Bitcoin Mining Giant Bitmain Investing $500 Million in Texas Mining Facility

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Bitcoin (BTC) mining firm Bitmain will build a $500 million blockchain data center and mining facility in Texas as part of its expansion into the U.S. market, the company revealed in a press release August 6.

Bitmain, which is valued at around $12 billion after its early July funding round, is also reportedly looking to plan an overseas Initial Public Offering (IPO) in a market with U.S. denominated shares.

Bitmain’s new data center will take over the former Alcoa smelter in Rockdale, Texas, with the estimation that the construction and set-up will be completed in the fourth quarter of 2018 and the center set to be “initiated” in early 2019.

Last month, job vacancies for a Project Manager and a Data Center Site Manager for Bitmain in Rockdale had been posted on Indeed.com, with Bitmain only confirming the center’s location in the August 6 press release.

The press release notes that Bitmain expects to bring in 400 local jobs in the first two years, quoting $500 million as the total investment into the economy over an initial period of seven years.

Despite mixed noises from both U.S. and Canadian authorities regarding cryptocurrency mining, both countries have become targets for businesses seeking out cheaper electricity costs in new jurisdictions.

In June, mining firm Coinmint confirmed it would transform a former smokestack facility in upstate New York into a Bitcoin mining facility.

In Canada, local miner Hut 8 launched its second mining facility in mid July, becoming the world’s “largest publicly-traded” operator by capacity in the process according to figures published at the time.

Crypto mining hardware manufacturer Bitmain has reportedly secured China’s biggest technology company Tencent and Japan’s Softbank, Uber’s biggest shareholder, as investors in a pre-IPO financing round.

Chinese crypto giant Bitmain, commonly known for manufacturing bitcoin mining equipment and operating mining pools, is attracting interest from some of the world’s biggest companies and investors ahead of its initial public offering (IPO) on the Hong Kong Stock Exchange later this year.

Bitmain was in the process of securing a $1 billion round of financing in a round that, at closing, would value the firm at $15 billion.

According to a report by Chinese publication QQ, Bitmain completed the pre-IPO raise on Saturday in a round of financing that notably includes Chinese technology conglomerate Tencent with a market cap that rivals that of Facebook and Japan’s Softbank, a tech giant heavily invested in a number of tech ventures globally including its standing as Uber’s largest shareholder.

The participation of the two investors, in particular, underlines the growing mainstream appeal of the sector and the relevance of the industry’s biggest firm.

An array of ASIC mining chips developed by Bitmain.

The backing follows Bitmain’s robust revenues this year, raking in a profit of $1.1 billion during Q1 2018. Compare that to mainstream hardware giant Nvidia with a reported net Q1 net income of $1.2 billion and it’s easy to understand investors’ interest in Bitmain, which was valued at $12 billion before closing a $400 million round of financing in June. After closing its latest round to peg its value at $15 billion, Bitmain has seen a 16.5% increase in its overall valuation in less than 45 days.

The QQ report also confirmed that Bitmain has begun the process for its listing in Hong Kong, hiring China International Capital Corp (CICC) – China’s oldest investment bank – as its lead underwriter ahead of its anticipated IPO on the Hong Kong Stock Exchange (HKEX) in September. According to local media reports in China, insiders expect Bitmain to go public with a market cap between $30 billion and $40 billion before the turn of the year.

Bitmain has thrived in spite of China’s largely restrictive crypto industry policies since early 2017 and continues to make record profits in what is largely a bear market for cryptocurrencies.

Bitmain has diversified its own portfolio through major investments in U.S.-based crypto trading firm Circle and major internet web browser Opera. This week, Bitmain confirmed its intention to establish a $500 million cryptocurrency mining facility in a Texas town, a move that is expected to generate 400 new jobs. Bitmain has also moved established a new base in a 20,000 square-foot office space in Silicon Valley and is tripling its employee-count at a development center in Israel.

Bitmain, the world’s largest bitcoin mining firm, is preparing to open a new data center in Texas, external job postings show.

The China-based cryptocurrency company, which reportedly recorded $1.1 billion in profit during the first quarter, is currently looking for a project manager and data center site manager to staff a new plant in Rockdale, TX, a small town nestled an hour-and-a-half south of Waco.

The news was first reported by local media outlet KXAN, who said that residents are hopeful that the new bitcoin mining operation will bring hope to a region devastated by job cuts in the coal production and manufacturing industries.

In 2014, Aluminum manufacturer Alcoa shut down production at its Rockdale smelting plant, which had opened in 1952 and processed as much as 1.67 million pounds of aluminum per day.

Earlier this year, Dallas-based utility company Luminant shut down its coal-fired power plant in Rockdale, cutting approximately 450 jobs at the plant and a nearby coal mine.

Consequently, residents say that they are optimistic that Bitmain’s new data center will bring high-paying skilled jobs to the community.

“These are technical jobs, these are well-paid jobs,” said Rebecca Vasquez, chair of the local Chamber of Commerce, adding that she hopes the business will bring new homeowners to the area and increase its tax base.

However, as one unnamed cryptocurrency investment fund manager noted in the report, cryptocurrency mining industry operations tend to be “capital-heavy and human-light,” so it’s not clear how many long-term jobs the new data center will bring to the area.

Bitmain is also hiring staff in Chandler, AZ, as well as two cities in Washington — Malaga and Wenatchee — as it strengthens its growing foothold in the North American market.

Earlier this month, Bitmain opened a 20,000 sq. foot office in the heart of Silicon Valley, a move concurrent with its desire to follow up its recent $400 million funding round with another $1 billion in financing ahead of its planned initial public offering (IPO) later this year.

The firm has also established a major data center in Quebec, which has a large surplus of electricity but has nevertheless had a complicated relationship with the cryptocurrency mining industry.

The cryptocurrency industries largest crypto mining company, Bitmain, just opened their new office in Silicon Valley ahead of its planned Initial Public Offering (IPO) later in the year.

According to the Silicon Valley Business Journal, the China based cryptocurrency mining hardware manufacturer moved into a 20,000 square foot office space in downtown San Jose California. The company filled the last vacancy of the city’s Riverpark Towers office building, which is known to be the hub of tech startups like Cohesity, Okta, and WeWork.

The expansion of Bitmain’s company is not surprising after the firm was recently valued at over $12 billion following the end of last month’s $400 million funding round. This makes it the most valuable cryptocurrency company in the world as well as the most valuable privately held tech startup.

Cryptocurrency companies have centered themselves around the same geographic locations as other tech industries. This recent move will better position Bitmain to expand and manage its digital empire. The company has been targeting expansion into the United States and Canada due to the industry’s uncertain future in China. The company has currently opened mining centers in both Washington state and Québec , Canada.

Bitmain has started investing in other tech startups, so it’s moved to Silicon Valley would naturally benefit its investment capital arm of the company.

The crypto mining company recently led a $110 million funding round for well renowned cryptocurrency trading desk, exchange, and investing app Circle.  Bitmain has also announced that they plan on creating a USD pegged stablecoin in the near future.

Recently, Bitmain invested $50 million in the Opera web browser, which allowed it a controlling stake in the company. Shortly after the investment, the company announced that it would integrate an Ethereum wallet into their web browser.

Just this week, Bitmain also funded a round for the launch startup Block.one (creator of EOS cryptocurrency), alongside PayPal cofounder Peter Theil. The investment capital size was not announced publicly.

A congressional hearing before the U.S. House Committee on Agriculture today struck a positive tone towards the impact that cryptocurrency and digital assets can have for the economy and processes.

The hearing included academics, engineers, and entrepreneurs in the cryptocurrency industry. They included:

  • Mr. Joshua Fairfield, William Donald Bain Family Professor of Law, Washington and Lee University School of Law, Staunton, VA
  • Ms. Amber Baldet, Co-Founder and CEO, Clovyr, New York, NY
  • Mr. Scott Kupor, Managing Partner, Andreessen Horowitz, Menlo Park, CA
  • Mr. Daniel Gorfine, Director, LabCFTC and Chief Innovation Officer, CFTC, Washington, DC
  • The Honorable Gary Gensler, Senior Lecturer, MIT Sloan School of Management, Brooklandville, MD
  • Mr. Lowell Ness, Managing Partner, Perkins Coie LLP, Palo Alto, CA

Bitcoin’s Role in Alleged Russian Hacking of DNC Emails

The recent indictments of 12 Russia-linked hackers related to their alleged involvement in the 2016 U.S. elections was brought up. Bitcoin was mentioned as the means the hackers used to fund their activities and whether this helped hide their indentities.

However, committee members were informed that bitcoin’s public ledger allowed investigators to pinpoint the movement of funds much more easily than cash. The committee chairman, Michael Conaway, said, “As long as stupid criminals keep using bitcoin, that’d be great.”

Hearing More Technical and Detailed than Previous Ones

With the numerous subject matter experts on the panel, the discussion went into much more detail than others, like the ones at the SEC.

Amber Baldet made a good case for current blockchain technology as an early open framework built on open-source technology, much like the infrastructure of the Internet. In its early state currently, blockchain technology has the potential to grow into new, foundational technologies like the SMTP email protocol. Baldet thus recommended a sensible and moderate regulation.

Baldet said, “the committee can take a more proactive approach to regulation” as a means to support a blockchain becoming a global infrastructure, as the United States did with the internet. This is in contrast to “reactionary” regulations.

CFTC Representative Deeply Involved in the Technology, Makes Actionable Recommendations

bitcoin law
Some subcommittee members raised concerns about bitcoin’s role in an alleged Russian plot to influence the 2016 U.S. presidential election

The questions from some committee members did keep the common concerns over bitcoin’s price volatility and ICO scams. Gorfine, of the CFTC, conceded that there were a large amount of bad actors in the space and that upwards of 80% of the ICOs have gone bankrupt.

However, Daniel Gorfine stated that his work is focused very much on a “fintech primer”, which ultimately helps educate investors and regulators understand the technology and avoid scams. The lack of education is a large source of fraud in the industry for market participants, in addition to still-murky regulations.

Gary Gensler Encourages Quicker Regulatory Decisions to Keep Innovation in the United States

Gary Gensler, Senior Lecturer at the MIT Sloan School of Management, encouraged speeding up decisions about sensible regulations in order to keep innovators in the United States.

Gensler believes that strict or unclear regulations could move innovation and economic benefits offshore. If other countries get ahead of the United States in the industry, this could be a concern. History from other sectors has shown that once innovators leave the country, it’s more difficult to bring them back once the regulatory decisions are made.

Conclusion: Concerns over Centralization

Chairman Conaway concluded that “the hearing was very elucidating for them on different issues.”

However, a recurring concern throughout the hearing is the centralization of capital and mining in bitcoin. One problem is that only a few wallets contain over 90% of all circulating bitcoin. Another point is that the largest miners of bitcoin are in China and Russia, both of which make up about 50% of mining power. Bitmain is rapidly expanding its business globally.

Overall, it is encouraging to see that the committee brought experts in private industry and academics to inform regulators on the complexities of blockchain technologies. The group appeared to synergize their specialties in the industry. The committee members could do well to bring more experts on board in the future, since many still appear to be learning about the technologies.

Stablecoin, a new stabilized cryptocurrency project that functions like normal money, has received  new support and investments from Peter Thiel, Coinbase, Distributed Global, and 40 others according to the press release on June 20.

The development stage of the coin is dubbed “Reserve” and closed a collective of $5 million to develop a fully decentralized cryptocurrency which works by securing other crypto assets in a smart contract. Cryptocurrencies will then provide backing via the reserve token in order to stabilize its price.

According to the cofounder of the Reserve, Nevin Freeman, the initial funding was intentionally kept small as the focus was more on partnership building rather than amassing capital.

Reserve token offers a solution to countries that have value decreasing fiat currencies and high inflation rates jeopardize citizens savings and security.

While cryptocurrency is currently decentralized and protects its citizens from government control, the price volatility of most crypto limits it from serving most retail uses.

Freeman states…

“Simply put, nobody wants to spend money on it token that may be worth less one month and then another value another month. Nobody wants to store their savings on a token that will be worth nothing in a year.”

In related news, Circle is focused on creating a fiat stabilized coin which recently closed $110 million in fund raising. The company also partnered with the mining hardware manufacturer Bitmain with regard to the development of the stablecoin.

Tether, the most popular and infamous of all stablecoins, confirmed today that there Tether tokens (USDT) are proven to be back by the USD according to a major US law firm.

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