)
– 1 cloud computing project integrating mining and energy recovery for Azultec
The 5 projects seem very interesting to me.
I have compiled in an exhaustive table the various information relating to their strategies.
For the sake of clarity, I have also summarized my analysis in this mini summary table, based on 6 criteria:
The seriousness of the project, the technical competence of the team, the performance of the miners, etc.
=> 10 points
2. Project advancement
The progress of the project: already launched, purely theoretical, partnerships already signed, etc.
=> 5 points
The sustainability of the project, in two forms:
– Is the loss of hardware performance really taken into account, are R&D efforts being made?
– Is there a plan B in case of a complete crypto crash that allows the project to survive?
=> 5 points
Is the project a Security token or a Utility token? My preference is clearly in favor of the former, which I believe is a source of greater reliability at a time when regulations are coming in.
=> 5 points
More subjective criteria: what is the general feeling of the project, what is the level of trust that the documents provided, the community, the team answers and profile can reveal…
=> 3 points
To what extent is the project really green (simple energy purchase? specific production? other?)
=> 2 points
AND THE WINNERS ARE…
As you can see, the projects are very close to each other.
My personal preference goes to
Minedblock and Azultec. Minedblock because it’s pure mining, done in a very trusted and efficient way (STO, experienced team, start up /low cost mindset). Azultec for its versatile business strategy that reduces the dependancy to crypto markets.
If I’m sharing here my personal opinion, I kindly invite you to dig deeper into the projects to make your own opinion.
Because you know it, in crypto (and elsewhere) it’s the rule: do your due diligence! 🙂
Please comment below, tell me why you agree, why you disagree, who I forget and so on 🙂