Leading Bitcoin infrastructure firm Blockstream has announced raising USD $125 million in convertible note and secured loan financing to expand its institutional bitcoin mining colocation services. Kingsway Capital led the convertible note, with other investors including Fulgur Ventures. Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC, is acting as exclusive financial advisor to Blockstream.
This fast-follows Blockstream’s August 2021 $210m Series B capital raise, which was utilized to build several enterprise-class mining facilities with capacity for institutional hosting customers, and to strengthen Blockstream’s vertical integration with the acquisition of Spondoolies to design and manufacture Blockstream’s own ASIC and enterprise miner.
Building on strong year-on-year revenue growth for 2022, Blockstream will use the new capital raised, including its first debt financing, to expand mining facilities in order to meet the strong demand for its institutional hosting services. Demand for Blockstream’s hosting services remains high due to the company’s strong track record and substantial scale, coupled with an industry-wide shortage of available power capacity.
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Hosting has remained a resilient market segment as compared with “prop” miners (and their lenders) who have been more directly exposed to bitcoin price volatility and compressed margins.
With over 500 Megawatts in its development pipeline, Blockstream is one of the world’s largest bitcoin mining operators. Blockstream will also expand its renewable energy mining products, and continue developing its own bitcoin miner – the first institutional-grade bitcoin miner purpose-built to scale.
Blockstream remains a market leader in fast growing Bitcoin “layer-2” technologies like Core Lightning (“CLN”) and the Liquid Network via the launch of its global “Build On L2” community initiative for entrepreneurs and individual contributors building on these technologies. Core Lightning is a lightweight, modular Lightning implementation focused on Bitcoin micropayments. The Liquid Network is a Bitcoin layer-2 network focused on non-custodial trading, secure smart-contracts, and the issuance of digital securities, stablecoins, and other financial products.
“This fundraise allows us to accelerate the YoY revenue growth we created with our 2021 Series B and continue to build infrastructure for the future Bitcoin economy,” said Blockstream President & CFO, Erik Svenson. “We remain focused on reducing risk for institutional bitcoin miners and enabling enterprise users to build high-value use cases on the most secure, robust, and scalable blockchain in the world – Bitcoin.”
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Recent events in the broader cryptocurrency industry underscore the value and importance of the work Blockstream is doing in both blockchain development and bitcoin mining.
“With 2022 being punctuated by multiple large scale centralized party and protocol failures, we believe this has been a learning experience for the market: that the fundamental value of blockchains is in reducing the need to trust third parties”, said Blockstream CEO, Dr. Adam Back. “The resulting refocus on security and decentralization presents an opportunity for market participants to move to Bitcoin-based non-custodial architectures, like the Liquid ecosystem of startups with decentralized market technology. Liquid’s simple contracts enable self-custody for active traders via offline limit orders, non-custodial options, collateralized loans, all from the security of the traders’ own hardware wallet protected by their own keys. This technology is compatible both with decentralized and centralized order-book exchanges.”
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