Blockchain infrastructure firm Blockstream and its founder Adam Back, have raised $125 million to increase its Bitcoin (BTC) mining capacity.
The firm raised the capital in a convertible note, a form of short-term debt led by Kingsway Capital. Cohen & Company Capital Markets, a division of J.V.B. Financial Group. The first of these companies will serve as advisors for the firm.
Blockstream Sees High Demand For Its Products
According to a press release, the company will use the funds to expand its facilities. The BTC mining firm wants to meet the high demand of customers for its institutional hosting services. Blockstream said:
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.
The adoption of blockchain technology has slowed down in recent months due to the impact of the crypto winter and the reeling collapse of the crypto exchange FTX. Despite this, Blockstream has noted an uptick in demand from its clients.
Blockstream stated that providing this hosting service to its customers remains a robust market segment for the company. Previously, Blockstream raised $210 million in a Series B funding round led by Baillie Gifford and iFinex, Bitfinex’s operator, at a $3.2 billion valuation.
The capital was used to accelerate Blockstream’s mining capabilities and acquire Spondoolies to launch an enterprise-grade miner. President and C.F.O. of Blockstream, Erik Svenson, stated that the raised capital would allow the company to accelerate the year-on-year revenue growth created in 2021 with the Series B financing program. The company will continue building the infrastructure for the “future Bitcoin economy.”
Blockstream has over 500 Megawatts of power capacity in its development pipeline, making it one of the largest mining companies in the world. Expanding its renewable energy mining products and continuing to develop its Bitcoin mining division are also among Blockstream’s goals for 2023.
Crypto Winters Has Learning Value
Adam Back added that 2022 was, in his words, a “learning experience” for the industry and the cryptocurrency market, as large-scale centralized entities and protocol failures characterized it.
For Back, 2023 should be a year of refocusing on security so that blockchains further reduce the need to trust third parties. The Blockstream found believes this period of decreasing crypto prices represents an opportunity for market participants to move to a “Bitcoin-based and non-custodial ecosystem.”
In contrast to the Back-led company, other Bitcoin miners like Core Scientific, one of the largest traded miners in the U.S., filed for bankruptcy in 2022 after selling off their bitcoin holdings to pay their debts, which led to the company being investigated for alleged securities fraud. Blockstream said:
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.