Cryptocurrencies, cryptocurrency mining and subsequently blockchain have been all the rage since Bitcoin became a household name and constant headliner after doubling in May of 2017 and again that June. Fast forward to now after Bitcoin's incredible run to an all time high of over $19k USD and back down. We've witnessed the creation of a several new market trends: blockchain and cryptocurrency.
In the early days of the trends, many investors misunderstood the relationship between blockchain and cryptocurrency. We believe this statement holds some weight as public companies building great blockchain based businesses with nothing to do with cryptocurrencies were trading in sync with the highs and lows of Bitcoin. Although a cryptocurrency is dependent on blockchain, the opposite is not so. As the relationship between blockchain and cryptocurrency delineates and they create their own paths, it appears the trends are digging in for the long haul. "Cryptocurrencies and the blockchain technology underlying them could become a $10 trillion market in 15 years." RBC Capital Markets analyst Mitch Steves says in an interview with CNBC.
By now you are likely clear on how blockchain technology is unique from a cryptocurrency but we shall recap nonetheless before moving on for our readers who may be new to the space. Blockchain is the technology or data structure that a cryptocurrency relies on for its day to day operations. A blockchain, also known as a distributed ledger, staying true to its name is an ever growing chain of data blocks which are created sequentially through a process known as mining (with respect to cryptocurrencies). Blockchain serves as the accountant, so to speak, for the cryptocurrency that's built on it, given that the blockchain records and processes crypto transaction requests. Blockchain technology is quickly emerging as a disruptive alternative to traditional data handling because it offers superior security, quicker confirmations of data transfers, transparency and is applicable to almost any industry.
A benefit of blockchain technology is that it allows a large volume of data to be shared with a large volume of users, of which all can be unknown and untrusted to each other. Its unique process of authentication allows the information to be shared among the entire group without worry of tampering or corruption and the entire historical record of the blockchain is transparent for anyone to read. This is beneficial as it cuts out a central management institution or middle man and its transparency is effective at stopping corruption. Companies are leveraging blockchains in a wide variety of ways to improve almost every industry, from payment solutions to advertising, to tracking goods on a supply chain; you name it, blockchain is applicable.
Most cryptocurrencies and alt-coins are influenced by the original Bitcoin, which was created by an individual referred to as Satoshi Nakamoto. They serve as decentralized currencies which are borderless, have no physical property and no institutional headquarters. Some have a pre-determined supply limit of coins that will be available once the entire float has been mined such as Bitcoin (21 million), Ripple (100 billion) and DASH (18.9 million). Others such as Ethereum and ZCash do not yet. So as users buy, hold, sell and trade cryptocurrencies all these unique transactions require authentication and cataloging on the ledger; this is handled by the process of mining known as 'proof-of-work'. The principle or process of mining is fairly simple, although the technology itself is not. The process begins with a transaction being proposed to the network. The proposal is distributed throughout a group of unique computers which are unknown to each other and random. They use computational power to solve complex algorithms and whichever reaches the solution first is rewarded with some crypto, the proposal is then granted, and the data recorded to the block. Theoretically the more power one has, the more rewards can be achieved. It is important to understand that proof-of-work mining requires an abundant amount of energy and for anyone to be successful, it is necessary to have a cheap power supply.
The cryptocurrency/blockchain trend has taken a bit of a beating as of late, with several catalysts being to blame. The government of South Korea cracked down on cryptocurrency traders and exchanges by removing the anonymity out of crypto trading as a way to track trades, collect taxes and keep money in the country. India sent out retroactive tax bills to crypto traders. Facebook banned ICO ads as a measure to protect investors from scams which had an overall negative effect on legitimate ICO's. When the Mt. Gox crypto exchange filed for bankruptcy protection after losing 850,000 bitcoins, its assets were handed over to an attorney dubbed the 'Tokyo Whale', whose mandate has been to liquidate over $2 billion worth of coins, which is really a staggering amount of selling pressure. We're experiencing them, and perhaps at the tail end of what many are calling a correction and the most recent drama has been a head to head battle over trade tariffs between U.S. President Donald Trump and China. Add the potential for some tax selling and this perfect storm of events has paved the way for some potential opportunities in the crypto and blockchain space due to the oversold conditions of the markets and the companies within them.
As we watch for that reversal in market sentiment, there are still some companies doing some really great stuff and we've compiled a list of a few that I believe stand out and if we see a shift in market sentiment I believe these companies could regain some of the ground they've lost. I'll give a quick run down of each, offering our readers a head start on your due dilligence. Some you may have heard of and some may be new to you.
1. (TSXV:HIVE)(OTC:HVBTF) - HIVE Blockchain Technologies Ltd. - Current SP $1.17*
Market Cap - $372 Million
52 WK Low - $.09 / 52 WK High - $6.77
Shares Outstanding 307,724,825
As of February 26, 2018, the company's digital currency portfolio had a total value of $13,624,783** generated through roughly 10.6 MW of energy consumption. The companies Swedish GPU data centre expansion of phase 2 recently came online totalling 17.4 MW of energy consumption and a further 20.0 MW is expected by Sept. 2018. Total assets valued $163,986,233** as at December 31, 2017, with roughly $99 million in cash. All expansion plans are fully funded.
HIVE recently announced intent to acquire of all Kolos Norway AS shares through means of a mostly non-dilutive acquisition of another Norwegian entity. The consideration is mostly cash with a minor amount of stock and warrants. What makes this deal significant is they could potentially scale up to 1,000 MW of clean, renewable energy dedicated to mining and blockchain operations.
“HIVE and our strategic partners, Genesis, are leading the development of the infrastructure needed to power the expanding global blockchain ecosystem,” said Frank Holmes, Chairman of HIVE Blockchain. Genesis’ innovative hardware and software tools enable us to run highly efficient mining operations, which directly feeds into our annual revenues. We started HIVE with a vision to go from a revenue run rate of $1 million per month to $1 million per week and now, by September 2018, HIVE’s annualized run rate revenue is over $150 million, or $3 million per week.” (HIVE Feb 28th Press Release)
2. (TSXV:DMGI) DMG Blockchain Solutions Inc. - Current SP $0.68
Market Cap - 39.5 Million
52 WK Low - $0.17 / 52 WK High $1.98
Shares Outstanding - 58,173,482
DMG Blockchain has introduced another innovation to the cryptocurrency mining space, MaaS or Mining-as-a-Service. The company offers a turnkey solution for cryptocurrency mining by providing the facility and energy for mining. Clients buy their own machines and DMG then manages, operates and maintains the mining machines while receiving monthly recurring revenue as a consideration. This strategy offers the company shelter from the volatility of the cryptocurrencies because they get paid a flat managerial rate, although they haven't been immune to the markets softness. The company expects to have up to 40 MW online by mid 2018 making them one of the largest in terms of energy consumption.
In a Feb. press release DMG announced they "received an order in excess of C$3 million from Forside Financial Services Inc. (“Forside”), a company headquartered in Tokyo, Japan for the hardware purchase and set-up, with monthly recurring hosting revenues to begin upon completion.". The company has sold out of its first allotment of 4 MW, and has 2650 mining rigs deployed and operational.
Recently the company announced the acquisition of 'Blockseer', in a press release. Blockseer is based in Silicon Valley, adding blockchain and artificial intelligence to DMG asset sheet. Blockseer holds several provisional U.S. patents related to security and identity tracking in anonymous cryptocurrency exchange networks. Previous customers of Blockseer include the U.S. Secret Service, FBI and IRS. One of the most notable shareholders of Blockseer is Charlie Lee, the founder of Litecoin. The company also provides Ethereum based services to one of the world's largest cryptocurrency wallet providers Blockchain.com.
The company has raised over $35 million in 2017 and more than 20% of the float is institutionally owned. I believe current operations revenue is $400,000 per month.
3. (CSE:BIGG)(OTC: BBKCF)(WKN: A2JSKG) Big Blockchain Intelligence Group Inc. - Current SP $.46*
Market Cap - 35 Million
52 WK Low - $0.105 / 52 WK High - $2.77
Shares Outstanding - 73,758,877
BIGG has developed a proprietary blockchain based product called 'BitRank VerifiedTM', an API plug-in that provides clients the ability to determine the risk involved with accepting cryptocurrency transactions and protects them from the scams. The software enables clients accepting cryptocurrency payments the protection of traditional financial regulatory and compliance requirements. The platform boasts it can "deliver 7 billion requests a month at an average of less than 1 second per request." (Apr 4/18 PR)
What really caught our attention was when we read this headline;
BIG Blockchain Intelligence Group Inc. Traces Proceeds from USD$534-Million Coincheck Hack of XEM Coin Laundered through Vancouver Based Exchange
The company also operates a platform called 'QLUE', which was likely what they used to track down the stolen currency and has since reported the theft to law enforcement. One look at this list of major coin hacks compiled by BitcoinExchangeGuide and one realizes that cryptocurrency theft is a major issue and costs investors hundreds of millions of dollars worth of coin every year.
Recently the company issued a press release announcing a revenue generating agreement with Hilltop Cybersecurity Inc. (CSE:CYBX) which they will supply BitRank VerifiedTM to Hilltop's military grade, patented platform, 'Vauban'. The company will receive a commission on every transaction.
The company also announced an exclusive distribution agreement with Blockchain Next Corporation in Japan, which is home to one of the largest cryptocurrency exchange hotbeds.
4. (TSXV:DASH)(OTC:NPPTF) Neptune Dash Technologies Corp. - Current SP - $0.30
Market Cap. - 24.06 Million
52 WK Low - $0.19 / 52 WK High - $0.85
Shares Outstanding - 80,193,329
Neptune Dash Technologies offers investors an opportunity for exposure to a unique and progressive form of cryptocurrency mining called 'Proof-of Stake'. Traditional mining of coins such as Bitcoin, Ethereum and Litecoin is referred as 'Proof-of Work', in which miners verify transactions using computational power to solve complex algorithms, the first to solve the algorithm is rewarded with coin and the transaction is written to the blockchain. Proof-of-stake differs because rewards are determined not by how much computational power you have but how much ownership or stake in the cryptocurrency you have. The more ownership results in more rewards.
Neptune builds and operates masternodes on the DASH network. For every masternode on the network you operate you need to own and hold 1000 DASH coins. Masternodes do the heavy lifting on the network, such as host the Instantsend and Privatesend functions, which are instant fund transfers unlike Bitcoin which can take 10 mins or more and are completely public. DASH Privatesend offers a degree of privacy. Masternodes get a higher percentage of the reward from block creation because of their higher degree of responsibility.
Neptune owns 18 masternodes, and as of the April 4/18 press release the company holds about 18,300 DASH, which at the current DASH valuation of $362.54 USD ($456.24 CA) the companies holdings are worth around $8,344,800 CA. The company states that each masternode is compensated roughly 6.9 DASH per month.
According to Coinmarketcap.com there are currently 8,010,457 DASH in circulation out of a max supply of 18,900,000. Compared to Bitcoin which has 16,978,112 in circulation of a max supply of 21,000,000 suggesting lots of potential for acquisition of coins and as use and popularity of the DASH coin grows. Supply is limited and demand could see significant increase in value.
Fidelity holds 11,973,499 Common Shares representing approximately 14.93% of the outstanding shares (sedar Mar 12/18 report), which is a solid vote of confidence and the Neptune Asset Group Inc. holds another 14.65% of the share structure. Fidelity fund manager is said to be same manager who held Canopy Growth and Shopify in their early days.
Neptune Dash is cashed up as they raised over $23 Million when they went public.
5. (TSXV:BLOK)(OTCQB: BKPPF)(Frankfurt: ES3) Block One Capital Inc. Current SP - $0.74
Market Cap - 47.77 Million
52 WK Low - $0.095 / 52 WK High - $1.85
Shares Outstanding - 64,548,333
Block One Capital is engaged in several different verticals of the space within the cryptocurrency and blockchain space. They have a 90% ownership stake in TG12 Ventures Inc, which is a fully funded Bitcoin mining operation that began generating revenue in March 2018. The operation is currently has 1000 mining rigs in operation with a second delivery of 1000 miners expected soon.
They own a 40% stake in Finzat Block LLC, which is a U.S. based mortgage blockchain company. The company aims to overhaul the U.S. mortgage industry by offering a blockchain based system which "aims to permanently preserve loan information at the point of every decision and to eliminate the need to recreate proof at the backend. The need for such a system is validated by more rigorous and standardized compliance regulations that are being phased in, as mortgage markets continue to move towards a mainstream paperless mortgage process." (Jan 25/18 press release). The company has estimated the U.S. mortgage industry at ten trillion dollars.
Block One is also investing in some ICO's, the first announcement being a $750,000 USD allocation in the oversubscribed presale for the token of a company called Shopin, a New York, USA headquartered, Retail Blockchain Solution Company (www.shopin.com).
In Dec 2017, the company closed a $10 million non-brokered private placement for 10 million units at a $1.00 which include a half-warrant exercisable at a $1.50. They just announced on Friday April 13/18 another $2 million dollar round of financing at $1.00 for 2 million units with a half-warrant at $1.50 which is a 25% premium relative to current share price.
6. (CSE:BLK)(Frankfurt:2AD) BLOK Technologies Inc. - Current SP - $0.26
Market Cap - 9.13 Million
52 WK Low - $0.005 / 52 WK High - $1.50
Shares Outstanding - 35,117,378
Blok Technologies Inc. is engaged in investment and the development of emerging companies in the blockchain technology sector and are building out a suite of blockchain enabled products and services.
The company acquired SimpleBlock Payment Systems, a proprietary fintech platform that has $10,000,000 already invested in it and is currently operational in Asia. The company intends to deploy it within the African marketplace.
“We are very pleased with the potential of adding SimpleBlock to our blockchain-enabled product suite,” said BLOK Tech CEO Robert Dawson. “Banking and payment processing are key areas of focus for us, and we have strategically targeted these sectors for investment and product development. The SimpleBlock platform is feature-rich and with the addition of blockchain technology, we believe it will be an efficient and effective technology solution for the un-banked to transact with businesses and fellow consumers.” (Mar. 1/18 press release)
The company made a $100,000 investment into Fogchain Inc. which gives them access to Fogchain's partner networks and distribution of technology products. Some of the companies that Fogchain has previous dealings with include Amazon, Cisco, CA, New Relic, and Sauce Labs.
Blok is currently executing on a $3,000,000 brokered placement for 10,000,000 units at $0.30 and a common share purchase warrant exercisable at $0.50.
7. (CSE:SAAS)(OTCPK:SRBBF)(Frankfurt:6gq) Subscribe Technologies Inc. Current SP $0.10
Market Cap - 3.82 Million
52 WK Low - $0.035 / 52 WK High - $0.25
Shares Outstanding - 38,177,670
Subscribe Technologies Inc. is a 'SaaS' or Software as a Service company that is coming out of the gate. What I like about these guys is they are building a cloud based software as a service platform powered by blockchain for small to medium sized enterprise (SME's). The company already has built and deployed several SME, SaaS platforms that are live and in use with over 350 Subscribe users and growing. The company has also stated that it has more applications developed and ready to launch in the coming weeks. Here's a short list of the applications already launched:
Bcontact, a customer relationship management and accounting solution which is akin to Quickbooks/Salesforce.
FileQ, a file storage and sharing solution, like a Dropbox.
Sitesafe, a suite of protection tools for your company and website.
Recently the company announced the addition of several new advisors to the company who are based out of Southern California, a hotspot for blockchain technology developers and technology companies. The new advisors offer Subscribe a wealth of blockchain technology knowledge and development experience along with capital investment backing. Several are members of the Silicon Valley Blockchain Society.
According to a Forbes report "by 2018, 27.8% of the worldwide enterprise applications market will be SaaS-based, generating $50.8B in revenue up from $22.6B or 16.6% of the market in 2013. IDC estimates the overall enterprise applications market in 2013 was $135.9B." It goes on to suggest "demand for SaaS enterprise applications is accelerating and exceeding the demand for on-premise applications by five times (during the five-year forecast period through 2018, SaaS revenue is forecast to grow at 17.6% CAGR, while on-premise revenue growth is only forecast at 3.1%)".
The company is cashed up with over $400,000 in the treasury, a low burn rate, and a tight float.
As we may be potentially seeing a turnaround for both cryptocurrencies and the markets, going forward it's important to know the fundamental differences between blockchain and cryptocurrency. Cryptocurrencies over the past week have made some significant gains and we're already seeing money begin to flow back into the sector. Although I've helped with the process, you are responsible for doing your own due diligence before buying any stock.
By: Jason Clegg, April 15/18
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* All Share Prices noted are given prices at the time of the publishing of this article and are subject to change.
** Cryptocurrency valuations are based off press releases and are subject to the volatility of the individual cryptocurrencies and markets.
Full Disclosure: At the time of the writing of this publication the author and/or principles of www.blockchainstocks.net hold long positions in several of the above mentioned securities.