Blockstream Mining Launches Third Investment Round for Hashrate-Backed BMN2 Token

Blockstream Mining Launches Third Investment Round for Hashrate-Backed Tokenized Note

Blockstream Mining has announced the opening of a third investment round for its hashrate-backed tokenized note, known as BMN2. This innovative financial instrument allows participants to receive a portion of the bitcoin (BTC) generated from the company’s mining operations over the next four years. Previously, two rounds of the BMN2 note raised approximately $7 million, and the current round is priced at $31,000, providing holders with bitcoin produced by 1 petahash per second (PH/s) of hashrate. The sale is set to last for three weeks, with Blockstream targeting a total investment of $10 million for this round.

A company spokesperson emphasized that “Blockstream is able to offer mining at a cost of under 4.5 cents per kilowatt-hour (kWh), significantly lower than the industry average.” This cost efficiency positions the BMN2 note as an attractive investment opportunity, allowing participants to benefit from access to some of the most cost-effective mining in the industry.

Co-founded by the renowned bitcoin developer Adam Back, Blockstream is collaborating with Stokr for the sale of the BMN2 note. As the cryptocurrency markets become increasingly financialized, hashrate-backed contracts are gaining popularity. However, what sets Blockstream’s note apart is its extended duration; while most contracts typically lock in hashprice for up to 12 months, BMN2 offers exposure to the bitcoin hashrate over a remarkable 48-month period.

Hashrate represents the total computational power used to mine and process transactions on a proof-of-work blockchain, serving as a proxy for competition within the mining industry and the associated mining difficulty. Hashprice, on the other hand, is a critical mining metric that calculates revenue on a per terahash basis, taking into account network difficulty, bitcoin price, block subsidy, and transaction fees.

Investing in Blockstream’s BMN2 note provides distinct advantages compared to purchasing hashrate futures from other bitcoin mining companies. Notably, investors are insulated from counterparty risk or potential failures of mining operations, and the price is secured for the entire four-year duration. Additionally, the market hashprice is adjusted quarterly, reflecting mining efficiency and encompassing risks related to energy prices and counterparty reliability.

“Given the current bitcoin mining market’s historically low hashprice levels, BMN2 presents investors with a strategic opportunity to enter the market at an advantageous time,” the company stated in a July release announcing the note.

A recent report from JPMorgan (JPM) highlighted that the hashprice is currently about 30% lower than levels observed in September 2022 and approximately 40% below the values recorded before April’s reward halving.

Investors in the previous note, BMN1, primarily consisted of international family offices and funds based in Europe. While there is growing interest from U.S. institutions in BMN2, the product is not yet available in that market. Many investors from BMN1 opted to roll over their investments into BMN2.

BMN1 was notably successful, “mining over 1,242 BTC and delivering returns of up to 103% over its three-year term,” as mentioned on Stokr’s website. This achievement is recognized as the “highest payout in real-world asset (RWA) security token history,” according to Arnab Naskar, co-founder and co-CEO of Stokr.

The initial two investor rounds for BMN2 commenced on July 18 and concluded on August 12. Anchor investors who committed over $500,000 were rewarded with a discount and participated in series 1, while both returning investors and new backers contributed to series 2.

The capital raised from the sale of the BMN2 note is earmarked for managing physical infrastructure and energy costs, as Blockstream is accountable for producing the hashrate that underpins the note. The company operates mining facilities located in Georgia, Montreal, and Texas.

Furthermore, the tokenized note will be available for trading on the crypto exchange Bitfinex, providing liquidity and investment opportunities for participants.