Vela puts £0.2m into mining-as-a-service firm Argo Blockchain

The AIM-traded firm said it has subscribed for 2,500,000 shares in Argo Blockchain, at a price of 8p per share.

It said the investment was funded from its existing cash resources, and was part of a larger fundraise which was completed by Argo Blockchain on 2 February, which raised £2.5m for the company on a pre-money valuation of £8m.

Following completion of the fundraise, Vela said it held approximately 1.9% of Argo Blockchain's share capital.

“Argo Blockchain is a recently incorporated private company whose business activities will be focused on mining-as-a-service (MaaS), which enables its users to access blockchain mining rigs and carry out cryptocurrency mining without the need to acquire, configure and maintain complex mining hardware,” Vela’s board explained in its statement.

“Until now this process has been reserved for those with a strong technical background and the resources to buy large amounts of server space.”

Vela explained that cryptocurrencies operated on a distributed ledger called a blockchain.

In order to update the blockchain with transactions, computing power was needed to aggregate transactions and form them into blocks which comply with the rules of the relevant blockchain.

Cryptocurrency mining is the process of aggregating the transactions into blocks and adding them to the blockchain.

“The creation of a block requires the transactions to be cryptographically 'hashed' which creates a fixed length alphanumeric string which can easily be verified.

“This string is added to the strings for other transactions, and the hash of those combined transactions must comply with the rules of the relevant blockchain,” Vela said.

“Computers are used in cryptocurrency mining to carry out this hashing process and can be measured in the number of hashes per second it can provide.”

It was that hashing power that formed the unit of measurement for Argo Blockchain's contracts.

When a block is added to a blockchain, the party or parties responsible for adding it to the blockchain receive a cryptocurrency reward.

That cryptocurrency reward was funded partly through transaction fees charged in respect of the transactions recorded in the new block, and partly through the creation of a new amount of cryptocurrency in accordance with the rules of the relevant blockchain.

“Users of the Argo Blockchain service will pay for a monthly mining contract up front for which they receive an amount of hashing power for the period of the contract,” the board confirmed.

“Any cryptocurrency reward received as a result of that hashing power is distributed by the blockchain network or cryptocurrency mining pool directly to the user.”

Argo Blockchain, which was incorporated in England and Wales on 5 December under the name GoSun Blockchain, had not published any accounts as yet with the company still pre-revenue.

Argo Blockchain did not trade until 15 January, and as at that date its net assets were £0.19m.