Blockstream’s mining security token – The Cryptonomist

Perhaps not everyone knows that Blockstream has issued its own security token. 

It is called the Blockstream Mining Note (BMN) and allows qualified investors to invest in their mining infrastructure. 

Blockstream launches its new security 

Blockstream is by far one of the most important single companies within the Bitcoin ecosystem. It was founded by, among others, well-known bitcoiner Adam Back, and is based in Canada. 

It is famous for its Bitcoin sidechain called Liquid, which among other things allows for the creation of security tokens. BMN for example was issued on Liquid itself. 

El Salvador’s famous “Volcano bonds” will also be issued on Liquid Network. 

Therefore it is not only a very active company within the Bitcoin ecosystem, but it is also by far one of the most famous and most followed. On Twitter it has nearly 200,000 followers, while its co-founder Adam Back has more than half a million. 

The BMN security token

One of Blockstream’s activities is Bitcoin mining. 

Adam Back himself is mentioned within Satoshi Nakamoto’s 2008 whitepaper as the inventor of Hashcash, or the Proof-of-Work protocol from which that of Bitcoin was derived. 

In addition to mining in Canada, and offering its services and technology to those who want to mine on their own, for some time Blockstream has also offered the opportunity to invest in their mining infrastructure. 

To make this possible it has created a security token on Liquid, BMN to be exact, and put it on the market. 

On Stokr it says it has raised $40 million in investment from 83 qualified investors, with a minimum initial investment of about $270,000. 

Blockstream’s goal, in addition to raising capital, was also to make it possible for not particularly large investors to invest in industrial mining. 

Industrial mining

After Ethereum‘s move to Proof-of-Stake, Bitcoin remained the only major cryptocurrency that still offered mining, alongside Litecoin and Monero. 

However, Bitcoin mining is no longer done at home with video cards: successful BTC mining requires large facilities with great power, requiring not only large investments but also considerable skill and experience in operating them. 

This actually prevents most potentially interested parties from being able to succeed in industrial mining successfully, so for those who already do it there is an opportunity to raise capital by offering part of the profits in return. 

For example, right now Blockstream’s mining farm does not appear to be among the top ten globally because the industry is dominated by even larger giants. Often these are not individual companies, but pools in which several companies pool huge amounts of computing power, sharing profits on a percentage basis. 

BMN and mining

For example, the official security token website states that each BMN token issued corresponds to 2,000 Th/s, thanks to which a total of 5.7 BTC has been mined by Blockstream to date for each BMN issued, and 0.004 BTC in the last 24 hours, corresponding to about $84. 

A total of 156.31 BMN tokens have been issued, corresponding to 312 Ph/s, or about one per thousand of the entire global Bitcoin hashrate. 

So anyone who has invested in BMN since the beginning should have received more than 5.7 Bitcoin in return so far ($120,000), with the possibility of reselling BMN tokens on the secondary market. 

Exchanges

BMN tokens can indeed be traded in the secondary market on a few exchanges, including Merj and SideSwap. 

But the main exchange seems to be Bitfinex, which for some time now has opened an entire section dedicated to security tokens. 

However, it is worth mentioning that since the launch in May 2020, trades have been very rare, with an overall negligible volume. 

As for the BMN/USD exchange pair, there are only about ten trades in all, while for the BMN/BTC pair about half. 

The comparison with Bitcoin itself is quite interesting. Indeed, while initially in March 2022 a BMN was trading at 6.95 BTC, by April it had dropped to 6.7 BTC, but then rose again to 7.2 in July and shortly thereafter returned to 7 BTC. 

The last trade in Bitcoin, however, occurred in November at 8.4 BTC, which is a significantly higher price than both the previous and the initial price. 

The fact is that the security token’s yield outperformed that of Bitcoin’s price in the latter part of 2022, so it is not surprising that in November someone decided to buy BMN paying in BTC at a higher price than before. Then again, in November with the collapse of FTX there were many fears about the resilience of crypto markets. 

With regard to the dollar price, on the other hand, it has fallen a lot over time due to the decline in Bitcoin’s market value. 

The initial price of 320,000 in March 2020 held up until March 2022 when it fell to $290,000 and then rose again to around $310,000. 

But in July it collapsed to $150,000, or less than half the initial price. 

In light of this, it is possible to say that the value of BMN depends on the market value of BTC, although it turns out to be much less volatile.