Today, we are excited to announce our $3.7M seed funding round to build a decentralized Bitcoin protocol. Block Green’s solution will unlock scalable Bitcoin returns by giving sustainable Bitcoin mining operations access to fair and transparent revenue-based financing on-chain. Our round was led by Founders Fund (shout-out to Scott and Amin for believing in us from day one), with participation from Dao5, Coinbase Ventures, Blizzard, 10X Founders, Global Founders Capital, New Layer Capital, and several high-profile angels such as Darian Shirazi (Gradient), Marc Barghava (Tagomi), Andrej Henkler (Leblon) and many other.
What is Block Green? 🌱
Block Green is developing a decentralized capital market protocol centered around Bitcoin. The protocol will give sustainable Bitcoin mining operations access to fair and transparent financing on-chain. Miners will use their future Bitcoin production as collateral by borrowing against their existing hash power. On the other end of the protocol, Bitcoin holders will be able to lend their assets and receive a share of the Bitcoin rewards produced. Block Green aims at unlocking DeFi liquidity for miners with sustainability in mind and supporting cross-chain financing mechanisms. In a later stage, Block Green will expand to additional industries producing recurring revenue, starting with energy.
Bitcoin at its Core ⛓
At Block Green we are developing an ecosystem around Bitcoin for its stakeholders. Our aim is to bridge the gap between infrastructure and liquidity. On the one hand, highly CAPEX-intensive mining infrastructure projects are incentivized by Bitcoin rewards. Meanwhile, Bitcoin liquidity providers struggle to find opportunities with a good risk-to-reward ratio. Our protocol allows Liquidity Providers to directly fund and receive returns from top-tier mining operators denominated in Bitcoin.
Bitcoin Institutions ⛰️
Liquidity Providers are the participants providing Bitcoin collateral and liquidity to the Block Green capital pool. These stakeholders are large Bitcoin holders and crypto institutions looking for a return on their, often passive, funds.
Today the opportunities for Bitcoin are few, the use of funds is non-transparent and the expected returns are low. Block Green offers a gateway to scalable and direct investments into the foundation of Bitcoin itself.
We enable Bitcoin staking in its purest form by participating in Bitcoin reward generation with the top miners in the world. The Block Green protocol allows LPs to invest in existing hashpower to access future production, unlocking attractive Bitcoin-denominated returns across chains.
In order to meet various risk appetites, Block Green will offer a menu of funding structures. One example is streaming versus a classic loan product. Streaming allows the LP to receive a percentage of the rewards produced by the collateralized hashpower, whereas the loan distributes fixed interest coupons. Read more about streaming, in an article by our investor and Board Observer Amin Mirzadegan.
The accredited Liquidity Providers with access to the protocol can learn more about each opportunity on the platform and participate by funding these opportunities on-chain. The first onboarded Liquidity Providers will be institutional clients, CeFi platforms, and Prime Brokerages firms.
Funding the Trailblazers 🔭
Even the most sophisticated mining operators don’t have access to the range of financial products usually available to profitable growth companies. Bitcoin and ASICs (the hardware used by Bitcoin miners to secure the bitcoin network) are volatile when priced in USD, which drives poor terms for USD-denominated financial instruments. As we have been observing during the recent downturn, using Bitcoin and ASICs as collateral for USD-denominated loans exposes both parties to high risks and is suboptimal.
Recent market conditions have forced non-resilient miners to liquidate Bitcoin holdings despite a vocal HODL strategy. High energy prices and a plummeting Bitcoin price have exposed a large delta in some of their economics and risk management. The inelasticity in the mining difficulty also tested the sector’s profit margins. Many miners, with unsustainable ASIC-collateralized debt positions, were forced to sell Bitcoin. Public miners sold off as much as 25% of their Bitcoin holdings at fire sale prices in June 2022.
Our protocol will only allow miners approved by the KYM (Know Your Miner) to borrow against their existing hashpower. Qualified miners will be presented with a new way to, for example, access liquidity, fund expansion, hedge their financial exposure, or de-risk current sites.
Mining operations qualify to participate in the protocol based on three separate frameworks; a proprietary underwriting scoring model, a sustainability index, and the expected value of their existing hashpower.
The size of the facility is then derived based on our framework, which can be used by the miner to introduce new opportunity pools open to Liquidity Providers on our platform.
As security, the borrowers will provide an on-chain margin pool of Bitcoin collateral and the hashpower collateralized via the mining pool.
We believe in the use case of Bitcoin mining to maximize renewable energy utilization. In the competitive energy market, renewable energy can stand to benefit from the mutualistic relationship with Bitcoin. Block Green has therefore taken the decision to only accept sustainable Bitcoin mining operations. The framework for green mining is under development but will be published on the website, transparency being a core value of ours.
Bitcoin Mining as a Key Enabler for the Transition to Renewables 🔋
In recent years there has been a heated public discussion around Bitcoin’s high energy consumption, with the popular comparison to the energy demands of smaller countries like the Netherlands or Finland.
The picture is not so straightforward, with some industry experts investigating the potential benefits of Bitcoin mining. For instance, Bitcoin mining is uniquely well-positioned to help make renewable energy cheaper, more accessible, and to accelerate the world’s transition to sustainable energy sources.
Curtailment is a recurring word in these discussions, renewable energy sources tend to produce large amounts of excess energy, especially in hours of strong wind or sunshine. A large chunk of this energy currently goes to waste if the grid can’t support the additional power supply. To prevent the waste of energy, miners are increasingly partnering with renewable plants to establish data centers on-site.
Intermittency of renewables is a major issue for grid operators working to balance supply and demand. In the past, it was easier to balance the grid with steady flows of energy from fossil fuels. As the grid relies more on renewables the intermittency has become a problem.
A high supply of energy is welcomed by the miners who monetize on cheap energy. A low supply of energy is met with dispatchable generation of energy, a flexible source of energy that quickly can meet demand.
Historically the demand response has been done through natural gas, hydro and nuclear. It’s only profitable to operate these power plants when the supply from wind and solar is low. Standby time means wasted capacity, Bitcoin mining gives plants a way to monetize standby power and keep it online to meet demand. Read more @Level 39
New expensive alternatives of dispatchable generation are being considered to deal with intermittent renewables, such as geothermal energy. This technology is costly and the financial viability is significantly improved by this new revenue stream.
Since the beginning of 2022, we have seen discussions about investments in renewables accelerate in Europe. Billions of EUR will be invested in space in the coming years for energy sovereignty. The 2050 emission reduction targets recently proposed by the European Union would require, according to McKinsey, an investment of $350 Bn between 2020–2030. The report lays out a scenario where renewables and possibly nuclear replace coal and gas over time, a scenario that is now being forced forward prematurely. Investments in renewables will take time and building a grid to accommodate the new energy sources will take longer which means the role of monetizing curtailed energy will be key.
“Our mission is to build a product on top of bitcoin with a broad use case and impact on society. We are convinced that bitcoin will be a driving force for the transition to a more sustainable economy and to energy sovereignty.”
Co-Founder and CEO, Sebastien Hess
Incentivize sustainability through financing 🥕
Unfortunately, there are currently several hurdles to realizing such symbiotic relationships between Bitcoin miners and local energy industries.
The most critical shortcoming is often insufficient access to cheap capital in order to finance such partnerships. Bitcoin miners, like most blockchain companies, are largely excluded from traditional capital sources like bank loans or governmental grants.
Block Green wants to solve that problem by creating a decentralized financing protocol for blockchain infrastructure and hardware. It will offer sustainable Bitcoin mining operations, with sustainability top of mind, a flexible solution to access capital in a direct and cost-efficient manner.
Backed by top-tier investors 🔗
For Block Green’s seed round, we already managed to secure an extensive list of high-profile investors in the DeFi ecosystem. It is important, especially in the early stages, to not only attract capital but also find partners that can support making the right decisions and build an ecosystem of like-minded stakeholders.
“We are glad to have found Founders Fund as our lead investors and early believer. As one of the top venture capital firms worldwide, they have been very active at the intersection between renewable energy and blockchain infrastructure, proven by investments in companies like Crusoe Energy and Solugen. Founders Fund has been and continues to be a key partner in our journey.”
Participating in this round is also Dao5, an important DeFi investment fund led by Tekin Salimi, former GP at Polychain Capital. Tekin is one of the most prolific investors in the industry and will be an important advisor for Block Green. Another key partner for Block Green will be Coinbase Ventures whose position at the center of the crypto industry and in-depth knowledge of the space will continue to prove very valuable into our journey.
Who are we? 🏃♀️ 🏃 🏃♂️
Block Green’s founding team has extensive experience in fintech and crypto. Sebastien Hess, CEO, is a serial entrepreneur within fintech and Web3. Bastian Becker, COO, came from a Director position at Mastercard focusing on blockchain infrastructure and strategy. The team now consists of 7 people, with an engineering team that brings years of industry experience.
We will soon have new hires to announce! 👫🏻👫🏻
What’s next 🔭
We’re working hard to develop the protocol, grow the team, and build a community of supporters who want to be a part of the journey. We are continuing our work to establish partnerships with sustainable miners around the world, with a focus on the US and Canada. We’re working closely with all parties to develop a product which is wonderful for our users.
Join us! 🌱
Join us on our mission to make the blockchain more sustainable. We are looking for our founding team members who have a drive to make critical decisions and help us shape Block Green.
Bastian Becker, COO, Co-Founder