Montana: Power Block Coin, LLC to Build $251 Million Data Center to Mine Cryptocurrency

Power Block Coin, LLC’s proposal to invest $251 million to build a cryptocurrency mining farm in Montana Connections, a special tax district west of the city of Butte, has been given the green light.

This Wednesday, Butte-Silver Bow Council of Commissioners voted unanimously (9-0) to allow Utah-based Power Block Coin, LLC — a subsidiary of Blue Castle Holdings Inc. — to build a campus of high-powered data centres in special tax district Montana Connections. The company plans to spend $251 million on improvements to the site over 36 months.

The Campus

Power Block Coin plans to harness 135-megawatts of power on its campus. As per the proposal to the county, the company will do this by building a substation at Montana Connections, which will be built in two phases over 24 months. Out of the $251 million total, $8 to $10 million will be spent on this new electric infrastructure. The company also plans to spend $60 million on between 70 to 200 separate mining units, each of which would use large amounts of power transmitted through the new substation. The size of these units will vary from larger warehouse buildings to small shipping containers.

The reason for the creation of this campus is primarily to mine digital currency mining, like Bitcoin. In addition, the infrastructure the company builds will also be able to support other businesses that need large amounts of power, such medical research, and artificial intelligence.

“Bitcoin is the fastest growing segment of cryptocurrency. If it tanks, the same processors can be used for medical research or AI (artificial intelligence),” Aaron Tilton, President and CEO of Blue Castle Holdings, said.

Moving Forward

According to Tilton’s interview with The Montana Standard, the jobs available at the campus won’t all begin at once. He estimates they will hire about 15 employees before the end of the year — that number will jump up to about 50 by the time the project is up and running. Salaries are estimated to range from $37,000 per year to $48,000 per year. Tilton said the company hopes to break ground this summer. After that, they expect to have the first data center up and running within 30 to 60 days, and by the end of the year, Power Block Coin anticipates it will have 30-megawatts of power at its campus.

County administrator Kristen Rosa said the county will reimburse Power Block Coin for their infrastructure through the taxes the company generates at Montana Connections — adding that it would only be based on what the company itself invests.

“Power Block Coin has to invest their money, build a substation, they’ll be a big power user,” Rosa said. “It’s not just a Bitcoin facility. We’re not buying into Bitcoin. They’re an aggregator, a campus to allow additional users to come in and use power.”

Data centers are key to the broader Bitcoin project going forward, as fewer coins are available to be mined and computation becomes ever more difficult. The climate of Montana is conducive to mining operations: Located in the West and Northern-most part of the U.S., along the border with Canada, Montana is very cold for a substantial part of the year, which can save miners money on cooling costs (mining operations generate a substantial amount of heat — sometimes leading to disaster).

Power Block Coin’s operation will be the second largest mining operation to find Montana in recent years. Back in 2016, Project Spokane, LLC launched its site near Missoula. It’s already one of the largest energy consumers in the region, housing a 20-megawatt facility and employing at least 25 locals.


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Late last year, it was reported that the Iranian government was interested in utilizing Bitcoin and other cryptocurrencies as a way of bypassing economic sanctions levied against the country. But the government has apparently changed its mind: Today, the Central Bank of Iran announced that it has never recognized Bitcoin as an official currency and conducts no transactions in it or other cryptocurrencies.

According to Iran Front Page, the country’s central bank has denied ever recognizing Bitcoin as an official currency, along with the idea that it was actively facilitating Bitcoin transactions. The bank also warned Iranian citizens about the high risks of making investments in the potentially volatile market, saying that there’s a chance they “may lose their financial assets.” Moving ahead, the organization is cooperating with other institutions to develop mechanisms to control and prevent the use of digital currencies in the country. The bank put it as follows:

“The wild fluctuations of the digital currencies along with competitive business activities underway via network marketing and pyramid scheme have made the market of these currencies highly unreliable and risky,”

Countries Creating Their Own Coins

Despite all the FUD that accompanies announcements such as these, there are some positive developments. Iran’s Information and Communications Technology (ICT) Minister Mohammad-Javad Azari Jahromi also declared today that Iran’s Post Bank is working on a locally developed cryptocurrency, which will need to be tested by the ICT. It’s unclear exactly how far into research or development the bank is in creating this new coin.

Iran would not be the first country to develop its own digital currency as a way of bypassing financial blockades. Just yesterday Venezuela launched its new coin, the Petro, which is backed by the South American country’s oil reserves.

Late last week, Europe’s newest digital currency, the Korona — which runs on the Lightning Network and is being touted as more stable, safer, and cheaper to use than its competitors — was launched in Budapest, Hungary. Jean-Marc Stiegemeier, Korona’s CEO, is optimistic about the future of the crypto-industry:

“Over the next few years we are going to see a revolution in the banking sector,” Stiegemeier, said. “Within ten years cryptocurrency will be used and accepted worldwide.”

Although sanctions on Iran are not as heavy as they were before the 2015 nuclear deal with the West, the country is still, for the most part, cut off from major international payment networks like Visa, Mastercard, and PayPal. As is the case in other parts of the world, such as Africa, this economic stalemate is making decentralized payment methods like Bitcoin more and more appealing.

SegWit Adoption

SegWit adoption has been steadily rising since its release in August 2017, albeit not as quickly as some would like. The problem is that it has to happen piece by piece, with each wallet, exchange, or other service provider rolling out the compatible address itself. Because each organization has both its own type of process — as well as its own issues — SegWit adoption has not happened overnight.

This phenomenon explains why the number of SegWit transactions still vary, accounting for between 10 to 20% of total transactions — though that percentage is set to increase. The protocol has already garnered some impressive results: As of today, February 20th, SegWit transactions account for almost 14% of the total — it peaked a few weeks ago when the transactions made up more than 18% of the total for the first time since activation.

As noted above, that percentage is likely to increase soon with announcements today from global leading exchanges Coinbase and Bitfinex confirming their adoptions of SegWit. Among other notable providers that have unrolled the protocol are: Shapeshift, Ledger wallet, TREZOR, Samourai wallet, and Edge Wallet. Several others have deployed SegWit, too, like the Kraken exchange and the CoinMall marketplace. 

Bitfinex

As for users of SegWit enabled exchanges like Bitfinex, the most noticeable changes in the short term will be, simply, a more efficient transaction process, with decreased transaction fees and improved speed — as a result of being able to fit more SegWit transactions in Bitcoin blocks. According to the company’s blog post today, the SegWit implementation means Bitfinex users “can benefit from lower BTC withdrawal fees (approximately 15%) and improved processing times on transactions across the Bitcoin network.”

Bitfinex CEO Paolo Ardoino puts it as follows:

“As a premier exchange, Bitfinex is committed to improving its market-leading offering for our loyal and discerning customers. SegWit provides not only an immediate benefit for users but also a foundation for future Bitcoin development. By supporting SegWit addresses, Bitfinex is tackling three of the biggest crypto-enthusiast concerns: transaction fees, transaction speed, and total network capacity. We are delighted that through this implementation we can provide our customers with bitcoin withdrawal fees that are up to 20 percent lower, as well as faster-than-ever transaction speeds.”

Lightning Network

In the context of the Bitcoin scaling issues, it’s important to discuss the development of another promising concept: Lightning Network (LN). Being initially introduced with the aim to, simply, make the Bitcoin network more useful, LN is a decentralized network of payment channels which permit users to make micropayments between two parties without the need to broadcast directly to the blockchain. As a result, transaction fees are decreased and the speed of the whole payment process is too.

Cryptocurrency idealists have envisioned Bitcoin becoming a sort of “free banking” system from the start. Consider LN in that context: Just like people don’t have to carry around weights of gold to engage in commerce, Bitcoin users need not clear all transactions “on-chain” to enjoy the benefits of the digital currency. With LN, they can transact using the network and clear their balances on the underlying blockchain — just like how people exchange gold-backed notes with banks. The most exciting part, in this example, is that rather than needing to rely on an intermediary bank, LN permits people to act on their own.

The Israeli Tax Authority has issued a circular outlining its position on Bitcoin and other digital currencies. The agency will look at the issue in two ways to determine tax status: Those who buy digital currencies as an investment, versus those who trade in order to make a living or run a business. The even-more complex issue of regulating initial coin offerings (ICOs) is yet to be dealt with.

Regardless of which group users might fall into, as far as the Tax Authority is concerned, digital currencies like Bitcoin are to be considered an asset, not a currency.

This means that a person who holds digital currencies in order to create a capital gain — while not engaging in business — will be exempt from paying VAT (value added tax), but will be liable for capital gains tax, which in Israel is between 20-25% for most taxpayers; For those who engage with digital currencies for business purposes things are a little rougher, as they will have to pay 17% VAT on top of the capital gains tax.

Mining: Businesses that generate cryptocurrency through mining operations will be taxed as factories in Israel, depending on the volume of their activity. Further, entities whose income volume from cryptocurrency qualifies them as a business will now be considered a financial institute and will be taxed according to the same regulations that govern banks and currency exchanges in the country.

The Israeli Tax Authority also requires that all digital currency transactions be documented for a possible audit. This requirement, specifically, might face some opposition, as it seems to go against what decentralized, semi-anonymous digital currencies stand for.

The agency says that in order to be able to present relevant evidence in the case of an audit, the taxpayer must demand documents outlining the trade, and verify the existence of the transaction and its monetary volume. In addition, the seller must attach the pages of the bank accounts through which the purchase and sale funds were transferred (and/or a computer screen shot) as well as the date and time it was held by the seller.

Despite this, the Israel Bitcoin Association has come out in favor of the Tax Authority’s move – primarily because it formally “recognizes” Bitcoin and other digital currencies as tangible things. Chairman of the group Manny Rosenfeld had the following to say with regard to the new guidelines (translated from Hebrew from news site Ynet):

“The digital currency revolution is here to stay. In the past year we have been working hard with the Tax Authority to adapt the draft circular that was published to the reality on the ground and to allow digital coins – a huge growth engine of Israeli high-tech – to develop and blossom. We are pleased that the Tax Authority has made several amendments to the circular in accordance with the positions we presented.”

16Fintech research house Autonomous NEXT has been researching crypto hedge funds — which have more than doubled in number in the four months leading up to today, February 15th. The firm recorded a record high of 226 global hedge funds, up from 110 global hedge funds on October 18th. That itself was up from 55 funds on August 29th and just 37 at the start of 2017. Assets under management hit between $3.5 and $5 billion, according to the Autonomous NEXT.

The surge in funds comes at a somewhat volatile time for cryptocurrencies. After hitting a record high of $20,000 in December, Bitcoin lost nearly 70% of its value — briefly slipping below $6,000 in January. The coin has since recovered some of those falls, sitting at just above $10,000 as of today. (Read our article Hedge Fund Investor: Bitcoin Already Hit Bottom, Ready to Surge to learn more about Bitcoin price predictions for the near-future).

Rival cryptocurrencies have also seen declines. The market cap of all virtual currencies — their price multiplied by the number of coins issued — currently stands at around $465 billion, according to Coinmarketcap, down from more than $830 billion in early January.

“While the softer prices of crypto assets does create a more difficult environment for investors, I do not think it will pause the influx of funds and other financial institutions building products in the space,” Autonomous NEXT partner Lex Sokolin said. “It would take the extreme case of the entire space contracting by 80% and high regulation before the flow of funds turns around.”

Some invest in just Bitcoin, taking both long and short positions, some buy several different cryptocurrencies, and others exploit the arbitrage between different exchanges’ prices. These different approaches mean that some players are, despite the markets, making a profit. Token Capital’s $500 million EKT Active Fund, which invests in initial coin offerings (ICOs) made 6.5% in January, a spokesman for the company said.

BitSpread, a Cayman-registered hedge fund, returned around 4.8%. BitSpread, with more than $100 million under management, makes money by market-making and exploiting arbitrage across different exchanges rather than going long or short. The company’s founder Cedric Jeanson said the fund’s market-neutral strategy meant it could make money even if the price of Bitcoin and its rivals collapsed. Since its launch in May 2017, the company has turned profits every month.

We have prepared an overview of what has happened so far in the world of cryptocurrencies in 2018 – a Simple summary. Whether you took some time off following the news and you’d like to catch up, or you just want to go over this year’s highlights, this article is for you.

According to an old rule, what goes up, must come down. This also happened to cryptocurrencies in January. We experienced significant price drops as well as high volatility in terms of market capitalization. The explanations provided ranged from reactions to regulatory efforts to crowd psychology behaviors. And although this might be difficult to watch when you have bought the assets and you are calculating how much the price change means in e.g. US dollars, this seems to be an innate feature of cryptocurrencies. Higher returns come at a cost of higher volatility. Also, even if the prices go down, seasoned traders know they can also short e.g. a BTC-USD pair and still make a profit.

Cryptocurrencies have been garnering notable attention in recent months from governments, regulatory bodies as well as media outlets. This was also reflected in the World Economic Forum in Davos, Switzerland. Many participants of the event praised the technology behind cryptocurrencies, specifically blockchain. One of them was a Nobel-prize winner Robert Shiller. Other voices focused on the malicious uses, such as money laundering or financing terrorism, and the need to prevent them. This view was shared by Steven Mnuchin, US Secretary of the Treasury and Christine Lagarde, the managing director of the IMF. Also, business representatives participated in the discussion: Lloyd Blankfein, Goldman Sachs CEO took the opportunity to deny the autumn report by Wall Street Journal which claimed that the bank had set up a bitcoin trading desk.

The beginning of February brought us a Senate Committee hearing with J. Christopher Giancarlo, heading the US Commodity Futures Trading Commission and Jay Clayton, his counterpart at Securities and Exchange Commission. The general message was optimistic to the cryptocurrencies community. Although both chairmen expressed the need for further regulations of the sector, they also emphasized the advantages of the technology, with Giancarlo stating that there is a need for a ‘do no harm’ approach when designing policies.

Japanese cryptocurrency exchange Coincheck declared that it had been hacked. The value of the tokens was estimated to exceed $500 million, which is more than the infamous Mt. Gox hack. Fortunately for its customers, and for the cryptocurrencies community, Coincheck declared it would repay the users whose tokens were stolen.

It will be interesting to see what developments the following weeks will bring, especially in terms of cryptocurrency prices as well as regulatory actions on the part of governments.

Note: A representative of SimpleFX is the author of this article.

Criminals in Europe are using cryptocurrencies to launder as much as $5.5 billion (£4 billion) in illegal money according to the head of Europol, the EU’s policing agency.

Director of Europol, Rob Wainwright, estimates that around 4% of all criminal proceeds in Europe are being funneled through cryptocurrencies like Bitcoin — and he expects this figure to increase. Given that the agency’s standing estimate for the total amount of illicit cash circulating Europe is around $138 billion (£100 billion), this would put the amount being trafficked in cryptocurrencies at $5.5 billion.

“It’s growing quite quickly and we’re quite concerned,” Wainwright said in an interview with the BBC. He went on to add that police find it harder to stop illicit cryptocurrency transfers because they have no way to freeze crypto wallets in the way they could freeze a traditional bank account: “They’re not banks and governed by a central authority so the police cannot monitor those transactions,” he said. “And if they do identify them as criminal they have no way to freeze the assets unlike in the regular banking system.” To make matters worse, Europol has determined that money mules are being used to cash out, converting Bitcoin into fiat currencies in smaller amounts making it harder for police to track.

Speaking to the industry in general, Wainwright said the following: “They have to take a responsible action and collaborate with us when we are investigating very large-scale crime. I think they also have to develop a better sense of responsibility around how they’re running virtual currency.”

Law enforcement officials across the board are increasingly concerned about the use of cryptocurrencies by organized criminals. The coins are not directly regulated in Europe and it is still unclear among most financial regulators how they should be classified under existing laws. The UK is considering making amendments to EU anti-money laundering rules to make it apply to cryptocurrencies.

With regard to money laundering, Bitcoin appears to be the most frequently used cryptocurrency, likely because of its higher profile. But officials have also voiced concerns about others like Monero and Zcash, which go to even greater lengths to conceal the identities of those trading in them. Overall, Litecoin and Dash are actually second to Bitcoin in terms of trading volume on the dark web.

Outside policing agencies like Europol, others governmental organizations are more enthusiastic about the future of cryptocurrencies — in particular, blockchain technology. The European Commission announced in a press release earlier this month that it is launching the EU Blockchain Observatory and Forum, taking a great step forward aimed at “uniting” the economy around Blockchain. The project will bring together various sectors, including regulators, industry experts, and politicians, to develop new use cases. 

Following a collaboration with the Decentralized Identity Foundation (DIF), tech giant Microsoft has revealed plans to utilize blockchain technology to solve some of the challenges faced in managing identities and personal data digitally, including users’ concerns on privacy and security.

In today’s post, entitled Decentralized Digital Identities and Blockchain – The Future as We See It, Microsoft announced its embrace of blockchain-based technology, such as those that underpin Bitcoin and Ethereum, for use in decentralized IDs (DIDs) through the Microsoft Authenticator app.

Unlike traditional forms of identification used today, a decentralized identity system is not controlled by any single, centralized institution such as a government or tech company. The idea is that DIDs remove the possibility of censorship and give an individual full control over their identity and reputation. After looking at various types of decentralized identity systems, Microsoft turned to public blockchains due to their ability to enable privacy, self-ownership, and permission-less access.

“After examining decentralized storage systems, consensus protocols, blockchains, and a variety of emerging standards we believe blockchain technology and protocols are well suited for enabling Decentralized IDs,” the announcement from Microsoft read. Identity is one of the long-touted use cases of blockchain technology that does not have anything to do with payments or currency. In the post, Microsoft points to Bitcoin, Ethereum, and Litecoin as three specific platforms it thinks are suitable foundations for DIDs.

A key takeaway is that instead of relying on third-parties, blockchain could prove instrumental in putting control back into the hands of the customer as well as securely storing personal data. “Today, users grant broad consent to countless apps and services for collection and retention of their data for use beyond their control,” the post reads. “With data breaches and identity theft becoming more sophisticated and frequent, users need a way to take ownership of their identity.”

In the past, critics have argued that identity systems built on public blockchains would be too expensive and difficult to scale, but today’s post points out that layer-two systems can be used to reduce the necessary number of costly on-chain interactions. This is somewhat similar to how the Lightning Network (LN) can be used to better scale Bitcoin’s payments use case. 

“While some blockchain communities have increased on-chain transaction capacity (e.g. blocksize increases), this approach generally degrades the decentralized state of the network and cannot reach the millions of transactions per second the system would generate at world-scale. To overcome these technical barriers, we are collaborating on decentralized Layer 2 protocols that run atop these public blockchains to achieve global scale, while preserving the attributes of a world-class DID system,” reads the post from Microsoft.

After raising $4.5 million in a series of initial coin offerings (ICOs), cryptocurrency start-up LoopX has disappeared — along with the cash that investors provided — in what appears to be the most recent exit scam to plague the cryptocurrency community.

Once a company with an active online presence, LoopX has entirely disappeared from the internet. The company’s website is no longer online and its social media accounts, including Facebook, Twitter, YouTube, and Telegram, have been deleted.

The founders of LoopX told early backers that their team had been building an investment platform that would utilize a proprietary trading algorithm. According to a cached version of the company’s website, it planned to offer the “most advanced loop trading software to date.” A quote from the defunct website read as follows: “After testing our algorithm thoroughly over half a year with great profits continuously every month, we can now finally bring all this advantages of our LoopX – Trading Software to the public.”

LoopX made a number of bold claims to investors, including the promise of “guaranteed profits every week” and “great profits continuously every month.” The company also claimed that cryptocurrency markets were “projected to grow up to 10 times the size of now until the next year.”

The company’s white paper — which, unsurprisingly, has also been scrubbed from the internet — offered similar language. “Finally the opportunity is here for the common investor to be part of a revolution and be finally free, financially free… Our top priority is to give you an opportunity to sit back, let us do the work and watch your money grow.”

“Our software handles over 10,000 trades per second and calculates over 100 currencies at a time,” the LoopX website read. “Always looking for those opportunities to make profits bigger then 10 percent, which will payed out to our members on a weekly basis.”

Off the backs of all these promises, the company raised about $4.5 million, including 276 Bitcoin and 2,446 Ethereum. In hindsight, it’s surprising that investors put so much faith into a company that was using a lot of incorrect language and grammar — something not indicative of a “core group of high performance professionals” that LoopX was apparently formed around. 

In an ICO, an investor is given a token in exchange for an investment of cash or another cryptocurrency. The idea is that if a company is successful, the token will gain value over time and the investor will eventually be able to bring-in major returns. For more information about ICOs, check out our article The Biggest Threat to an ICO and How to Avoid It.

In the case of LoopX, it appears the money put forth by investors is gone, along with the company itself in what appears to be a classic exit scam — a con job where a company accepts money for a service that it never intends on providing.

Cryptocurrencies like Bitcoin have shown clear signs of a pricing bubble and consumers could lose all of their money, the European Union’s banking, securities, and insurance watchdogs said today, February 12th.

The European Supervisory Authorities (ESAs) for securities, banking, and insurance and pensions said in a joint statement that they were “concerned” about an increasing number of people buying virtual currencies without being aware of the risks involved.

The warning was requested by European Commission Vice-President Valdis Dombrovskis, who said last month that the agencies must prevent cryptocurrencies from becoming a “token for unlawful behavior.” There will be a meeting of key authorities and the private sector soon to assess the longer-term situation for cryptocurrencies beyond current market swings, he said.

“The ESAs warn consumers that VCs (virtual currencies) are highly risky and unregulated products and are unsuitable as investment, savings, or retirement planning products,” the group of watch dogs said. The agency went further, arguing that cryptocurrencies can be volatile and show “clear signs of a pricing bubble.” They added that people investing in them should be conscious of the high risk that they could “lose a large amount, or even all, of the money invested.”

Markus Ferber, Vice Chair of the European Parliament’s Economic Affairs Committee, said the warning was overdue and “Wild West” virtual currencies should be regulated like other financial instruments. “I expect the Commission to take the warnings by the three supervisory authorities seriously and issue a legislative proposal in this regard as soon as possible,” Ferber said.

As virtual currencies and the exchanges used to trade them are not regulated under EU law, the regulators warned that cryptocurrency investors are not protected in the event of an exchange going out of business or a cyber-attack.

The EU joins a number of government authorities in raising concern over cryptocurrencies. Last week Germany and France asked the Group of 20 Economies (G20) to discuss possible regulation for cryptocurrencies at its next meeting. South Korea recently introduced measures to tackle speculation in the sector, banning the use of anonymous bank accounts in cryptocurrency trading. And Indian Finance Minister Arun Jaitley said recently that his government will take measures to “eliminate” the use of cryptocurrencies in “illegitimate activities or as part of the payment system.”

Looking outside these recent announcements from governmental bodies and agencies, it’s not all doom and gloom. Across Europe smaller banks are looking forward to giving investors access to cryptocurrencies without any major hurdles, and some are even offering advice on initial coin offerings as well. Two stand-outs are Falcon Bank and Vontobel, you can read more about them here.