Crypto vs. Cash
“The fact that banks don’t want to engage with cryptocurrencies is a challenge,” said Sean Ristau, Director of Exchange Integration and Education at Bcause LLC. “However, crypto was not created to circumvent banks, it is a byproduct of what happened. It is a faster method of moving money and a different way to store it. Banks serve a purpose but like everything, they need competition.”
With the markets abuzz about bitcoin and cryptocurrencies, Hehmeyer Trading + Investments sat down with Sean Ristau to learn more about their mining facility, the biggest challenges this new asset class faces as well as how he thinks the launch of cryptocurrencies is like the ascent of electronic trading.
One of the first full-stack cryptocurrency ecosystems, Bcause is a mining facility and data center as well as a spot market and pending CFTC approval, will be a designated contract market and clearinghouse. Bcause founders recognized that digital currencies would need a regulated marketplace for asset allocation and risk management. While other participants have addressed the market’s need for regulated futures contracts, Bcause is one of the first to also offer mining pools or as Ristau calls them, "mining rigs."
Ristau explained that Bcause is able to host, maintain and service “mining rigs,” which are computing boxes that solve complex equations to generate new coins. The amount of computing effort expanded by miners is known as the “hash rate.”
Ristau said that miners have a better chance of getting a return on the investment by combining efforts.
“In this case, hashing is calculation power,” he said.
The more hashing power you have, the more mining power you have and the larger you are on the network, which allows you a better chance of mining more blocks.
He compared it to the Sam's Club/Costco model, where consumers are able to get discounts as a result of the warehouse club buying in bulk.
Participants on Bcause can currently only mine Bitcoin (BTC) and Bitcoin Cash (BCH) since as Ristau explained, some coins are not mine-able.
“Proof of state coins such as EOS or Ripple are not mine-able because you prove validity through a different concept,” he said. “You can however mine Litecoin, Dash and Monero for example.”
He explained that there has been a lot of demand for Bcause’s cost-efficient services.
“Individuals can get into mining. The cost of mining isn’t very high but the initial build out is expensive and requires expensive transformers and large amounts of power,” he said. “For a multi megawatt facility, it is a multi million dollar investment to build it out properly.”
Bcause’s customers are institutional clients such as large global firms and individual early adopters.
"We also have customers that have had mining pools and data centers in Asia but due to regulatory concerns, they are moving their equipment stateside," said Ristau.
Regulatory concerns and the decentralized nature of the technology behind bitcoin can cloud this new asset class. However, Ristau says the fact that cryptocurrencies cannot be tied to a jurisdiction provides a leg up.
“Bitcoin is not tied to the government like fiat currencies. In fact, bitcoin competes with gold, which is price controlled by a few big players and has a ton of intermediaries,” said Ristau, who believes that bitcoin is a similar digital version with programming in the protocol to control inflation.
Ristau also believes that human nature itself is a big hurdle in the adoption of cryptocurrencies because humans are not good with change. He compared this time to when electronic trading had just emerged.
“It’s like when electronic trading started on the Exchange, it wasn’t built to replace floor trading but to streamline it,” said Ristau. “First they hate you, then they ignore you and then they embrace you and want to work with you. What did people think about electronic trading before it launched? They will never get rid of the floor but look what happened. We will just have to wait and see how this all shakes out.”
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