HARD WALLET

Pipe offers revenue-based financing for bitcoin miners

Good morning, and welcome to Protocol Fintech. This Wednesday: Haun picks a name, Pipe mines crypto dollars, and Bulgari goes NFT.

Off the chain

Was it something I said? After I grumbled a bit last week about the conundrum of what to call Katie Haun’s VC firm, she courteously debuted its official name Tuesday: It’s Haun Ventures. Well, that’s simple enough, and catchier than KRH Partners (which is still how it’s registered with the SEC, I’ll note). There is a statement in its simplicity: By following the last-name convention of firms like Andreessen Horowitz, her former employer, and Kleiner Perkins, Haun is placing herself in their pantheon. And with a $1.5 billion war-chest, it’s hard to argue with the power move.

— Owen Thomas (email | twitter)

Mining for mining dollars

Pipe is bringing revenue-based financing to the world of bitcoin mining. The fintech company operates a marketplace for recurring revenue streams, with hedge funds and other large investors buying recurring revenue from companies in SaaS, insurance, direct to consumer products and property management. Now, it’s making its crypto play.

As Pipe puts it, you can “mine now, pay later.” The idea is to turn a future mining revenue stream into upfront cash.

  • Pipe’s newest market is bitcoin-mining hardware and hosting companies. When the companies have contracts for recurring revenue with customers, they can sell them on Pipe’s marketplace for upfront cash.
  • Compass Mining, Pipe’s first “mine now, pay later” partner, is selling bitcoin mining hardware that it is also hosting.
  • Existing options for bitcoin miners, like those from Salt Lending or BlockFi, mostly center around using a miner’s existing crypto or equipment as collateral. Pipe, meanwhile, is not offering a loan, which could be an easier way for new players to enter the market.

More capital means more miners. And more miners means a more decentralized bitcoin network, which has implications for a wide range of crypto players.

  • Crypto miners have long raised equity and debt to buy hardware. But for smaller bitcoin miners, it’s hard to find financing for these specialized computers which can cost $10,000 or more, said Pipe CEO Harry Hurst. He wants to open up bitcoin mining to smaller players in the market.
  • So does Block CEO Jack Dorsey. His company is developing new bitcoin-mining hardware to make it cheaper and easier to mine. Dorsey’s goal is to make mining more decentralized, so a small number of entities can’t control the network.
  • However, more miners and more competition mean it will be harder for miners to actually get bitcoin. That would make it less profitable to mine bitcoin.

That’s the irony of lowering the cost of bitcoin mining. Cheaper hardware or capital could just draw more people into the business.

  • There are real concerns over the concentration of bitcoin mining, which is largely driven by the high costs involved. Hurst argues that more trust in the network will increase the value of bitcoin over time.
  • It’s not clear that, at least in the short term, abstract concerns about trust or decentralization play much of a role in the price of bitcoin. More recently, the cryptocurrency’s price has moved mostly in tandem with other risky assets.
  • But there’s some technical evidence in what’s known as the hash price, a measure of bitcoin value produced. That’s increased from about 12 cents in 2020 to around 20 cents today, said Joe Burnett, analyst at Blockware Solutions. “You’re actually making more dollars even though you’re earning less bitcoin,” he said.

So will Pipe change the crypto landscape? It’s a tricky pitch: Since the supply of bitcoin is ultimately fixed, every additional miner dilutes others’ earnings. The payoff in trust from having more miners is a long-term benefit to everyone. But trust is awfully hard to monetize.

— Tomio Geron (email | twitter)

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On the money

On Protocol: Sergey Vasylchuk, founder and CEO of the Ukrainian crypto company Everstake, thought people who voted for Volodymyr Zelenskyy as president were crazy. He’s changed his mind since the Russian invasion of his homeland.

Also on Protocol: The U.K. is continuing its crackdown on crypto companies. It has now issued notices to over 50 companies advertising crypto and is asking them to review their ads for compliance with regulations.

Worldcoin is reportedly raising $100 million. The cryptocurrency startup run by former Y Combinator president Sam Altman is getting backing from Andreessen Horowitz and Khosla Ventures, according to The Information.

TransUnion South Africa was hacked, which is kind of unsurprising once you learn the details. The attackers who claimed responsibility for the hack, a Brazilian group named N4ughtySecTU, said they used the password “password” to get into the system.

Yuga Labs is bringing its Bored Apes into the metaverse after raising $450 million. Otherside, its new metaverse project, is intended to connect a new game to the NFT universe, and will use ApeCoin as currency.

Grayscale launched a new crypto fund. The fund is named Grayscale Smart Contract Platform Ex-Ethereum Fund, which, you guessed it, excludes Ethereum.

The NFL is now allowing teams to seek limited blockchain sponsorships. While teams can now partner with blockchain companies subject to the NFL’s approval, they still can’t directly promote crypto.

Russian tanks are being sold on OpenSea as NFTs. Someone who claims to be a Ukrainian farmer is selling abandoned Russian tanks as physical items and as NFTs. The proceeds will aid agriculture after the war, the seller told Trustnodes.

Crypto.com is offering NFT sales on its app. The Crypto.com NFT marketplace is available for app users only in Australia for now, and users in other countries can expect a rollout in their apps soon.

Overheard

The NFT-luxury crossover continues, with Bulgari, Temera, Luxochain and Polygon teaming up for the latest Bulgari watch collection. Think of the included non-fungible token as the ultimate complication. “This fabulous landmark that we are setting today with the Octo Finissimo Ultra is in fact — for me and all the teams — the fulfillment of a dream,” Bulgari CEO Jean-Christophe Babin said in a press release.

Arthur Cheong, founder of DeFiance Capital, got over $1.7 million worth of NFTs stolen from his personal wallet. “Well, this hit me hard but if I got exploited as a fairly sophisticated 5 years crypto user (DeFi user, password manager, mostly hardware wallet), I’m not sure how I can persuade most normal people to put a substantial part of their net worth on chain anymore,” he said in a now-deleted tweet.

Ethereum co-founder Vitalik Buterin wants to remind people what the goal of crypto is. “The goal of crypto is not to play games with million-dollar pictures of monkeys, it’s to do things that accomplish meaningful effects in the real world,” he said in his Time magazine interview.

Just one question with JP Chauvet, CEO of Lightspeed Commerce

Chauvet took over as the payment firm’s CEO in February.

How is payments changing in this phase of the pandemic?

Now that the physical world is reopening, because we have online and offline [payments], we’re seeing a huge switch back to physical. We’re seeing GMV in the physical world go through the roof again. And it’s going to be interesting to watch the behaviors of consumers, especially with payments across channels. QR-code payments is a good example: Everybody now kind of expects when you’re going dining in a restaurant in the U.S. that you can pay with your QR code and Apple Pay. So the pandemic has brought a lot of incredible tech to the physical world. It’s just going to accelerate adoption of new platforms. When you look at this QR code logic, it’s the epiphany of software meets payments — that QR code has to transact or interact with the cloud.

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Thanks for reading — see you tomorrow!



Traciwininger
Author: Traciwininger

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