Bitcoin 'mining', the process that produces the decentralized digital currency that is set to transfigure monetary systems, shares at least one commonality with actual mining, in that it is a capital intensive activity. For Bitcoin miners, the stakes are high. It is into this brave new world of virtual currency that Vancouver-based software and service company Newnote Financial Corp. (CSE:NEU) steps.
Specializing in the development and acquisition of products and services specific to Bitcoin and other crypto-currencies, Newnote aims for the creation of a self-contained 'eco system' of such services. “Everything we have ties in together in an integrated platform,” says president, CEO and director Paul Dickson.
There's no doubt that Bitcoin is slowly but surely gaining traction, an acceptance signaled recently by the currency's use in the purchase of a $500 000 villa in Bali.
Dickson, who allows that “most people just don't understand [Bitcoin] yet,” says he commonly describes Bitcoin in terms of mobile devices and app stores. “Bitcoin protocol is like an app store and Bitcoin is an app. Right now developers like us are pioneering new financial tools and utilities that are going to be added to the 'app store' – financial services like escrow and contracts.”
The company has already purchased its first Bitcoin ABM machine, a device that can convert fiat currency to Bitcoin in fifteen seconds and accepts notes from over 200 countries. The ABM – the first of many, according to Dickson – not only allows Newnote to make commission on withdrawals and trades, but the machine is also linked to the company's exchange.
“So someone who buys Bitcoin from the ABM purchases automatically from our own exchange, from a human on the sell side, creating more liquidity on the exchange.”
The exchange Dickson refers to is another near-term development in Newnote's rapidly-developing story, also known as the Puretrade Bitcoin exchange, due to be opened “any day now.”
Of the planned exchange, Dickson says traders will find some familiar aspects. “It's going to have a lot of familiar trading tools – it will be like trading a stock.”
The company recently achieved a major milestone in its rapidly developing story, as Winrock Resources Inc.(CSE: WR), the company of which Newnote Networks Inc. is a wholly-owned subsidiary, changed its name to Newnote Financial Corp. and had its common shares approved for listing in early April. Newnote’s shares commenced trading under its new symbol [need exact date].
“We're really excited about that,” says Dickson. “We did it without getting halted – we did it delicately with tons of disclosure and we're quite pleased with the results.”
“Everything's coming to fruition at the same time. It's going to be an exciting next couple of weeks.”
Among the plans aborning is one that takes advantage of the capital intensive nature of the mining process for Bitcoin.
Newnote's data centre, in full operation now, which has “six 10 tonne AC units and virtually unlimited power”, currently boasts capacity of “6 or 7 terahashes”, says Dickson – that is, a speed of production of a trillion hashes per second, a hash being the smallest unit of mining work. An order due in the next few weeks is set to bring the total to more than 10 terahashes, with further plans to get to 50 by December.
These machines can be bought or rented such that individuals can buy gigahashes (which correspond to a million hashes per second) for a set amount of time, with the resultant Bitcoin going straight to their Bitcoin wallet.
Once again, the practice has a tie-in to other Newnote products. “When [a client] creates an account on the cloud hashing service, they automatically get an account on the Bitcoin exchange and vice-versa. So if you're trading on our exchange, you can go buy gigahashes; if you’re mining Bitcoin, you can trade on the exchange.
“We're creating an eco-system of Bitcoin services.”
The data centre is also a revenue stream in itself in that it currently hosts 12 of “other people's machines that rent the space from [Newnote]. We charge per kilowatt hour.”
Newnote has other ambitions beyond this, including its own crypto-currency currently under development for the explicit purpose of philanthropy.
The currency, called CryptoAid, is produced by a customization of the Bitcoin software. But unlike Bitcoin, which goes exclusively to the miner, CryptoAid is mined with the intention that a portion be redistributed.
While the miner gets the lion's share of the currency, a random amount within a range is sent to a manifest list of beneficiaries of that coin. The list, developed through votes cast by the CryptoAid community, is broken down such that a different level of importance and thus a greater amount of currency is awarded to those closer to the top of the list.
“Unlike other charities, it doesn’t end,” says Dickson.
“With CryptoAid, we continue the charity until you say stop.” And unlike Bitcoin, it can be efficiently mined currently with consumer-grade hardware.
It is a project close to Dickson's heart, and in the same vein with the youth entrepreneur program he founded. CryptoAid, says Dickson, is important to him “because there's no charity coin out there.” Ultimately, the chief executive is planning to form a CryptoAid foundation that will eventually be spun off from Newnote.
With the launch forecast for later this month, CryptoAid will be tradable for Bitcoin on the Puretrade exchange to start.
The process of inventing CryptoAid and the “technical knowhow” it conferred gave Newnote the inspiration for another revenue-stream based on the Bitcoin model, what Dickson calls “a vanity coin, or a marketing tool we offer other companies.”
Under this scenario, Newnote would pre-mine the coin in the quantity stipulated, supply a QR code to put in or on the company's product – under a bottle cap in the case of a beverage company for example – for the consumer to then scan with a mobile device in order to collect the coins, which could then be redeemed for products and prizes.
Another application could be a vanity coin that takes the name of a pop star with a large youth following, which could then be redeemed at concerts for branded.
The marketing campaign “can last as long as you want,” says Dickson.
“Crypto-currencies are neat because you can trade them. They're unique, and you can create as many as you want. If it's a five year campaign, we will have to run the data centre for five years for them. There's the potential for it to be a long term source of revenue.”
Certainly, Dickson sees the future as one in which acceptance of crypto-currencies is commonplace, pointing to such tacit endorsements as eBay's (NASDAQ:EBAY) recent launch of a crypto-currency section, and the acceptance of Bitcoin in payment for subscription to old media stalwart The Chicago Sun-Times.
“Acceptance and the valuation in the short-term are going to continue to grow. Crypto-currency is going to be accepted as all it takes is for merchants to accept it. There are companies developing their POS [point of sale] services, and someone's going to add that to their existing infrastructure.
“Once that happens, we're going to see Bitcoin acceptance will become just like using a debit card, but on your mobile device.”
It is a future Dickson sees as being wide open, and constrained only by imagination.
“There's just so much you can do.. It's going to change things just like email changed communication forever. This is going to change money forever.”