Cypherpunk Technologies has acquired a large Zcash mining operation for $33.33 million, giving the Nasdaq-listed company about 18% of the Zcash network’s total computing power.
The company said the new operation includes Bitmain Z15 Pro mining machines with a combined capacity of around 4.2 GSol/s. The equipment is already running at hosting facilities across the United States.
Cypherpunk estimates that the mining fleet could produce around 7,800 ZEC each month. However, actual production can change depending on network difficulty, the price of Zcash, electricity costs, and competition from other miners.
The company did not pay cash for the acquisition. Instead, it issued a pre-funded warrant allowing the seller to purchase about 43.29 million Cypherpunk shares at a very low exercise price. The deal valued the company’s shares at $0.77 each.
The acquisition was made through Cypherpunk Mining, a wholly owned subsidiary. The mining equipment and related hosting agreements were purchased from companies connected to Winklevoss Capital.
Cypherpunk said the mining business is already generating positive cash flow and was acquired without debt. The company also plans to build its own data center and power infrastructure as the operation grows.
The new mining business gives Cypherpunk another way to increase its Zcash holdings. The company currently holds more than 323,000 ZEC, equal to around 1.92% of the cryptocurrency’s circulating supply. Its long-term goal is to reach 5% of the circulating supply.
Mining could allow Cypherpunk to add ZEC to its treasury without having to buy all of its coins directly from the market. The company also plans to use mining income and ZEC holdings to support investments in privacy technology and future expansion.
Cypherpunk believes Zcash mining can provide strong returns compared with some other types of crypto and data-center operations. However, these estimates depend heavily on ZEC prices, electricity costs, mining difficulty, equipment performance, and market conditions.
The acquisition also gives U.S. investors a way to gain indirect exposure to Zcash mining through a publicly traded company. Cypherpunk trades on the Nasdaq Capital Market under the ticker CYPH.
The company has also brought in Kevin Zhang to lead its mining operations. Zhang has experience in both Bitcoin and Zcash mining and has worked on mining facilities and infrastructure in North America.
While the expansion gives Cypherpunk a much larger position in the Zcash market, the company still faces risks from changes in ZEC prices, mining conditions, regulatory developments, and possible security issues affecting the Zcash network.
