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While many investors may be familiar with cryptocurrencies like Bitcoin and Ethereum, they are often less familiar with the thriving ecosystem of companies that support the development of blockchain technology and digital assets in general. This article identifies four key segments in the blockchain asset space today, along with a prominent company operating in each segment.

Canaan: Leading Manufacturer of ASIC Bitcoin Mining Equipment

Canaan is one of the largest manufacturers of Bitcoin mining equipment, alongside Bitmain, MicroBT, Ebang, and other smaller manufacturers. Canaan follows a non-factory model, focusing primarily on product design and R&D, while partnering with leading manufacturers like SMIC, TSMC, and Samsung for chip manufacturing.

The hardware needed for profitable Bitcoin mining has evolved significantly with the network’s expansion. Early miners used central processing units (CPU), followed by graphics processing units (GPU), then field-programmable gate arrays (FPGA), and now application-specific integrated circuits (ASICs), which are the latest viable hardware solution for profitable Bitcoin mining. Canaan led the latest stage of this transition, being the first company to develop Bitcoin miners using ASIC technology in 2013.

Canaan’s main business is selling ASICs for Bitcoin mining under their AvalonMiner brand. They also sell Bitcoin miner parts, post-sales technical services, and offer mining leasing services. Canaan’s technical expertise in supercomputing, acquired through ASIC development for Bitcoin mining, has allowed them to enter the market for ASICs designed for artificial intelligence applications. However, this activity remains a tiny part of their overall business.

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Both Canaan and its main competitors are Chinese companies, which may be more exposed to regulatory risks following China’s recent ban on cryptocurrency trading and mining. However, the global demand for Bitcoin miners may outweigh the headwinds posed by these challenges. Bitcoin mining remains highly profitable on a variety of ASIC machines, and considering the chip supply limitations, it may be several years before marginal costs approach marginal revenues.

Riot Blockchain: A US-Based Cryptocurrency Mining Company with a Bitcoin Focus

Riot Blockchain is one of the largest Bitcoin miners in the US, listed on the stock exchange, generating revenues from Bitcoin mining and data center hosting services. Simply put, they acquire Bitcoin mining hardware (ASICs) and find data centers with the lowest energy costs to deploy them.

Bitcoin mining is the act of using electricity and advanced hardware to secure the Bitcoin blockchain through a brute-force calculation process. Bitcoin miners iterate different inputs through the cryptographic hash function SHA-256 as quickly as possible, searching for an unlikely output. The result of a cryptographic hash function is known as a hash, and the hash rate is a measure of the number of hashes that can be calculated per second.

Riot’s hash rate is currently approximately 3,000,000 TH/s, representing 1.7% of the total Bitcoin network hash rate, which is 173,000,000 TH/s. Additionally, Riot expects to increase its hash rate to 12,800,000 TH/s by the end of 2022, a 327% increase reflecting a significant purchase agreement with Bitmain Antminers that will be connected monthly until the fourth quarter of 2022. In recent periods, Riot has turned to capital markets to finance its operations, providing flexibility to hold its mined bitcoins as an investment on its balance sheet. As of December 2021, the company held approximately 4,889 bitcoins.

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Riot has taken a vertically integrated approach by acquiring both Bitcoin miners and hosting facilities to deploy their machines. In 2021, Riot successfully acquired Whinstone US, the largest Bitcoin mining and hosting facility in North America. Whinstone, based in Rockdale, Texas, sits on a 100-acre plot with 300 megawatts (MW) of currently developed power capacity and an additional 400 MW infrastructure expansion currently underway.

Coinbase: A Leading Digital Asset Exchange and Infrastructure Provider

Coinbase is one of the largest cryptocurrency exchange platforms and a major provider of digital currency infrastructure and services. The company launched in 2012 with a mission to provide access to Bitcoin for anyone. Over the years, Coinbase has expanded significantly beyond its core exchange business, culminating in its direct listing on Nasdaq in April 2021. As of December 2021, Coinbase had over 73 million verified users, operating in over 100 countries, with cryptocurrency trading volume in the last quarter almost surpassing $330 billion.

Today, Coinbase is a full-service cryptocurrency platform that covers retail and institutional trading, lending, custody, wallets, staking, debit cards, blockchain analytics, trade integration, cloud services, a soon-to-be-launched non-fungible token (NFT) marketplace, and much more. While Coinbase’s revenues are still dominated by retail operations, they also generate income from institutional operations, and subscription and service revenues grew an astonishing 1256% quarter over quarter as of September 30, 2021.

Within this segment, blockchain reward revenues contribute the most. This segment was reinforced by Coinbase’s acquisition of Bison Trails in January 2021, a blockchain infrastructure-as-a-service company that offers services enabling individuals, custodians, cryptocurrency exchanges, and funds to earn yield on certain cryptocurrencies, charging a performance fee for such services.

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Another key business for Coinbase is their cryptocurrency custody business. Coinbase Custody operates as a standalone and independently capitalized business, providing custody solutions for funds, institutional clients, and high-net-worth individuals. Coinbase Custody is believed to be the largest cryptocurrency custodian in the world.

Overstock: An E-commerce Business Supporting and Investing in Cryptocurrencies

Overstock is predominantly known as an e-commerce business offering a range of products such as furniture, home decor, and household items. However, starting in 2014, Overstock implemented a multifaceted approach to increase its exposure to blockchain technology and cryptocurrencies. Firstly, the company partnered with Coinbase to enable its e-commerce customers to pay with Bitcoin, and Overstock added the flexibility of holding a portion of the Bitcoin earned on their balance sheet. Secondly, Overstock embarked on a broader initiative to develop and advance blockchain technology through its subsidiaries collectively known as the Medici business.

Medici aimed to leverage the transparency and security properties of blockchain technology to address problems in six main areas: identity management, property rights and management, central banking and currencies, capital markets, supply chains and trade, and voting systems. The Medici business primarily consisted of Medici Ventures, a venture capital business investing in blockchain companies, and tZERO, a business applying blockchain technology to capital markets, predominantly in the area of digital asset securities.


These four companies represent key participants in the blockchain and digital asset ecosystem today. The publicly traded blockchain companies’ landscape has evolved significantly in recent years, with dozens of companies operating in these segments, in addition to the ones highlighted in this article. Furthermore, numerous established blockchain companies are expected to access public capital markets for the first time through special purpose acquisition companies (SPACs) and initial public offerings (IPOs) in the coming year.

While many of these companies may not receive the same attention as cryptocurrencies do today from investors, they provide broad thematic exposure to blockchain and digital asset space selections and could offer complementary exposure to direct cryptocurrency investments.

For more information, read the full article on the Ratingperson website.

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