Alex Zhao is the CEO of Standard Hashrate, the creator of BTCST, which brings exchange-grade liquidity to Bitcoin mining.
What initially attracted you to blockchain and cryptocurrency?
Blockchain and cryptocurrency is still in its infancy. The massive technological and cultural potential is what drew me to the industry many years ago. Along with the rest of the Standard Hashrate Group team, I’m a crypto early adopter. Most of us got our start in bitcoin mining in 2014, much before the BTC boom we’re witnessing. Freedom of money was and continues to be a huge draw.
Could you share the genesis story behind Standard Hashrate?
Standard Hashrate Group is an open association composed of institutional bitcoin miners and early crypto adopters. Collectively, these miners represent over 12% of the world’s bitcoin mining hashrate. After observing the DeFi boom last summer, we began thinking about how we could use our extensive amount of hashrate to bring something new to investors and bridge the gap between bitcoin and DeFi. Thus, the idea of BTCST was initiated – tokenized hashrate ready for the secondary market. We successfully brought bitcoin to DeFi in January 2021 with the launch of BTCST on Binance Launchpool. Since then, BTCST’s TVL has exceeded $300 million USD and nearly $600 million USD in capital has been committed.
For readers who are unfamiliar with this concept could you explain what synthetic assets are?
The aim of synthetic assets is to allow users to gain exposure to different asset classes without actually needing to physically hold the underlying asset. These assets can include anything from gold to stocks to cryptocurrencies like bitcoin. Synthetic assets give investors the benefits of being able to hold tokens that hold the value of the underlying assets without leaving the cryptocurrency ecosystem. Synthetic assets are decentralized and provide more flexibility in certain use cases like DeFi staking, meaning that they are open to all users across different areas and are secured using smart contracts and other methods with data stored on distributed ledgers.
Could you briefly explain what bitcoin mining is, what is hashrate, and how staking the BTCST token rewards token holders?
Bitcoin mining is essentially the process of creating new bitcoins. It is done through sophisticated computers that solve complex computational problems. Hashrate refers to the total computational power that is being used to mine and process transactions. The more hashrate you have, the more secure a blockchain is, so mining is extremely important to the overall stability of cryptocurrencies. BTCST is a token collateralized by real bitcoin mining power. This means that by holding BTCST tokens, investors are able to reap the benefits of bitcoin mining without physically owning and operating the machines. Through staking BTCST, token holders are able to receive bitcoin distributions depending on the mining power staked.
Who are some of the mining partners that are responsible for the actual bitcoin mining?
Standard Hashrate Group is partnered with BTC.TOP, Easy2Mine, Genesis Mining, Atlas Mining, and Hengjia Group. Collectively, these miners exceed 12% of the world’s entire bitcoin hashrate. With BTCST, these miners are tokenizing their hashrate while maintaining custody of their mining machines. Essentially, our partners are able to sell hashrate to institutional and retail players, offering instant access to liquidity that was previously untapped.
Why should investors capitalize on bitcoin mining by staking BTCST versus investing in cloud mining platforms or actually buying mining hardware themselves?
With our Boost Factor, staking BTCST can result in much more effective and higher bitcoin mining rewards compared to mining bitcoin with equipment. While it is difficult to know for certain the exact amount of BTCSTs that will participate in staking, if we assume that 500,000 BTCSTs participate in mining, someone who stakes BTCST can expect a boost factor of 11x. Put more simply, that is 11 times more bitcoin rewards than if someone were to either mine bitcoin directly or with cloud mining contracts using equivalent hashrate. Staking BTCST also provides a host of other benefits such as the ability to mine synthetic PoW assets like τBTC or τDOGE, which are pegged 1:1 to the underlying asset BTC and DOGE respectively.
What is your vision for synthetic assets in 5 years?
We believe that the future of DeFi is synthetic assets and high quality collateral. We’ll continue to see the bitcoin ecosystem expand through novel applications like synthetic assets leading to more value being drawn from sectors of the industry like mining, which has traditionally been overlooked since not many players understand PoW mining unless you have participated in it. The Standard Hashrate Group will continue to bring value to our ecosystem and bridge the bitcoin and DeFi worlds.
Is there anything else that you would like to share about Standard Hashrate Group?
Ultimately, our goal is to become a version of the Grayscale Bitcoin Trust (GBTC) — a means for investors to gain access and exposure to bitcoin in the form of a security without the challenges of buying, storing, and safekeeping BTC — for bitcoin mining hashrate. Standard Hashrate Group is intended to be an open association where each and every eligible miner can tokenize their hashrate. We want to be the force that brings true liquidity to mining hashrate to facilities across the globe. With our bitcoin mining and DeFi expertise, we are well positioned in the long run to provide maximum value to interested parties in the crypto sphere and beyond.
Thank you for the great interview, readers who wish to learn more about this project should visit Standard Hashrate.