Episode 001 - FOCUS ON FINTECH Series: Cryptocurrency Mining Explained - Aurum Capital Ventures (with John Paul Baric, Founder & CEO)

Introduction

• Welcome to Distilling Venture Capital.  I am your host, Bill Griesinger
• Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world.  My mission is to cut through and go beyond the hype that tends to dominate the tech landscape.  And provide you with information you can use.

Episode Introduction:

• I would like to introduce Today’s Episode topic as follows;   We hear a great deal about cryptocurrencies, mostly Bitcoin, and the impact they are having on the financial services and investing landscape, with respect to how we define money, e-commerce, make investments, and even what Central Banks are doing to authorize/issue their own digital currency or stable currency, etc.
• On the other hand, we don’t hear much or may understand very little about the derivation and creation of cryptocurrencies themselves.  Where do they come from?  What is their intrinsic value and utility?  How is all of this accomplished?
• So, today We’re going to get into what I consider a very interesting segment of the crypto-currency world – Crypto-Mining - that we don’t often hear that much about but yet is vitally important to our ability to be able to utilize these digital currencies, digital assets to conduct financial transactions:  Crypto-currency Mining
• To answer these questions and distill down our understanding of the crypto-mining industry, I am joined by JP Baric who is the Founder and CEO of an technology/energy company directly involved in multiple aspects of the crypto-mining industry, operating as Aurum Capital Ventures

 

• Aurum Capital Ventures is leading the way not only in the development and deployment of turnkey crypto-mining technology in the field…but also efforts to bring much needed liquidity and financing to the mining and cryptocurrency markets themselves…
• So, we’ll dig into those topics…

 

• Welcome JP and thanks for joining me today.  To kick off today’s conversation, JP, perhaps you can provide a little background about the origins around the formation of your Company and identify its core goals and objectives. 

 

What you Will Learn in Today’s Episode:

• Define Cryptocurrency-Mining & How it Works  
• The Future of Crypto-Mining
• Crypto-Currency and Crypto-Mining are Fully Transparent Markets, by Design
• The Search for the Best Equipment and Cheapest Source of Energy 
• How Aurum Capital Ventures is Changing the Game and Mindset Regarding Crypto-Mining and the Production of Energy
• Aurum is Both a Buyer and Seller of Energy
• Aurum is Redefining How Energy is Consumed and Transmitted
• Aurum is Creating Unique Investment Vehicles to bring needed liquidity – both debt and equity capital – to the Crypto-Mining and Crypto-Currency 
• How Crypto-Miners are Rewarded
• What is a Halving Event and What does it Mean for Cryptocurrency Mining?
• And Much More…

 

Cryptocurrency Mining Explained

• Miners are, in effect, getting paid for their work as auditors.  They are doing the work of verifying previous bitcoin transactions. 
• It is said that, miners are, in effect, "minting" digital currency…
• By verifying transactions, miners are helping to prevent the "double-spending problem," a scenario in which a bitcoin owner illicitly spends the same bitcoin twice 
• In addition to rewarding miners and supporting the bitcoin ecosystem, mining serves another vital purpose:  It is the only way to release new cryptocurrency into circulation.  In other words, miners are basically "minting" digital currency
• The primary draw for most Bitcoin miners is the prospect of being rewarded with valuable bitcoin tokens
• To earn bitcoins through mining, you need to meet two conditions.  One is a matter of effort; one is a matter of luck:
• • 1) You have to verify ~1MB worth of transactions. This is the easy part.
  • 2) You have to be the first miner to arrive at the right answer to a numeric problem. This process is also known as, proof of work

• The integrity and value of crypto is predicated upon the ability of miners to confirm, validate a 1MB block

 

• We just had a pre-designed reduction in the reward that miners can earn when mining, referred to as a Halving Event: 
• • On May 12, 2020, Yesterday, the reward for mining Bitcoin just dropped from 12.5 BTC to 6.25 BTC, for validating a 1MB Block -   This is what crypto- miners face all over the world.  Block-halving is hardcoded into how Bitcoin operates.  Its business as usual and it means that Bitcoin is doing exactly what it is supposed to do according to the original design of Satoshi Nakamoto.

• Halving Event - So, when we talk about miners being motivated and incentivized by being rewarded with Bitcoin for successfully delivering a proof of work,  Describe what a “halving” event is and what it means – how it affects crypto-mining activity

Why is There a Halving Event?

• There can only ever exist a maximum of 21 million bitcoins.  Therefore, the reward for making new ones needs to be reduced periodically in order to bring sustainability to its value.  That’s exactly what blockhalving accomplishes once every 210,000 blocks (roughly every four years).
• The creation of “mining pools”

Business Problem that Aurum Capital Ventures is Solving

• Mining is a very capital and energy intensive business and is presently “oversupplied” globally
• Description of the main Business Problem Aurum solves – Its value proposition
• • Where geographically are your major deployments?
  • Discussion of Iowa, NY and other major installations
  • Unique concept and approach to the energy component of operations

Business Model Characteristics

• Your Bus. Model has Multiple Revenue Sources:

1. Turnkey Mining Equip Deployments & hosting services; 

• Speed & Efficiency through repeatable process of Power procurement, infrastructure deployment, and remote management

2. Running your own Mining servers
3. Managed Services
4. Selling used equipment to established network

Defining and Solving the Capital Procurement Obstacles of the Crypto-Mining Industry:

• One of your firm’s stated GOALS: There exists a lack of liquidity in the space.  JP explains how Aurum is creating unique investment vehicles to enable institutional capital to enter the space to provide liquidity
• • Launch Global Bitcoin Mining Fund to allow for better market liquidity and transparency in the sector;  JP Baric Explains
  • Securitization of mining hash rate (hash rate tokens);  JP Baric Explains
  • Launching vehicles like investment trusts and funds that offer investors exposure 

Goal:

• Enables Liquidity Unique Financing Approach:
• • Issuance of secured, insured bond to finance equipment and projects
  • Attractive risk-adjusted return characteristics for investors
  • Opportunities for arbitrage in power contracts
  • Providing increase in credit and capital to Aurum and the entire market
  • Providing investment banks
  • Mining, b/c it’s an infrastructure investment is easier for institutions to get into to than Bitcoin purchasing
  • Not currently in the prospectus of the major Energy Funds to invest in energy consumption products – they are only focused on energy generation - Bitcoin is not part of their investment thesis.
  • Allows exposure to underlying Bitcoin asset and mine Bitcoins at a discount relative to the volatile Bitcoin market price itself.  JP Explains

Competitive Advantages

• Modular, mobile equipment deployment – more efficient
• Rapid Payback/Utilization of “Stranded Energy” - Aurum’s mobile mining deployments profitably monetize any type of stranded energy anywhere in the world
• Situation where the value of the underlying collateral (mining equipment) can increase in value during life of the equip. and related financing, due to a halving event of Bitcoin
• Allows you to build inventory of equipment for deployment now, in advance of halving event that you know occurs approx. every four years
• JP Baric explains Aurum’s business model advantages relative to competitors such as Genesis Mining

Closing Remarks

• JP provides an overview of where he sees things headed for crypto-mining industry in general…
• We’ve just had this Halving Event – what are some key things that happen next as it relates to Crypto-Mining?
• JP explains Aurum’s leverage, differentiation and its expertise to bring to market top equipment and energy sources required by Miners and the financial liquidity mechanism to make it happen – keeping with Aurum’s core mission

Contact Information for Aurum Capital Ventures

• Those seeking additional information and wishing to learn more about Aurum Capital Ventures:
• • JP’s Twitter Account – @JPBaric
  • Sign up for Investor Newsletter at: Aurumcapitalventures.com

Thank you for joining me for this edition of DVC.  I hope you found the topic interesting and useful.  I am currently working on the DVC website.  In the meantime, Please send questions and your comments regarding today’s episode to: [email protected]

Stay tuned for my next Episode, coming very soon, where I will I am going to provide a follow-up to Episode 001, Unicorn-Mania, where I will dig into and discuss the sagas of WeWork and Uber in the context of Unicorn-mania.  Thank you again and I look forward to joining you for my next Episode of Distilling VC.