A Good Place To Be

To hear Charles Allen, chief executive and founder of BTCS, a Bitcoin mining company, tell it, when the day comes that Bitcoin miners have to start charging transaction fees for keeping the blockchain because they can no longer be compensated with newly mined Bitcoins for their work, the survivors will be the ones that can validate the blockchain at the lowest cost.

“There is a limited supply of Bitcoins, and as it dwindles, payment to miners will need to be supplemented with transactions fees,” says Allen. “The miners that focus on providing blockchain verification as the lowest-cost providers will be the ones that make money, because they will attract the volume that higher-priced miners can’t.”

BTCS strengthened its hand as a low-cost blockchain verification service earlier this year when it purchased an 83,000-square-foot facility in North Carolina to be stocked with high-performance mining hardware from Spondoolies-Tech of Kiryat Gat, Israel. The two companies later announced plans to merge.

The merger is expected to give BTCS direct access to Spondoolies’s Bitcoin-mining equipment, providing the economies of scale large miners such as BitFury and KnCMiner enjoy. “Our strategy is to create a fully integrated company,” Allen says. “Spondoolies will design and build the hardware and we will deploy it.”

By focusing solely on mining, which includes blockchain validation, Allen says BTCS does not have to focus on Bitcoin application development, or invest in companies that do, to become profitable.

“When the value of Bitcoin went down, mining got hit hard, but the reality is that regardless of the value of a Bitcoin, without blockchain verification, the whole ecosystem goes away,” says Allen. “As more transactions ride on the rails of the Bitcoin ecosystem, companies that pay transaction fees will naturally be attracted to the lowest-cost provider. That’s why low-cost blockchain verification is a good place to be sitting.”