Hut 8 is a bitcoin mining company led by CEO Sean Clark, a well-known Canadian entrepreneur who founded SHOES.com and now leads First Block Capital, Canada\u2019s first cryptocurrency investment firm. The start of Hut 8 can be traced back to when Clark\u2019s First Block co-founder Marc van der Chijs met Bitfury founder Valery Vavilov on, where else, Richard Branson\u2019s private island in 2013. That relationship would come in handy as the prevalence and worth of cryptocurrency grew over the next few years.<\/p>\n
\u201cWe knew that capital markets were starving for blockchain deals and to allocate capital into the growing asset class. We formed Hut 8 to negotiate an exclusive services agreement with Bitfury,\u201d explains Clark.<\/p>\n
But why doesn\u2019t Bitfury cut out the middleman and expand on their own into Canada?<\/p>\n
\u201cThere\u2019s a big problem with blockchain companies trying to go public. No global securities regulator will do it because of the nature of bitcoin,\u201d says Clark. \u201cNot only that, there\u2019s proprietary information a lot of these tech companies want to keep close, so filing a full prospectus actually hurts them.\u201d<\/p>\n
What\u2019s happening now then is a private offering of just over 13 million Hut 8 shares through GMP Securities, equal to around $33 million. The funding from these proceeds will go towards the immediate control of 22 primed and ready bitcoin mining centres located in Drumheller. In the first months of 2018, a public listing on a Canadian stock exchange will take place, increasing control to an additional 35 data centres, some of which may be in Drumheller, or in various other locations around Canada and potentially the U.S.<\/p>\n
In that sense, Bitfury often operates Hut 8 using a reverse takeover, utilizing smaller companies to act as proxies in order to gain access to capital markets and institutional money growth. Hut 8 has a North American exclusivity agreement with Bitfury, meaning the Canadian firm will receive all of the necessary equipment solely from Bitfury.<\/p>\n
Clark goes on to explain how an expansion to Canada is the perfect move for Bitfury.<\/p>\n
\u201cRight now if you look at the bitcoin mining globally, there\u2019s too much emphasis and hashing power located in China,\u201d he explains, recognizing that over 50 per cent of mining happens in the country where ICOs and cryptocurrency exchanges are banned.<\/p>\n
\u201cIt goes against the decentralized nature of bitcoin.\u201d<\/p>\n
The Bitfury group has over $350 million in revenue and is profitable. Hut 8 is bending in the company’s data centre assets for the company to capitalize and raise money to create a massive mining operation.<\/p>\n
\u201cWe\u2019re building a utility company,\u201d says Clark. \u201dWe\u2019re not talking about one or two megawatts\u2014we\u2019re talking about hundreds and hundreds of megawatts here.\u201d<\/p>\n
Bitfury already has around 172 megawatts operating globally, mining a massive chunk of the world\u2019s total bitcoin. The new capital raised will allow Hut 8 to roll out hundreds more megawatts of mining power and help rebalance the bitcoin mining network to North America, reducing dependency on the volatile market environment of China.<\/p>\n
“We are thrilled to be partnering with Hut 8 to establish data centers in Canada. We decided to grow our presence there because Canada is a business-friendly country and has the infrastructure, economy and energy resources ideal for Blockchain and bitcoin companies,” says Valery Vavilov, CEO of Bitfury. “More generally, we believe North America has the potential to be a hub for cryptocurrency mining, so we are excited to be taking a step in making that happen.<\/p>\n
Access to electricity is a huge infrastructure challenge, as is evident by the sheer amounts needed to mine bitcoin. One megawatt is enough to power 400-900 homes according to some studies, and Hut 8\u2019s fully operational mining centres will need in excess of 200 megawatts when fully running.<\/p>\n Currently Hut 8 is in the process of negotiating fixed rates for electricity with the Manitoba government, and if they can lock in a 10-year guarantee, they will open locations that will operate for 10 or more years. Right now Hut 8 is leasing land for the mining centres and operating on a contract where power is sold at 3.5 cents per kilowatt-hour. If Quebec or another province can come in and beat that price, Hut 8 will move and establish a fixed location.<\/p>\n The opening and eventual prevalence of mining centres in Canada is only a good thing\u2014Hut 8 and Bitfury are bringing in technology, hiring workers and putting Canada on the map as a blockchain leader. There is potential for more expansion beyond pure power costs and hiring as well.<\/p>\n \u201cThe Bitfury group will invest through Hut 8 to create a higher education blockchain learning centre, like they have done in Japan, and we\u2019ll do it in Quebec or Manitoba, wherever we put a fixed location,\u201d says Clark. \u201cThis will encourage innovation, train developers, help startups and more. Bitfury is an operating company that holds its values close to the ethos of bitcoin.\u201d<\/p>\n \u201cNow is Bitfury\u2019s time to ramp up through capital market raises and give North America 20 to 30 per cent of the market share of bitcoin mining. At the end of the day, scale wins this game, and scale allows Hut 8 to operate no matter what the bitcoin price. It\u2019s a utility play,\u201d he adds.<\/p>\n Bitfury is the largest shareholder of Hut 8 so they are incentivized to make sure the company becomes a success. With the price of a single bitcoin climbing well over $10,000 USD, the market is primed to become a major player with huge financial institutions. Considering Bitfury has seen over $90 million worth of funding so far, they have the assets to take this Vancouver company led by Sean Clark and flip the traditional China-dominated bitcoin mining model on its head.<\/p>\n","protected":false},"excerpt":{"rendered":" In an unprecedented North American first, Canada will soon be home to one of the largest bitcoin mining data centres in the world. The Vancouver-based Hut 8 has announced a partnership with Bitfury to acquire, install, maintain and operate North America\u2019s largest bitcoin mining data centres in Drumheller with possible expansion to other cities in […]<\/p>\n","protected":false},"author":76244,"featured_media":0,"menu_order":0,"template":"","meta":{"_acf_changed":false,"footnotes":""},"categories":[13],"tags":[506,2325,627,631,1067,2326,2327],"magazine-region":[],"magazine-series":[],"magazine-topic":[],"class_list":["post-99261","magazine","type-magazine","status-publish","hentry","category-News","tag-bitcoin","tag-bitfury","tag-blockchain","tag-china","tag-cryptocurrency","tag-hut-8","tag-mining"],"acf":[],"_links":{"self":[{"href":"https:\/\/brainstation.io\/wp\/api\/wp\/v2\/magazine\/99261","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/brainstation.io\/wp\/api\/wp\/v2\/magazine"}],"about":[{"href":"https:\/\/brainstation.io\/wp\/api\/wp\/v2\/types\/magazine"}],"author":[{"embeddable":true,"href":"https:\/\/brainstation.io\/wp\/api\/wp\/v2\/users\/76244"}],"version-history":[{"count":0,"href":"https:\/\/brainstation.io\/wp\/api\/wp\/v2\/magazine\/99261\/revisions"}],"wp:attachment":[{"href":"https:\/\/brainstation.io\/wp\/api\/wp\/v2\/media?parent=99261"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/brainstation.io\/wp\/api\/wp\/v2\/categories?post=99261"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/brainstation.io\/wp\/api\/wp\/v2\/tags?post=99261"},{"taxonomy":"magazine-region","embeddable":true,"href":"https:\/\/brainstation.io\/wp\/api\/wp\/v2\/magazine-region?post=99261"},{"taxonomy":"magazine-series","embeddable":true,"href":"https:\/\/brainstation.io\/wp\/api\/wp\/v2\/magazine-series?post=99261"},{"taxonomy":"magazine-topic","embeddable":true,"href":"https:\/\/brainstation.io\/wp\/api\/wp\/v2\/magazine-topic?post=99261"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"acblockbox\"](\"https:\/\/d3ghupt9z9s6o0.cloudfront.net\/app\/uploads\/2017\/12\/13095824\/acblockbox1.png\")