A brief history of Bitcoin and me
I first became aware of Bitcoin sometime in 2011. I was busy at the time working on a digital marketing project for a large hotel chain and did not have a lot of free time to dive in, but it got filed into the back of my mind as something to dig into later.
Fast forward to mid 2013 and I had some free time. I was most interested in the concept of mining Bitcoin both out of technical curiosity and to see if it would be a way to earn a passive income. I was sadly disappointed to learn that Bitcoin mining was only possible on expensive and proprietary ASIC devices and that profitability was not probable unless you had access to an abundant source of cheap or free electricity. I was also discouraged to see that most mining profitability calculators did not factor cooling into the power consumption estimates.
I decided that it was not worth the time and that the window of opportunity for mining as a hobby had passed. I briefly flirted with buying and holding Bitcoin, but as a member of GenX with a penchant for conspiracy theories, I decided that investing in complex financial instruments probably was not for me even if said instrument was based on cryptography and decentralized.
The price of Bitcoin was below $200 when I made this decision and I had no idea what would happen later. However, this isn’t one of those stories where the author is kicking himself for not “getting in” when the price was lower.
Of Bitcoins and Blockchains
The take away here is that I was thinking of Bitcoin simply as digital money. I understood that the distributed ledger solved the so called double spending problem that has plagued all previous attempts to create “digital money”, but the concept of blockchain itself and its true potential had escaped me.
When Ethereum launched and with it Decentralized Applications (DAPPS) and Smart Contracts; the entire game changed. This was no longer just eMoney, this was transformative technology with the power to disrupt almost any business, not just financial institutions. It was not until fall 2017 that I caught a news story covering Bitcoin’s crazy price climb that I revisited Bitcoin and Blockchain again.
I become a miner
I had the good fortune of working with a firm that was willing to risk some R&D money to purchase mining hardware and some friends at a data center willing to provide free electricity in exchange for future mining profits (if there were any). I chose to mine Ethereum not because it was the most profitable, but because I believed in the project’s technology and it’s philosophy. I ended up building a 72 GPU Ethereum mining farm and made a ton of mistakes along the way. Thankfully, some talented friends at the data center helped with re-engineering the equipment to run smoothly. The farm is very stable now and we are profitable after hardware and electricity costs.
World view shift
By February 2018, I was all in on Blockchain and cryptocurrencies. I didn’t care that the prices were dropping because I knew that they would eventually come back up. I had seen similar patterns each time a disruptive technology was maturing. The Personal Computer, the Internet, eCommerce, VoIP, Social Media and Smart Phones are a few examples that come to mind. I could also add subcategories such as the Macintosh, Windows, iPod, iTunes, iPhone, Android, etc. Each of these technologies were highly disruptive in their own way, but the pattern I’m referring to is the period of denial that the incumbent institutions go through before they realize that their very existence is threatened by the new technology.
Working in Information Technology professionally since 1998, I have seen many businesses and individuals pass through this denial stage. I remember the first time I saw an iPhone 3G at the H.O.P.E (Hackers on Planet Earth) conference in New York City July, 2008. A fellow attendee was using one and I asked to see it. He explained that within one week of purchasing it, that he seldom used his laptop anymore. This person was highly technical and owned his own company. We talked some more and he let me play with it. When I returned home to rural Indiana, I bought one.
I am not a futurist, but I recognize a game changer when I see one. I knew that the iPhone and smart phones in general would be the next big thing. I knew when centralized Napster was shut down that something decentralized like BitTorrent and Kazaa would replace it.
Once I understood what Bitcoin and Ethereum really were and how they worked, I knew that blockchain had the potential to change everything. Even if Bitcoin and Ethereum ultimately get replaced by something better and no longer exist, they are still game changers. AOL is basically gone, but the impact that AOL made is still felt on the Internet we use today.
Let’s start a new business
I’ve started several companies and worked for a handful of startups. I knew that I wanted to start a crypto / blockchain business and mining seemed to be the logical choice given the resources I had access to. I experimented with several business models such as selling custom mining hardware, selling shares in mining farms, consulting for mining farm design, etc.
Ironically, the success of cryptocurrencies themselves became the biggest impediment to launching a mining business. Even with the price decline, most people I spoke to were more interested in investing directly into the cryptocurrencies themselves, rather than owning a share of a mining farm. Of course I’m talking about the people who were interested in jumping in at all, not those who were scared of crypto or thought it was a scam or something criminals used to hire assassins.
To me it made perfect sense to have part ownership of a crypto mining operation. I had already demonstrated that you could be profitable if you set it up correctly and there are several tax advantages to mining versus investing. I approached several local sources in Indiana about investing and while everyone was intrigued, they all took a wait and see approach to the space.
Oh right, regulations
So I came to find out that people with a lot of money tend to be afraid that the SEC (Securities and Exchange Commission) might declare Bitcoin, Ethereum and other cryptocurrencies an illegal public offering of a security and effectively destroy them. Of course this made sense from the point of view of an accredited investor (A person with an annual income of $200,000, or $300,000 for joint income, for the last two years with expectation of earning the same or higher income. Or person with a net worth exceeding $1 million, either individually or jointly with their spouse).
I see both sides of the argument about regulations for cryptocurrencies, but in my opinion responsible regulations are probably a good thing. There are a large amount of scams in the crypto space and there are many projects that are just bad ideas that are bolting crypto onto something that doesn’t need blockchain at all.
I started exploring launching an ICO (Initial Coin Offering) to crowd fund my mining farm when I learned that there were options available to raise money for blockchain projects legally via so called STO’s (Security Token Offerings) within the legal framework of the JOBS Act. Basically, this is crowdfunding like Kickstarter, but instead of perks you get ownership of the company you’re investing in.
Security Tokens and The Digital Divide
Security Tokens are different from most cryptocurrencies as they are not so much digital money as they are digital stocks. Each security token represents fractional ownership rights to an underlying real world asset. This could be ownership of a building, or rents from the leases of a building, or partial ownership of intellectual property such as a song, a movie or a piece of software. The main distinction is that ownership of the security token proves that you own a percentage of the real world asset and any rights that are assigned to it.
The data center I work with has another business that builds fiber optic networks in rural areas. This is a very capital intensive business because of all the materials, licensing, right of way and local government issues that come with building wired networks.
The other issue with this business, is that generally speaking, the only people who care about high speed broadband in rural areas are the people who live in rural areas. This is a big problem as 53 percent of rural Americans (22 million people) lack access to 25 Mbps/3 Mbps broadband (Source: FCC 2015 Broadband Progress Report).
I began to wonder if security tokens might be the answer to closing the digital divide in the United States.
Co-Ops and the electricity divide
The digital divide between urban and rural areas in America is similar to another divide from the previous century. When electricity came into wide spread use in the early 1900’s, energy providers did not have much interest in wiring up rural areas. The reason was simple; the stockholder-owned power companies knew that they could get more customers in one city block, than 100 miles of farmland.
In the 1930’s and 1940’s electrical cooperatives were created to close this electrical divide. Today, over 900 Co-Ops serve an estimated 42 million people in 47 states.
Electric cooperatives are:
- Private, independent, non-profit electric utility businesses
- Owned by the customers they serve
- Incorporated under the laws of the states in which they operate
- Established to provide at‑cost electricity service
- Governed by a board of directors elected from the membership which sets policies and procedures that are implemented by the cooperatives’ management
Many Co-Ops have managed to build fiber optic networks to offer broadband to their customers at reasonable prices. This is usually done with private funding or by utilizing government guaranteed loans or grant programs. Unfortunately, the vast majority of these areas will not receive government grants and private funding doesn’t work for every area because the return on initial investment can take years.
Broadband, Co-Ops and Security Tokens
What if there was a way to fund the deployment of broadband to rural areas without decades of debt to private, institutional or government investors? What if the money for a project could be accessed all at once before the project begins?
Security Tokens could make this a reality for rural broadband. Let me explain.
Let’s imagine a small town in rural Indiana. Let’s call it Hawkins, Indiana for fun. Hawkins has 600 residential homes and a small town with a Mayberry type main street. They have a couple of banks, post office, police station, fire house and government buildings.
Many people are surprised to learn that if we deployed a fiber optic network to Hawkins that provided Internet, Phone and TV as well as provided the needed network infrastructure for the local government and emergency services, that the monthly subscriber fees would be in excess of $20,000 per month. The cost to deploy this network is approximately $400,000 and could be completed in 6-8 months.
If we pre-sold a security token that entitled the token holders to a percentage of future profits from subscriber fees, we could completely fund the Hawkins, Indiana project before one shovel touched the ground. The network could be designed to best serve the needs of the community without sacrificing quality of service or materials.
In my opinion, the biggest innovation that this funding model provides is the security that blockchain provides to investors who have no stake in the future success of Hawkins, Indiana. For example an investor in Germany can now make a safe investment with guaranteed future monthly payouts and never visit Hawkins. In fact, the investor would not need to ever visit the United States at all. That is the potential power of security tokens!
There are dozens of towns in Indiana and the rest of rural America that are just like Hawkins. They all want access to broadband and are willing and able to pay for services. The larger incumbent broadband providers are not going to make the investment, but maybe the rest of us can.
GigaCrypto is born
I started GigaCrypto to remove the barrier of entry to crypto mining and to provide access to broadband for rural America. We’re currently running a proof-of-concept centralized mining farm in Indiana and in an underground facility in Missouri.
We have future plans to deploy a decentralized mining farm through a managed services model and to provide a secure crypto storage solution in the underground facility. If we are successful with our raise, our long term vision is to release a security token to fund the construction of fiber optic networks in rural and other unserved areas.