March 24th, 2019

The Hat welcomes the Hut

By Collin Gallant on March 21, 2018.

Preparations are well underway at the site of a dataprocessing facility announced by Hut 8 Mining Corp at Monday's city council meeting. The 11-acre site sits to the east of the city's recently commissioned Unit 16 power plant off Box Springs Road and 52nd Street NW.--NEWS PHOTO COLLIN GALLANT

Many Hatters might say cryptocurrency and blockchain technology is out of this world, too good to be true, or have no idea where to start, but the man whose company is building a $100-million local data processing centre says it’s the wave of the future.

Sean Clark, the interim CEO of Hut 8 Mining Corp., says his company is uniquely poised to profit and grow in the burgeoning financial technology sector.

“We have the capital, the (computer) chips and the now the electricity with the City of Medicine Hat,” said Clark. “Now it’s about executing.”

Clark, members of the Hut 8 board, and operation officials held a briefing Tuesday morning to introduce the firm and the sector to the media in Medicine Hat.

Clark stressed that Hut 8 isn’t a speculation company.

What it provides is logistics support of a commodity that doesn’t have a tradition network of buying and selling points like, for example, national currencies, grain or gold futures.

That work is done with an emerging technology known as blockchain that connects users worldwide via the Internet.

Companies like Hut 8 verify transactions by completing complex mathematical problems with super computers using specialized chips.

The largest manufacturer of those chips outside China is European firm BitFury, which is a large minority shareholder in Hut 8.

“We’ll be able to be a major player in this industry because we have access to those chips,” said Clark, who described Hut 8 as the capital wing of BitFury in North America.

“We’ll be more efficient than our competitors, because this has moved into a scale game, and an industrial-sized processing centre is what we’ve moved to here in Medicine Hat.”

He expects to be profitable regardless of the wildly fluctuating cost of Bitcoins and other cryptocurrencies.

“When the price goes down, we gain market share because inefficient miners will leave the marketplace,” he said, adding, conversely, that when the price rises so does the value of transactions they process and the value of the company’s own cryptocurrency holdings.

City council on Monday approved a power supply agreement and land lease to the company that will see about 40 computational units installed, each requiring one megawatt of electricity.

RELATED: City officials say power rates won’t increase

They expect 15 to be operational by June and another 25 delivered and running in September.

Those are already purchased and paid for after the company raised $100 million from institutional investors prior to its initial share offering and listing on the TSX Venture exchange earlier this month.

Clark envisions eventually adding “hundreds” of other units to sites in Canada, and he wants “the CMH to be the flagship.”

“There are people who raise money saying they’ll do stuff,” said Clark. “Well, we do stuff.”

The contract and site in Medicine Hat are the result of four months of talks with city land office and utility departments.

Bulldozers were well advanced Tuesday in levelling the 11-acre site — located next to the city’s Unit 16 power plant off Box Springs Road.

City elected officials hailed the deal as a huge benefit to the utility department, which provides roughly $100,000 in lease revenue, and will create 40 jobs.

“We’re all learning about it, because it’s an emerging technology, including me,” said Mayor Ted Clugston.

“I’m feeling more secure now (knowing) they’ve raised capital in the markets, without (borrowing).

“I’ve got my head around the risk and have some employees that are very risk adverse who are on board, too.”

The company plans to be partially operating in June, with the expected delivery of 15 units, each the size of a 40-foot seacan.

Clarks described the facility, which will be an array of containers, not a building, as easily scalable. Site preparation and other improvements will be “substantial” over 11 acres, and the company will pay to hold an option to lease another 10 acres west of the site.

Going forward, Hut 8 is becoming the developer and BitFury will operate the sites.

The two companies are considered joint owners of the recently opened facility in Drumheller, which is also expected to expand this spring.

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