Hashrate Bond for Blockchain Mining Capital
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Solution Overview
Problem
The cryptocurrency mining industry faces challenges in securing capital for intensive capital costs, particularly due to the increasing difficulty of blockchain networks and high costs of maintaining ASIC equipment, leading to unappealing equity sales and volatility in cryptocurrency prices, which affects miners and investors alike.
Innovation Solution
The Themys Hashrate Bond provides a non-dilutive capital solution by allowing miners to raise capital through a bond that ties debt to cryptocurrency mining income, with interest payments made in mined currency, utilizing blockchain technology to secure hashrate and network difficulty for variable interest rates, ensuring alignment of interests between miners and investors.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Quantity of substance
If miners raise capital through equity sales to fund intensive capital costs, then they can secure funding for mining equipment and operations, but this dilutes equity and exposes investors to counterparty risks
Solution Approach 1:
The patent introduces a bond contract as an intermediary financial instrument between miners and investors. This bond structure allows miners to raise capital without equity dilution while providing investors with a fixed-income instrument that has legal enforceability. The bond acts as a mediator that resolves the contradiction by enabling capital raising without the counterparty risks associated with equity investments.
Solution Approach 2:
The patent changes the fundamental parameter of how capital is raised by transitioning from equity-based fundraising to debt-based bonding. This parameter change allows miners to access capital markets through a different mechanism that does not dilute ownership while providing investors with protected returns. The bond contract transforms the capital raising process into a regulated financial instrument with clear terms and conditions.
2Productivity
If miners invest in ASIC hardware to solve Proof-of-Work problems, then they can participate in cryptocurrency mining, but the cost of equipment and maintenance increases significantly
Solution Approach 1:
The patent enables preliminary capital raising through bond issuance before the miners actually deploy the ASIC hardware. By securing funding in advance through the bond market, miners can plan and execute their hardware acquisitions and maintenance budgets more effectively. This preliminary action allows for better capital allocation and reduces the financial burden during equipment deployment phases.
3Reliability
If blockchain network difficulty increases to maintain 10-minute blocktime, then consensus security is improved, but the computational power required for mining increases
Solution Approach 1:
The patent incorporates feedback mechanisms through variable interest rates that are adjusted based on network difficulty and hashrate conditions. When network difficulty increases, the bond contract automatically adjusts interest payments to reflect the changed mining conditions. This feedback mechanism ensures that the financial instrument remains aligned with the actual operational costs and security parameters of the blockchain network.
4Reliability
If miners pay debt obligations in mined cryptocurrency, then they avoid secondary fees and align with investors, but cryptocurrency price volatility affects repayment ability
Solution Approach 1:
The patent introduces dynamic elements to the bond contract through variable interest rates and flexible repayment terms that can adapt to changing cryptocurrency prices and mining conditions. This dynamic structure allows the bond to maintain reliability during price volatility by adjusting financial parameters in response to market conditions, while still providing a stable investment product for investors.
Data Source
AI summary
A digital derivative is a cryptographic- and blockchain-based financial product that governs capital investments in blockchain mining infrastructure. The digital derivative resembles a bond financial product that utilizes blockchain protocols for principal, interest, and payment aspects. A secured hashrate is delivered by the issuer for the lifetime of the digital derivative. Income is generated in the cryptocurrency being mined, and the issuer may elect (prior to issuance) to repay the principal in the mined cryptocurrency. A cryptographic variable interest rate is calculated in the mined cryptocurrency based on the secured hashrate and a protocol-reported network difficulty.