At the heart of bitcoin’s elegant issuance, game theory mechanics, and security model is the mining market — a confluence of firms, pools, and independent miners competing to solve a lottery-like cryptographic puzzle once roughly every 10 minutes.
Satoshi Nakamoto, the anonymous creator of bitcoin, mined the first bitcoins in 2009 before leaving the sizeable purse of untouched bitcoins behind.
Today, the mining market is flourishing, with bitcoin’s hash rate
, and improved hardware from chip manufacturing firms (e.g., ASICs) creating more powerful, energy-efficient chips. With all of the development in bitcoin’s mining market over the last decade comes some intriguing collateral developments, like bitcoin’s
vastly outpacing altcoins, and new takes on mining firms arising — like public mining company
. I had a chance to sit down with Andrew Kiguel, CEO of Hut 8, on his firm’s origins, the ongoing developments with Bitcoin, and the future of the mining market.
Joresa Blount: How was Hut 8 started and where did the name for the firm come from?
Andrew Kiguel: The name Hut 8 pays homage to the godfather of computing and cryptology, Alan Turing. During WWII, Alan Turing, at Bletchley Park outside of London, was able to bust the supposedly unbreakable German Enigma code. Enigma was used by the Nazis to transmit coded military messages used for attacks. Turing decoded Enigma by developing an early predecessor to our modern computer in a building named “Hut 8.” His work was essential to winning the war and saving millions of lives, inspiring modern computing and encryption in the process.
Joresa: Can you describe your public mining business model and how it differentiates from competitors in the industry?
Andrew: As a public company, Hut 8 strives to be a low-cost producer of bitcoin and maintain an inventory of bitcoin for appreciation. Most competitors are private and not accessible to investors. The public ones do not hold an inventory of bitcoin; thus, they do not provide exposure to bitcoin over the long term.
Joresa: What advantages does Hut 8 offer to institutions like family offices who want exposure to Bitcoin as an investment without having to actually purchase BTC?
Andrew: Buying bitcoin directly requires a leap of faith, providing private information to an exchange, wiring money to an offshore entity, and understanding hot wallets and cold storage and how to manage those. Many people who want to own bitcoin never follow through on the process or give up mid-way. Hut 8, as a public stock, makes the process of getting exposure to bitcoin simple.
We only mine bitcoin. And we hold an inventory of bitcoin.
We are easy to buy or sell with, and you can own Hut 8 in your existing stock portfolio without having to open a new account. If you are a family office or institution seeking exposure to bitcoin in the same format as a stock, Hut 8 offers the best alternative. As the largest public player in the space by market capitalization and operating capacity, we are the go-to name for investors who want bitcoin exposure.
Joresa: What average mining rate (per Bitcoin) does Hut 8 currently mine?
Andrew: Hut 8 operates at approximately 963 peta hashes per second. The amount we mine is dependent on the competition as the amount of bitcoin produced daily is relatively fixed. At current rates, Hut 8 represents over 1 percent of the overall market.
Joresa: Why did you select the BlockBox AC as your commercial mining unit? What is your relationship with Bitfury?
Andrew: The Bitfury Group is the world’s leading full-service blockchain technology firm. They were our first choice to partner with when Hut 8 was created. We have a strong relationship with them, and they own approximately 47 percent of Hut 8. Their Blockbox technology is unique; each 40-foot container is a self-contained data center. Because it’s portable and compact, we can locate them in remote areas that have excess energy at more competitive prices.
We don’t need to build a large facility; we just drop the boxes where it makes sense. They are also more economical and environmental to upgrade as we can replace the chips without discarding the existing equipment around the chip.
Joresa: Who are the primary groups that Hut8 is seeing interest from so far (i.e., types of institutions, retail investors, etc.)?
Andrew: We have had interest from around the world for having a high profile investor group, board of directors, and being one of the largest Bitcoin miners in the world. Investors that are interested in investing in Bitcoin but require a publicly listed entity to do so, find Hut 8 to be compelling.
Joresa: How do you balance your portfolio of holding bitcoins for appreciation vs. selling bitcoins for a profit shortly after mining? What is your position on the progress of the mining industry, and Bitcoin’s overall evolution over the course of the next 5 years?
Andrew: Bitcoin is evolving quickly. The most significant issues surrounding bitcoin investment – security and regulation – are being resolved. Fidelity, Goldman Sachs (via Bitgo), and most recently, NYSE, Microsoft, and Starbucks (via Bakkt) have started offering institutional custodial services for bitcoin. Visa has teamed up with Coinbase to launch a bitcoin debit card. Lloyd’s of London is providing insurance for bitcoin accounts. The list of established credible players entering the bitcoin sector goes on.
And it’s just beginning.
As the interest level from institutions in bitcoin grows, so will bitcoin’s use cases and merchants that accept the cryptocurrency. At Hut 8, we believe bitcoin represents the future of digital money and the best form of money available today as it is global and independent in its operation from interference from governments and central banks. As a result, our policy is to only use our bitcoin to pay our fiat expenses and keep the balance in inventory for appreciation. But if it makes sense, we will also use some of that inventory to continue to expand our operations.
Our goal is to be the largest bitcoin miner on the planet and hold an inventory of bitcoin for appreciation.