CoinSeed Announces $5 Million Investment in BitFury Mining Gear

NEWS
Nermin Hajdarbegovic
Jan 24, 2014 at 02:49 UTC  |  Updated  Oct 22, 2014 at 17:50 UTC

Las Vegas-based bitcoin investment fund CoinSeed announced a substantial investment of $5m in mining hardware on 23rd January.

CoinSeed revealed that it has acquired $5m worth of BitFury's 55 nanometre bitcoin hardware, but that this is just its first step in its larger vision to become a large-scale bitcoin clearing house, one that will be able to someday process the real-time transactions it says bitcoin will need to truly compete in payments.

The announcement might not sit well with some members of the bitcoin community, especially among miners and those who frown upon centralisation.

CoinSeed's Merlin Kauffman, however, suggested such sentiments risk holding the wider bitcoin community back at a time when companies like his own are seeking to improve and scale the currency's infrastructure.

"Personally, I'm sure there will be people out there who are grassroots bitcoin purists, who are going to say you're taking something that's grassroots and decentralised and making it a commercial venture," Kauffman said.

"But, on the other hand, it's these same people who want bitcoin to be taken seriously, and bitcoin is in serious need of some larger players coming in and giving it legitimacy."

Securing funding

CoinSeed says it raised $7.5m from private investors in less than a month, and that it is aggressively investing in mining hardware to secure a leading position in commercial mining. In addition to Kauffman, CoinSeed's team includes Zach Dailey, founder of LabRatMining, as well as other sales and technical employees. The company plans to raise an additional $15m over the next eight months to bring its total funding to $22.5m.

Kauffman noted that his experience securing investment was helped greatly by his tenure in the domain name sector 10 years ago. While he declined to mention names, he noted he relied on these past relationships as a means to secure necessary funding.

"It was fairly easy for me to raise the money, because I have a proven track record of success with interesting businesses models and interesting business," Kauffman said.  

Scaling its operations

MegaBigPower, the US distributor of BitFury mining gear, said the CoinSeed deal is the biggest single-order purchase of bitcoin mining hardware to date.

David Carlson, president of MegaBigPower stated in a press release that the company has entered into a long-term agreement with CoinSeed to provide "a stable supply" of hardware to support their infrastructure requirements.

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CoinSeed's big picture

Despite issues with volatility, Kauffman said he is confident in bitcoin's long-term viability both as a currency and payment method. For example, the company says it will look to generate returns in bitcoin, which it hopes will increase in value to support its goal of serving large merchants.

"I think that everyone is pretty well aware of the issue of confirmation times and that being problematic for real-time transactions, especially given that it's a volatile market right now. In the future, a lot of these large merchants are going to be in need of dedicated confirmation power to rapidly transact their sales."

However, while Kauffman considers the future to be bright for CoinSeed, he is less optimistic about mining and its role in the evolution of bitcoin.

"Mining is a cool thing, it's a fun thing, but it's not forever, difficulty is on the rise. Mining will always happen, it's just not going to be as profitable."

Kauffman added that the company is already "in talks" with high-volume merchants, and that it is pursuing "other cryptocurrency investment opportunities".

New CoinSeed Bitfury Mining Hardware running at 1522 GH/s, images courtesy of CoinSeed.

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BitFuryMerlin Kauffman

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