Bitcoin development company Blockstream is launching a token that is tied to the company’s Bitcoin mining production and which is redeemable in bitcoin.
One Blockstream Mining Note (BMN) represents 2,000 terahashes per second of hashrate from one of Blockstream’s mining facilities. The first tranche of 62.5 BMN will go on sale next week, April 7, and can be redeemed after three years for the bitcoin equivalent to the total hashrate the note represents.
(Hashrate is the total estimated number of hashes or “guesses” being used to mine bitcoin at any given time and is generally a good gauge for measuring how much power Bitcoin consumes at a give time; currently, Bitcoin’s hashrate is roughly 164 exahashes per second).
Blockstream is issuing the token on its Liquid sidechain, a semi-privatized, trusted blockchain that runs in parallel with Bitcoin, and will sell it initially through a private token sale on STOKR. The first batch of tokens will go for £200,000 ($275,836) each, and there’s a purchase minimum of 1 BMN (payable in bitcoin, or BTC and USDT on the Liquid network).
The sale is open to all non-U.S. qualified investors, and the tokens can be split and transferred in amounts down to 0.1 BMN and traded over the counter (OTC) after the sale.
“The BMN leverages our extensive experience in the Bitcoin mining space and offers investors up-front, fixed rates with improved tradability,” explained Blockstream CEO Adam Back in a statement.
Hashrate tokens are a recent development in the Bitcoin derivatives market, lead by Bitcoin miner Poolin and the Binance exchange.
These contracts exist as a way for high-caliber investors to gain exposure to bitcoin and bitcoin mining without owning the bitcoin outright or fumbling with mining hardware. Typically, they are traded OTC before being integrated on exchanges.
“In an ASIC and colocation market that is prohibitive for retail investment, hashrate tokens and contracts are a great way for investors to get exposure to the mining sector. Given the ease of purchase, exchange-grade liquidity, and low barriers to entry, hashrate tokens trade at a premium to physical ASICs, ” Ethan Vera of Luxor Mining told CoinDesk. He added that the North American Mining firm expects this premium to dip to 10-15% with the new hashrate tokens coming to market.
Hashrate contracts are just one of many roundabout ways investors can gain exposure to bitcoin. Bitcoin-holding companies, like Microstrategy and Square, have offered stock exposure through what some see as a de facto bitcoin ETF.
Historically the most popular accredited investor option, Grayscale’s Bitcoin Trust (which is owned by CoinDesk parent company DCG) has been losing its premium recently as other options like NYDIG’s bitcoin products and futures volume snap up market share (and as Bitcoin ETF hopes through filings from Fidelity and others are high).