At a time when many other bitcoin miners are shutting down because they can’t afford to continue operating based on current prices, Bitcoin Shop, rebranded as Blockchain Technology Consumer Solutions (BTCS), is moving aggressively into the mining sector in an attempt to take a large chunk of market share.
“People are leaving the mining business because it is a sucker’s game,” said Charles Allen, CEO of BTCS, in an interview with Bitcoin Magazine. “But the only way to make money in the next 1-2 years is with mining.”
The company is putting its money where its mouth is. It signed a partnership with Spondoolies Tech, a provider of mining hardware, to acquire a significant amount of mining equipment. Spondoolies became a shareholder at about 10 cents a share and in exchange, BTCS was able to ramp up its mining operations from 176 Th/s (tera hashes per second) to 891 Th/s.
Allen said that if the effort works, the company is ready to quickly scale from there.
It signed a lease in a repurposed manufacturing building with 83,000 square feet. The first year rent is $58,271, and if the operation goes according to plan, BTCS has the option to buy the facility outright in the second year.
Allen feels this is the perfect time to get into bitcoin mining because the price has dropped enough that everyone else is starting to leave.
“The mistake everyone made was that they didn’t care about cost structure,” Allen said.
In other words, everyone kept thinking about how the price could go to the moon, so they didn’t try to get the cheapest electricity or the best hardware. Allen explained that there were miners who were paying 10 cents per kilowatt hour.
“You need to be under 6 cents per kWh. If you’re in the 3-4 cent range, you’re doing good,” Allen said.
Operation Hedge Strategy
BTCS intends to succeed with a mechanism it calls Operation Hedge. Allen believes it will be one of the cheapest — if not the cheapest — miners on the market. That means that it can tolerate bitcoin price drops more than other miners.
Allen is banking on smaller and more inefficient miners to go offline as the price drops, which will cause the network hash rate to drop and the difficulty with it. If that happens, BTCS’ overall operation will account for more of the total hash rate, which will result in more bitcoin mined per month.
“Because we were able to get the lead manufacturer [Spondoolies] to take equity, we are in a good position,” Allen said.
Between the decreased cost of hardware because the life of mining hardware increases when the difficulty drops, the decreased costs to run the mining operation, and the increased number of bitcoin mined, BTCS expects to find success in its mining operation.
It’s About the Ecosystem
BTCS isn’t just looking at mining, though it is the way to generate revenue fastest with Bitcoin. The company is expanding into the entire sector, trying to become a universal Bitcoin ecosystem.
It has made strategic partnerships with GoCoin, Gem, Expresscoin, and Coin Outlet, which will allow it to spread out into multiple parts of the total network.
In particular, Allen feels that remittance is the way that businesses can generate revenue longer term. If mining is 1-2 years, remittance is likely 3-5.
“The best way for remittance to work is to set up ATMs,” Allen explained. “You have one in the target country as well as the originating country, and users can go in and out of bitcoin.”
Its partnership with Coin Outlet will allow it to quickly grow out the ATM business across the world.
Mining As a Business
BTCS is in a position to get into the mining business at an attractive price point. And as it scales, Allen explained that its power costs will decrease for each kilowatt hour because it will be able to negotiate based on its buying power.
In the United States, Washington State is the best place to mine and then, Allen said, North Carolina, which is where BTCS has its operation. The electricity is cheap enough, and with its Spondoolies hardware, it is in a good position to take a significant amount of market share.
Photo by Beraldo Leal /CC BY 2.0