What’s the big idea behind HIVE?
Blockchain technology is revolutionizing finance and there are very few ways for investors to gain exposure to businesses in this space.
HIVE has partnered with the world’s largest cryptocurrency mining firm to build a new public company that mines cryptocurrencies like Ethereum.
HIVE’s goal is to become a world leader in crypto mining and build the bridge between crypto and traditional capital markets.
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What is HIVE’s business model?
Simply put, HIVE is a cryptocurrency mining firm. We validate transactions on blockchain networks — like Ethereum — for rewards paid in cryptocurrencies. Everyday HIVE earns new crypto coins which it can monetize for revenue and cash flow. HIVE offers shareholders exposure to the operating margins from cryptocurrency mining plus a growing portfolio of coins.
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What are the keys to successful crypto mining?
Cryptocurrency is extremely competitive, hence the need for efficiencies of scale.
The largest inputs to mining are electricity costs and hardware. You need a reliable and cheap source of electricity for your hardware. Just securing hardware in the current environment is difficult.
Fast and reliable internet access, as well as a cool climate, help to lower costs.
There’s also a real scarcity of talent with expertise scaling cryptocurrency mining operations. We are fortunate to have a partner that is unrivaled in this area to help HIVE stay competitive and ahead of trends: Genesis Mining.
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Who is Genesis Mining and what is their relationship to HIVE?
Genesis Mining is the largest cryptocurrency mining company in the world. They’re also the largest cloud mining company serving nearly a million customers.
Genesis was founded in Munich, Germany in 2013 by three early Bitcoin investors. Their first large-scale Bitcoin mining facility was built in 2014 using custom hardware. This was followed up in 2016 with the construction of the world’s largest Ether mining facility.
HIVE is a new public company, separate from but co-founded by Genesis Mining, to connect the blockchain sector and traditional capital markets. Genesis builds and operates the data centres for HIVE and is HIVE’s largest shareholder.
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What is the difference between a Genesis cloud mining contract and investing in HIVE?
Genesis Mining provides cloud mining services to nearly a million customers globally. These customers lease mining hash capacity from Genesis for a fixed period of time — typically two years — to mine their own coins.
This is significantly different from HIVE, which directly owns its facilities and is itself a business operator. As a publicly traded company, HIVE provides shareholders with exposure to the margins of mining, together with the price performance of a growing portfolio of crypto coins held and managed by HIVE.
Leasing hash is finite and non-transferrable. This is the main distinction from HIVE.
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What are HIVE’s assets?
HIVE will own and operate multiple cryptocurrency mining farms in strategic locations.
Our initial GPU-based data centre was assembled by the crypto mining infrastructure experts at Genesis. It is located in Reykjanes, Iceland, where electricity costs are low due to an abundance of hydro power and geothermal energy. Iceland has some of the lowest electricity costs in Europe.
Iceland also tends to be cool year-round, with summer daytime temperature seldom rising above 25°C. This means that HIVE will not have to incur substantial expenses in cooling mining equipment that is prone to overheating.
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Why GPU-mining?
There are two main categories of computing hardware used to mine: ASIC-based and GPU-based.
An ASIC — or application-specific integrated circuit — is a single-purpose chip built for Bitcoin mining. The chip is custom-built for this purpose only and has no flexibility to mine anything other than Bitcoin.
A GPU — or graphics processing unit — on the other hand, can mine many different types of cryptocurrencies and has the flexibility to switch between them.
Genesis CTO Stefan Schindler likes to say our GPUs are “the Swiss Army Knife of the blockchain”. By focusing on GPU-based mining, HIVE has the flexibility to identify and focus computing resources on existing and new cryptocurrencies as they become more profitable to mine.
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Which cryptocurrencies does HIVE mine?
Our GPU mining rigs have the capability to mine any GPU-based algorithm, including Ethereum, Monero, and Zcash. In the immediate future, we plan to focus on mining Ether, but will examine other altcoins for potential opportunities.
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What about Bitcoin?
Genesis is already a very significant player in the Bitcoin market. HIVE’s decision to initially focus mining efforts on Ether does not mean we will not also mine Bitcoin and other cryptocurrencies in the future. However, we, like our partner Genesis, are very excited about the potential for the Ethereum project.
Genesis made an early bet on Ethereum and constructed the world’s largest Ether mining facility — known as Enigma — specifically to support the project at an early stage of its development. Genesis is a world leader in optimal construction and operation of GPU-based mining facilities as a result.
The bottom line is that HIVE will focus its hash power on the most profitable coins to mine, which will vary from time to time.
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Why proof-of-work mining?
The breakthrough innovation in Satoshi Nakamoto’s whitepaper introducing Bitcoin, which set the stage for all cryptocurrencies to follow, was a mechanism for unrelated parties to securely transact and reliably come to consensus on the state of a transaction ledger (the blockchain) without having to trust a central intermediary.
This mechanism is known as proof-of-work mining, a system where a decentralized network of miners commit “work” — using electricity to power computer hardware — in exchange for receiving rewards in the form of cryptocurrency.
The original communications protocol for the Internet — HTTP — is still in use today notwithstanding the introduction of more efficient protocols. Just like HTTP, the original vision of Satoshi — proof-of-work mining — is the backbone of the whole blockchain world. After eight years and massive growth in total crypto market capitalization, this consensus mechanism has proven to be stable and highly secure, and has withstood numerous hacking attempts.
For these reasons, we expect proof-of-work mining and data centre infrastructure like HIVE’s will always be an essential component of the blockchain and cryptocurrency ecosystem.
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What about proof-of-stake?
Proof-of-stake is an alternative method of fulfilling the same function as proof-of-work mining — the validation of cryptocurrency transactions — by having parties deposit, or “stake”, amounts of cryptocurrency into a smart contract.
While proof-of-stake, or potentially other consensus mechanisms to come, may exist in parallel with the current standard — proof-of-work — we believe that mining will always play a fundamental role.
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How does HIVE secure its coins?
Mined coins will be deposited into a designated digital wallet, which is a secure digital wallet used to store, send, and receive coins. However, like anything stored on a computer network, crypto wallets can potentially be exposed to cybersecurity threats and hacks. Security measures will be in place to mitigate against these risks, and we are also exploring insurance options to ensure that our assets, including coins, are appropriately safeguarded against these and other risks.
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How long will HIVE’s hardware last?
Genesis Mining has facilities as old as four and five years that are still mining cryptocurrencies profitably. This is partly due to Genesis’ proprietary monitoring software for large-scale mining, which HIVE will also be using. The software constantly tracks things like hash rates, temperatures, and power consumption. This allows us to easily detect problematic rigs, and prevent overheating or hash rate drops, keeping maintenance costs to a minimum.
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How will HIVE source hardware?
It’s no secret that the increased interest and demand for cryptocurrencies has led to a shortage of mining hardware as individuals purchase equipment for their home mining rigs. HIVE will have an advantage in this regard with access to Genesis’ longstanding and solid supply-chain relationships.
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What is HIVE’s approach to selling versus hoarding coins?
We are actively mining Ether from our initial data centre and are implementing an investment strategy involving liquidation of a portion of mined coins as a ratio of future forecasted expenses, while holding the remainder as inventory to benefit from price appreciation/volatility.
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What are the biggest risks to HIVE?
For full information, investors should refer to the risk disclosures filed under HIVE’s profile at www.sedar.com. Some of the risks include volatility in cryptocurrency markets, flaws in cryptocurrency code and hacking, fraud or security failures of the cryptocurrency exchanges on which our coins are exchanged, increased competition in the mining space, mining margins potentially becoming uneconomic, and obsolescence of hardware and equipment in our facilities.
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Who are HIVE’s competitors?
There are more than a million miners today from "Mom and Pop's" to Governments. To our knowledge Genesis Mining is the most successful and largest miner in the world. HIVE is also unique in that it is the only significant crypto mining business in a public company.
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Why go public on the TSXV?
Being a first mover to list on a major public exchange is key part of HIVE’s strategy. It provides equity shareholders a way of getting exposure to the crypto world through a traditional investment vehicle. The capital markets have very few options for investors to participate in the sector, and HIVE provides a unique opportunity to do so. Public markets are a huge untapped opportunity to finance the growth of the blockchain sector and HIVE. We chose the TSX-Venture Exchange in particular because it is a flexible capital formation platform, and at the same time, is one of the most accessible stock exchanges globally.
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What's next for HIVE?
Three next steps for HIVE. The first will be to establish a market presence. We need to engage with the investment community as well as the blockchain community to tell our story, gain important partners, and further develop our team. Second, HIVE will continue to strengthen its security and risk management processes internally, which we believe to already be best in class for a company like HIVE. Finally, we intend to rapidly grow the business through further acquisitions and development projects. Look out for a lot of news from HIVE.
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Will HIVE acquire other businesses?
HIVE’s first priority is to scale the mining business and grow in partnership with Genesis. We believe there is enough internal growth and with Genesis to keep our plate full. However, HIVE absolutely may develop, invest in, and acquire other blockchain business models. Our first mover advantage to the public markets is exposing HIVE to a tremendous amount of positive deal-flow. HIVE will be the first substantial publicly traded blockchain equity and we may in future look at consolidation of other opportunities. Our focus for now is to grow the mining business.
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