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Cointerra recently announced their entrance into ASIC bitcoin mining with 28nm chips. Application specific integrated circuits (ASIC) are customized components that perform the calculations necessary for bitcoin mining. The team is lead by Ravi Iyengar, previously the Lead CPU Architect at Samsung where he helped design chips for compact mobile devices such as the Galaxy S4. Iyengar has also previously worked at industry giants Qualcomm and NVIDIA. He is joined by Chief Architect Dr. David Tannenbaum, a principal engineer at NVIDIA, and VP of Engineering Jim O’Connor who brings previous experience from an array of firms including Nortel and General Electric.
Two of the big three bitcoin ASIC companies, Avalon and ASICMiner, have been producing chips using 110 nm processes while Butterfly Labs opted to use 65nm. Smaller processes allow for higher performing chips but add complexity and cost to the designs. Although specs will not be publicly released for another few weeks, Iyengar is confident their product will lead the market, with in $/GH in the single digits and power efficiency 10x better than existing products. Cointerra will face off with KNCMiner who promised September delivery with their 28nm miners, meaning KNC is expected to have a working prototype soon.
Cointerra raised a $1.5M round from angel investors to fund development costs, but will need to sell pre-orders in order to fund production costs. They plan on starting pre-orders by the end of the month, with production scheduled for December. Some notable investors include economist Tuur Demeester, author of the Dutch investment newsletter MacroTrends, as well as Joeri Cornelissens.
Update – Aug 5, 7:37 PM GMT : From the WSJ, “Investor Joe Lewis isn’t investing in a bitcoin venture called Avalon and doesn’t lead a Zurich-based private-equity fund called the Phoenix Fund. An article on the supposed investment was inaccurately published and has been removed.”
Update – Aug 5, 12:58 PM GMT : CNBC just reported that Joe Lewis denied the WSJ story cited in the below analysis. More details as they develop.
Phoenix Fund plans to invest $200M in Avalon on Tuesday, according to the Wall Street Journal. Avalon was one of the first companies to mass produce ASIC bitcoin mining chips and has pre-sold over 100,000 chips in large 10,000 unit batches, which have already started arriving in customers’ hands. Phoenix funds is based out of Zurich and backed by Joe Lewis, the billionaire ForEx trader.
Avalon will team up with Taiwan Semiconductor Manufacturing Co. (TSM) to take advantage of advanced 20nm processes. This would mark the most advanced technology to be used in bitcoin ASICs. Schedule presents the largest concern, as is the story with all bitcoin mining hardware. Yiu Guo, CEO of Avalon, expressed his frustration his ASIC manufacturers pushing back his orders for larger customers while presenting at the Bitcoin Conference in San Jose earlier this year. The deal with TSM should reduce schedule risk significantly.
The major question remains whether the plan is to produce consumer ASICs as Avalon has been doing or if they will mine with their equipment like ASICMiner does. Given the remaining market cap of bitcoins to be mined is around $1B at current exchange rates, and the fact that a single entity could jeopardize the security of the network if they control more than 40% of the network, the maximum this investment could return solo-mining is around $400M over the next 100 years. It then seems more likely that Phoenix Fund either expects a significant increase in the bitcoin exchange rate, or plans on reselling hardware to make a larger profit than the would be able to mining on their own.
Also in question is the valuation of Avalon that a $200M investment implies. Since it is unlikely that Avalon is valued at or above the market cap of all currently outstanding bitcoin, we expect the headline figure of $200M to represent a total commitment amount, rather than a cash investment that would imply the current value of the company at some multiple of that figure. The specific deal structure may never be known outside of the parties involved, but likely contains provisions for incremental allocation such as contingency clauses for future release of the funds depending on company performance or market metrics.