The Russian Mining Company (RMC), established by the internet ombudsman Dmitry Marinichev and businessmen Sergei Bobylev and Boris Zyryanov, has signed a contract with the OLDI retail chain to begin the sales of cryptocurrency mining boards (miners). Invest Foresight learned of this development right at Marinichev’s office, when the document was being signed. According to Sergei Bobylev, this is the first time that the miners will be sold in retail stores to private citizens.
Contract with OLDI
Up until now, the miners could only be purchased online. Sergei Bobylev claims that the miners are sent to customers in boxes that contain nothing but the mining boards themselves, and if any instructions are included, they are only in Chinese.
“It is not a user-friendly purchase, and it can’t be defined as retail by its legal parameters,” says Sergei Bobylev.
RMC sells three types of Pantech miners, and will soon introduce the new ASIC miner Sunrise s11i with 16 nm Bitfury chips, computational capacity of 22.6 TH/s, and energy consumption of 2.3-2.5 kWh. It costs $4,000, has a water-cooling system and can simultaneously heat up the room (altough that might be a problem in the summer months). RMC is the only company in the world to manufacture such miners with a water-cooling system. The sellers claim that such miner can earn $500 a month as part of the farm. The miner gives up to 20% of its capacity to the bitcoin-russia.ru farm. The miners sold by the RMC are by default aligned with this farm, but users can change the settings and work with another mining farm. The sellers will teach their clients to change the farms and wallets, but they also point out that bitcoin-russia.ru farm is more convenient as it doesn’t require a registration that would be necessary for working with a Chinese farm, for example.
The executive director of OLDI Computers Denis Smirnov disclosed that OLDI will be given the master distributor status for the RMC miners, and will provide the sales guarantees and service the equipment.
OLDI retail chain was founded in 1992. It incorporates 17 offline electronics hypermarkets and an online store, and is the exclusive reseller of MSI hardware peripherals in Russia. MSI is the global gaming industry leader. According to the available information, OLDI is owned by Evgeny Golubev and Dmitry Nikitin. The company’s revenues amounted to 170.6 mln rubles ($2.9 mln) in 2016.
Prospects and risks
RMC estimates that the current annual volume of miner sales in Russia amounts to $180-200 mln, and that in 2-3 years these figures will reach $1 bln. RMC itself envisions control over 30-35% of the domestic miner market, as it remains Russia’s only company to manufacture miners. The remaining 65-70% will be taken up by Chinese and other manufactures. Today, there are two large miner producers in the world — the Chinese Bitmain and American Bitfury. By expanding its mining capacity, Russia will start servicing global cryptocurrency transactions, RMC says.
But mining entails a number of risks. RMC doesn’t seriously consider the risk of bans on mining at apartments and private houses, because miner’s electricity consumption is comparable to that of an electric oven, which means there’s no surplus load on the grid. Plus, consumers have to contend with limits on electricity consumption. Nonetheless, few people engage in mining at their homes, especially in Moscow, because electricity tariffs for private citizens are very high (5.38 rub/kWh in Moscow). Therefore the ban on mining is meaningless both from the point of view of security and from the economic perspective. It would’ve been logical in 2011-2013, but not today.
There’s also a risk that private citizens will be banned from investing in bitcoins. The owners of miners who mine the cryptocurrency may be considered such investors. But this ban can be circumvented by using foreign cryptoexchanges.
There is another risk — perhaps, the most serious one — that Bitcoin and Ethereum blockchains will make a transition to PoS, Proof-of-Stake. In this case there will be no mining, and miners will become useless. The principal developer of the Ethereum blockchain Vitalik Buterin already announced that Ethereum will transition to PoS in September. Today the majority of cryptocurrencies are mined, which means that they use the Proof-of-Work protocol. Proof-of-Work is the node’s ability to ascertain that the miner (or the node adding a new block to the blockchain) actually made the computations.
RMC believes that Bitcoin’s transition to PoS is improbable, since it’s unlikely that bitcoin’s miners who manage the community would deprive themselves of income. What’s more, this is a large community without centralized management unlike the Ethereum with its clear leader Vitalik Buterin. But even with Ethereum, RMC believes that its transition to PoS is unlikely to happen this soon. There is no mathematical proof that Proof-of-Stake is a reliable method of consensus unlike the universally agreed upon Proof-of-Work. But even if these two principal cryptocurrencies make a transition, there are and will be other altcoins that require mining.
The Chinese as well as large Russian companies had invested in RMC tokens
On August 7, RMC announced that it started the development of a new multicellular processor and new generation of miners for cryptocurrency mining. On August 28, RMC launched the ICO, planning to raise $100 mln to finance the R&D. By September 7, the ICO raised around $40 mln, of which $37 mln were paid in rubles. Dmitry Marinichev told Invest Foresight that RMC tokens were bought by several large Russian companies, but declined to name them. In addition to the Russians, the ICO attracted investors from the US, Japan, South Korea and even China, even though on September 4 the People’s Bank of China banned ICOs in the country.
“The Chinese Central Bank can’t ban the Chinese investors from investing in other countries, even in Singapore, – Sergei Bobylev told Invest Foresight. – It can only regulate ICOs in its own country. The Chinese regulator already made a mistake in the beginning of this year, when it closed all of the cryptocurrency exchanges, and all of transactions moved to the Japanese exchanges. Four months later, People’s Bank of China announced that it didn’t close anyone, and the exchanges were opened once again, but the result was that China lost its lead as the place with the greatest number of cryptocurrency transactions, ceding it to Japan.”
RMC is holding the ICO to start production of the new generation of miners with multicellular processors. The company claims that such miner’s energy efficiency is 35-200 times higher than that of GPU-based miners. The new 28-nm processor will have 256 cells and computational capacity of 22.2 Th, and will mine any type of altcoin using Proof-of-Work technology.
“Is Russia becoming a crypto-friendly zone? – rhetorically asks professor Artem Genkin, whose 2006 doctoral dissertation on private monetary systems was the first of its kind in Russia. – One gets the impression that the national states are starting to compete for the cryptocapital. We’ll see what comes next…”
Written by Natalya Kuznetsova