Latest update from the chairman (29th April 2014)
Dear CipherMine Shareholders,
This is a partial cross-post with the CipherTrade thread. Although it deals with many concerns raised regarding CipherTrade and CipherMine's involvement in it, please do remember that CipherMine and CipherTrade are distinct entities!
This is just a quick note to let you all know that I'm still here. My health is continuing to steadily improve and I'm slowly chewing through the backlog that has been piling up.
We now have almost all the CipherMine hardware paid for last year up and running. We are having some issues with one of the CoinTerras and one of the HashFast Sierras, and are unfortunately unable to do much in terms of self-help (their chassis contain little more than a couple of ASICs with lots of cooling - not much to debug). We are therefore waiting on support tickets. We are also still trying to resolve the issue of a missing Babyjet (more to-ing and fro-ing with a very slow after-sales support service). We got in early with orders for Scrypt ASIC GridSeeds and KNC Jupiters last month which should give us a massive boost compared to GPU mining. The GridSeeds should arrive in May, the KNCs later this year (hopefully).
As you are also no doubt aware, things are also progressing with CipherTrade, albeit somewhat slower that we'd like. I have been pushing for the platform to launch ASAP, and am willing to accept some personal risk to that end (a bit of a necessity in such an emergent space which has the potential to upset financial regulatory authorities), but the issues causing delays have been the ones where the lawyers rate a significant chance of jailtime for the directors unless we do it right!
We have been clarifying some roles in the mean time. Going forwards I will be chairman of CipherTrade and CipherMine. Sy (sims) is now CEO of CipherTrade, with Ciphertrade-PR being our main marcomms forum channel (that account is temporarily being handled by one of our board of investors - until we can employ someone for the role). This makes much more sense given my recent health issues and subsequent reduced capacity / availability. Running one company (Memset) is a full time job in itself, and running two was, I must confess, biting off more than I could chew. As chairman I shall continue to provide strategic oversight and set the vision for all the "Cipher" businesses (we do have others on the drawing board, but obviously we are getting CT & CM solid first).
The Memset systems administrators, Ross and Wealdy, that started out by helping me with the CipherMine hardware in their spare time have stepped up in the last few months to keep CM ticking over, and for that I'm very grateful to them both as you can imagine. Although we don't have the same level of formality in CipherMine as with CipherTrade, I am in-effect doing the same thing; stepping back slightly to focus on the strategy, with Wealdy & Ross taking over the executive elements. Wealdy (analbeard) is handling marcomms for CipherMine now and can be considered its official spokesperson. Please bear with them though since we do all have full time jobs, and CipherMine is thus a spare time activity (unlike CipherTrade which has much more dedicated resources - most notably Sy). We have added one person to the CipherMine fold though; Wayne, our new DC ops engineer.
In due course we will be untangling CipherMine from Wood Technology LLP (my consultancy / "mad ideas" vehicle) and turning it into a real company so that we can issue real shares on the CipherTrade after market. Please be aware that this is not going to happen overnight, however, and due to the legal strategy we are pursuing we cannot take short cuts (eg. just sticking them on the trading platform and calling them "virtual shares" or a loan or wotnot). For the time being CipherMine's strategy is very simple: maximum, sustainable yield for shareholders from mining operations.
I know that the proportion of CipherTrade which belongs to CipherMine shareholders is causing much debate, so I should clarify this. Originally we had tentative expectations that CipherMine would by now have the resources to employ people and do R&D in a number of areas, with a focus on High-Performance Computing (HPC). However, CipherMine continues to be run on a shoe-string budget and doesn't have any full time employees. I am continuing to absorb some of its costs out of my portion of proceeds (eg. getting my employees to spend paid time on hardware maintenance - that's not a cost I currently deduct from CipherMine's profits). All of the core CipherMine crew are putting in much more than they re getting out of CipherMine (ie. our personal shares of profits do not come close to adequately compensating us for the time we put in); it has become more a labour of love for most of us.
While CipherTrade could have been something CipherMine might have expanded into, it has simply lacked the resources. Further, had there been resources for R&D there were many other projects closer to CipherMine's core business which would have taken priority; a cryptosecurities / crowdfunder service was not even mentioned as a possible diversification. CipherTrade is a completely separate entity to CipherMine and is only becoming a reality because a private group of investors have come together to create it, at a significant cost. I have personally contributed circa $40k from my own pocket, for example. CipherMine's contribution is purely financial in that context, but it is still an amazing opportunity for CipherMine shareholders to get in on the ground floor of this new enterprise. I fully expect that that small deduction from CipherMine's hardware reinvestment fund will ultimately be much more lucrative for CipherMine shareholders than if it had been spent on mining hardware. If CipherMine had employees who had been working on the creation of CipherTrade then the contribution, and consequently CipherMine's share, would be larger. Fundamentally, CipherMine has not been the success we all hoped. Mining difficulty has risen much faster than our worst-case scenarios while we have been plagued by delayed hardware, despite doing reasonable of due diligence on our suppliers.
I have no idea where the unreasonably high expectations of CipherMine's share in CipherTrade arose. I can only conclude that it began as conjecture here and was allowed to flourish in my absence (I would have quashed it sooner otherwise). The math is quite simple: CipherMine contributed $20k into a $125k initial investment pot (16%), which will be diluted down by around $75k of staff shares (that dilutes all founding investors, including me, but we want our staff to be highly motivated), resulting in about a 10% stake for CipherMine shareholders. CipherMine has contributed nothing else whatsoever. None of us are employed by CipherMine, as stated above. CipherMine shareholders do not "own" our time beyond that required to maintain the core mining operation - indeed even that isn't a stipulation of the original agreement. Expecting more is irrational.
Please also remember that, while I took the bold step of trying to bring some professionalism to the Wild West of crypto-securities, CipherMine was initiated as part of a game (LTC Global). We are doing the responsible thing and making it into a real company, but that too is taking time and resources. CipherTrade is itself an example of that dedication too; I conceived the idea in no small part as a way to maximise CipherMine shareholder value! We have gone above and beyond the call of duty when it comes to looking after our shareholders, and the stake in CipherTrade should be seen as a boon, not something to bicker about. Once that process is complete we will also be in a position to publish CipherMine's abridged accounts, which I think will help demonstrate my points above regarding CipherMine's mediocracy and how it could never have embarked on an undertaking like CipherTrade by itself.
As for dissatisfaction over CipherTrade's timeline, yes, it has been delayed, but with very good reasons. We started out thinking that we'd just be making a technical platform to replace LTC Global & co, but over the last few months we have become increasingly expert in relevant bits of regulatory frameworks and have concluded that the real opportunity is to bring the platform (which has actually been working for quite a while now) into the market as the world's first regulatory-compliant, cryptocoin-based crowdsourced startup funder with an aftermarket (the order matching engine). We are not just aiming to be an also ran, but to be a true pioneer bringing together the brilliant innovations of cryptosecurities (cryptocoins' goodness, global Web access, API driven, complete transparency, etc) with more traditional processes (formal business management, due diligence processes [on users and issuers alike], policing of the after-market, corporate visibility, legal compliance, etc).
As for those of you who are rattling the legal sabre, please review the CipherMine shareholder agreement and try to find exactly how / where we have breached it, bearing in mind the above. Yes, some dividends have been a little late, but we're actually only obliged to deliver them monthly and given how the infrastructure we were relying on (ie. litecoinglobal.com) vanished I do not think it at all unreasonable that there have been some slightly longer periods between dividends. Indeed, we have gone above and beyond the call of duty to continue to service our shareholders in this unforeseen scenario of litecoinglobal's closure! Further, the decision to invest $20k in CipherTrade was mine to take; at that time I owned more than 50% of CipherMine's virtual shares and had not implemented the 25% veto. Further, I had actually been encouraged by many of you (the forum users) not to raise motions on decisions where I was simply going to force it through with my majority shareholding as it had caused upset in the past. Personally I think the worst we can be accused of is poor communications and shareholder relationship management, but as above we're having to operate CipherMine as a part-time activity and never promised more unless it had the resources to do so. If you feel you have a legitimate legal claim having carefully considered the above and the shareholder agreement then please email [email protected]
and we will evaluate your case.
Anyway, thank you again to all those who have been patient with us over the last few months. It has been a very rocky road this year, both for me personally and for the "Cipher" enterprises, but I believe we have an excellent foundation to build on going forwards. CipherMine is in reasonable shape, despite all the recent challenges. Although plagued by late hardware, we now have some serious hashpower (12 TH/s, and that's with several faulty units) and have have some good pre-orders for Scrypt ASICs. With a little luck the HashFast Miner Protection Programme will catapult us back on course (HashFast are proving hard to contact at the moment, as you're probably aware, so we're not 100% certain of the status of the MPP - but by my calculations it should pay out massively, potentially tripling our hashpower).
CipherTrade's board of investors have been, and I am confident will continue to be, an outstanding resource for that company, and we could not hope for a better CEO than Sy (sims). I am hugely excited by CipherTrade, and so should you be. We are making something truly innovative, plugging the gap between the Wild West of crypto-securities and the traditional world of finance. We have a very real chance of transforming both!
I shall not be actively engaging with the forums other than making the occasional post like this one; if nothing else this will prevent me getting into arguments with trolls and making a twit of myself (again). As mentioned, you can consider Ciphertrade-PR and analbeard (for CipherMine) to be the authoritative voices speaking on my behalf. They will also bring to my attention anything major that crops up here.
PS. Apologies for any confusions, but to be absolutely clear there is no plan to "buy back" any shares. If you are unwilling to identify yourselves to Cipher Enterprises Ltd (trading as CipherTrade) then your shares will be forfeit. We will deduct any such shares from the issued total, ie. the dividends from such forefeits will be re-distributed to the remaining shareholders. I appreciate this is not in the spirit of cryptosecurities as they stood, but we are now forced to comply with regulatory requirements as discussed. For those unable to due to local legislation, we'll most likely be able to hold the shares in nominee for a few months if it looks like it can be resolved in due course (eg. the improved legislation for crowdfunding that's coming in the US). We will have to address those cases individually.
LOriginal opening post
I'm pleased to announce our new security, CIPHERMINE
, listed on Litecoin Global
. CipherMine is a joint venture between leading British IT entrepreneur Kate Craig-Wood
(aka. woodtech), founder and CEO of Memset
, Giles Russel (aka. evilscoop) the man behind EvilMiners
, and two systems administrators at Memset.
Please view the security here
. We have completed both rounds of our IPO in astonishingly little time; the second at the higher price of 0.9LTC/share sold out even faster than the first found! We have now put all planned reserves (20,000 shares) on the market. Thank you to all our investors!
The latest version of the full business plan can be downloaded from docs.ciphermine.com
, an excerpt of which is below. Although we are quoted in LTC our principal operation will be SHA256 mining using ASICs and FPGAs.
CipherMine is a virtual cryptocoin mining business. All shares are listed on on the LTC Global exchange. 1.1 Goals
1.2 Strategy summary
- To provide a vehicle through which Litecoin (LTC) can be invested in mining cryptocoins.
- To give shareholders a high, reliable, long-term return on investment via regular dividends and equity growth.
- To aggressively invest in ASIC mining hardware to maximise early-mover advantage.
- To promote LTC and the LTC Global exchange as a good alternate to Bitcoin (BTC) and associated crypto-exchanges by being successful, and in doing so encourage a growth in value of LTC similar to BTC's.
- To operate in a sustainable and environmentally-friendly manner.
CipherMine is already in operation, at present mining LTC with a combination of heavily discounted CPU resources and wholly owned GPU rigs. We wish to diversify into BTC mining and have an aggressive strategy of reinvestment in hardware. Although our models and discussion herein focus on LTC and BTC, we intend to apply our scrypt and SHA256 clusters to whichever coins are most profitable at any given time.
We have chosen LTC-Global since there is currently a dearth of mining companies on that exchange and because we believe that by being successful we can encourage LTC and LTC Global to become a main stream cryptocurrency and exchange with similar value explosions to that witnessed with BTC and shares on the BTC Trading Co exchange.
We shall invest 50% of profits back into hardware, as well as a 3-year straight-line amortisation / depreciation of existing hardware, and pay our 50% of profits as dividends. We have a detailed business model and forecast (available on request), the dividend forecast from which is shown in the figure 1.
The assumptions used (see detail below) are conservative. Most importantly, we assume that BTC mining productivity will decrease significantly due to difficulty increasing, and have based our difficulty forecast on the last two months trend. We also assume a fixed price for both LTC and BTC. Should they appreciate, as we expect, then our profitability will rise significantly. We shall be doing our accounting in Euros, not cryptocoins, though dividends will be in LTC.1.3 Key strengths / differentiators and assets
- An outstanding, publicly visible principal with a wealth of technical and business expertise, backed up by a superb team of professionals with demonstrable experience.
- A carefully considered, detailed and realistic business plan and model showing the growth potential.
- 750 Avalon SHA256/BTC-mining ASICs on order (~230 GH/sec, delivery lateJuly - early August).
- 100 SHA256/BTC-mining FPGAs on order (~24GH/sec, delivery late June).
- We have the following arrangements with Memset Ltd:
- Use of their ultra-efficient, high-security (to British government standards) data centre for which CipherMine will only be charged power at cost (and there is a lot of spare space).
- Use of the spare compute in their virtual machine estate with a minimal at-cost charge.
- The expectation that they will purchase end of life GPU rigs from CipherMine for use in their GPU cloud.
- Four quad-AMD 7950 GPU LTC mining rigs deployed (one mid-build).
- Cluster of 40 VMs LTC mining with Memset's spare compute (expandable).
- A proprietary, scalable software suite for the automation of mining workers as well as auto-selection of best value cryptocoin to mine and automatic conversion of alternate cryptocoins into LTC.
NewsNo longer being actively updated - please see the security's news page on LTC Global for the latest updates.24 Jun 2013: First 80 SHA256 FPGAs delivered
We have recieved our first batch of 80 Ztex 1.15x clone SHA256-mining FPGA boards. Some pictures are below, apologies for the shakiness - was a phone camera! We've since packed them up for transport so not had a chance to take better ones, but will post more in a few days.
We are testing them in batches of 10 at present. Unfortunately we only have 10 mini USB cables due to a slow shipment, but according to Amazon they have been dispatched and will arrive in the next few days soon after which we will be able to get all 80 crunching on SHA256. We already have the necessary power cables and just need to rig up some fans (the little ones they came with are inadequate and we are removing them).
Each stack of 10 boards is producing 2.0 - 2.25 GH/s, so 16 - 18 GH/s in total (~0.44 BTC/day, or ~16 LTC/day with current conditions). Giles thinks we can coax a little more out of them with a firmware upgrade, some more overclocking and the aforementioned improved cooling arrangements.
26th Jun 2013: Jan, Private pools, Diversification and PR
I have updated the CipherMine business plan to take into account recent developments. Please download version 1.05 from docs.ciphermine.com
. The pertinent changelog entry is pasted below. Three items are of particular note:
1) I am delighted to announce the addition of Jan Heinicke-Clemm (aka. JohnDorien on bitcointalk.org) to our team. Jan is a competent, multi-disciplinary IT specialist with skills in programming, systems administration and electronics engineering. In the near-term he will be helping me with software development, in particular putting up private pools (see section 5.1.8 ) for our alt-coin mining. Once this is complete the first tranche 500 shares will be released to him. The second 500 will be release on or before 15th August once we have verified his merit. Those shares are coming from my personal allocation so no-one is being diluted.
2) Today I had a conversation with my PR agent, Katie Olver, about CipherMine. She is extremely excited and thinks that with the interest around bitcoins at the moment she can get us coverage in national British newspapers. This is part of a strategy to raise awareness of the security in hopes of boosting share prices (see section 4.5) and making it easier to raise money in the future should we need to. It will also ultimately help our diversifications (see section 5.2). Katie is calling her journalist contacts tomorrow (PR people are always so impatient!
so there is a chance that things could get "interesting" in the next week or so.If it does look likely that we're going to get some good coverage then I will be "forking" the busines plan to modify a couple of elements and removing previous versions. Please retain a copy of v1.05!
It will remain available to shareholders via a mechanism yet to be determined. Further, if you are a shareholder then please keep a close eye out for announcements in the coming week or two - we may need to act quickly and I will want to involve you.
3) We have purchased BTC with the 15,667 LTC raised in the IPO rounds and have placed an order and paid for for an additional 2,500 Avalon ASICs with Steamboat. There will be more hardware purchases in the next few days. This should nor mean that we are ahead of plan (we assumed the IPO would take longer and the ASICs would be delivered later than the mid-August ETA).
Kate.Changelog for release 1.05:
- Added Jan (developer and electronics engineer).
- Added detail to R&D diversificaiton section.
- Expanded on software and mining pools section, including private pools plan.
- Updated staff shareholdings.
- Added preamble note to shareholder contract about successful IPO and how money is being spent.
- Added section 4.5 (marketing and press relations).
- NOTE: New hardware orders and timelines not yet put into the model - forecast should improve once done.