Blockstream Mining Launches Third Round of Hashrate-Backed Tokenized Note

Blockstream Mining, a prominent player in the cryptocurrency mining industry, has announced the opening of a third round of investment for its hashrate-backed tokenized note, known as BMN2. This innovative financial product allows participants to earn a share of the bitcoin (BTC) produced from the company’s mining operations over the next four years. The previous two rounds of the BMN2 note successfully raised approximately $7 million, demonstrating strong investor interest and confidence in Blockstream’s mining capabilities.

The latest investment round is priced at $31,000 per note, which corresponds to the bitcoin generated by 1 petahash per second (PH/s) of hashrate. This sale will be open for a period of three weeks, during which Blockstream aims to secure an additional $10 million in funding. A spokesperson from the company emphasized the competitive advantage of Blockstream’s mining operations, stating, “Blockstream is able to offer mining for under 4.5 cents per kilowatt-hour (kWh), which is far below the industry average.” This highlights the efficiency and cost-effectiveness of Blockstream’s mining strategy, making it an attractive option for potential investors.

Blockstream, co-founded by influential bitcoin developer Adam Back, is partnering with Stokr to facilitate the sale of the BMN2 note. The partnership aims to streamline the investment process and provide a compliant avenue for investors looking to gain exposure to bitcoin mining.

Understanding the Hashrate-Backed Tokenized Note

The financialization of cryptocurrency markets has led to the emergence of various investment products, including hashrate-backed contracts. While such contracts are not new, what sets Blockstream’s BMN2 note apart is its extended duration. Most hashrate contracts typically lock in the hashprice for periods of up to 12 months. In contrast, BMN2 operates as an EU-compliant security token that provides exposure to the bitcoin hashrate over a four-year period.

To understand the significance of hashrate, it is essential to recognize that it refers to the total computational power harnessed for mining and processing transactions on a proof-of-work blockchain. This metric serves as a proxy for the level of competition within the mining industry and the associated mining difficulty. Hashprice, on the other hand, is a crucial metric used to calculate mining revenue on a per terahash basis. It is determined by a combination of factors, including network difficulty, bitcoin price, block subsidy, and transaction fees.

Advantages of Investing in BMN2

Investors are presented with several advantages when opting for Blockstream’s BMN2 note instead of conventional hashrate futures from bitcoin mining companies. One of the most significant benefits is the elimination of counterparty risk and the potential for miner failures. By investing in BMN2, investors can secure a fixed price for a four-year duration, mitigating uncertainties associated with market volatility.

Moreover, the market hashprice undergoes quarterly adjustments and is influenced by mining efficiency. This allows investors to benefit from any improvements in operational performance while avoiding risks linked to fluctuating energy prices and counterparty vulnerabilities. James Macedonio, Blockstream’s Senior Vice President and global head of mining sales and business development, stated, “With the bitcoin mining market currently experiencing historically low hashprice levels, BMN2 allows investors to strategically enter the market at an opportune time.”

Market Context and Investor Interest

Recent reports from Wall Street giant JPMorgan (JPM) have highlighted the challenges faced by the bitcoin mining sector, noting that the current hashprice is approximately 30% lower than it was in September 2022 and about 40% below levels recorded prior to the April reward halving. This context underscores the potential for investors to capitalize on BMN2 during a period of low hashprice levels, making it an appealing opportunity for those looking to enter the bitcoin mining space.

The initial rounds of BMN1 attracted a diverse range of investors, primarily international family offices and funds based in Europe. As interest in BMN2 begins to grow, there is a noticeable shift towards attracting U.S. institutions; however, the product is not yet offered in that market. Notably, many investors from BMN1 have chosen to roll over their investments into BMN2, demonstrating confidence in Blockstream’s ongoing success.

Performance of Previous Notes and Future Prospects

Blockstream’s previous note, BMN1, enjoyed remarkable success, mining over 1,242 BTC and delivering returns of up to 103% over its three-year term. According to Stokr, this performance represents the highest payout in real-world asset (RWA) security token history, as highlighted by Arnab Naskar, co-founder and co-CEO of Stokr. Such impressive results set a high bar for BMN2, which aims to replicate or exceed its predecessor’s achievements.

Use of Funds and Trading Opportunities

The funds raised from the sale of BMN2 will be strategically allocated to manage physical infrastructure and energy costs. Blockstream bears the responsibility for generating the hashrate that underpins the note, ensuring a direct correlation between investments and mining capabilities. The company operates mining facilities located in strategic regions, including Georgia, Montreal, and Texas.

Once the tokenized note is issued, it will be available for trading on the crypto exchange Bitfinex, providing liquidity and allowing investors to trade their tokens in the secondary market. This feature enhances the attractiveness of the investment, as it offers flexibility and the potential for capital gains.

In conclusion, Blockstream’s BMN2 represents a significant opportunity for investors seeking exposure to the bitcoin mining sector, particularly during a time of low hashprice levels. With its unique structure, strong historical performance, and strategic use of funds, BMN2 is poised to capture the interest of both institutional and individual investors alike.