Mr. Frank Holmes of Hive reports
HIVE ANNOUNCES STRATEGIC PARTNERSHIP AND SHARE SWAP AGREEMENT WITH DEFI TECHNOLOGIES
Hive Blockchain Technologies Ltd. has entered into a letter of intent with Defi Technologies Inc. for a share swap arrangement, by which Hive will receive 10 million Defi Technologies common shares, representing approximately 7 per cent of the existing outstanding common shares of Defi Technologies in exchange for four million common shares of the company, representing approximately 1 per cent of the company's issued and outstanding common shares. The transaction, which does not involve any cash payment by either side, is expected to close on or about April 16, 2021, and is conditional on the completion of satisfactory due diligence by both parties and approval of the TSX Venture Exchange. In addition, Hive and Defi Technologies plan to create a partnership surrounding the decentralized finance (Defi) ecosystem with specific applications around Ethereum and miner extractable value (MEV). The new partnership, which follows three months of discussions, will enable Hive with a strategic stake in Defi Technologies and a broader partnership surrounding the Defi ecosystem with a specific focus on the Ethereum-based MEV space and developments surrounding it.
MEV refers to the amount of profit miners can extract from reordering and censoring transactions on the blockchain. It has become an important issue over the past year as the Defi space has grown from $3-billion (U.S.) to $71-billion (U.S.) in market capitalization. Of the $347.3-million of extracted MEV, 88 per cent comes from Defi activities. As can be seen from data by Coin Metrics, over half of all ETH miner revenue currently comes from transaction fees. By partnering together to take on these activities, individuals get a more capital-efficient market to play in, while distributing greater returns to miners for acting more altruistic.
Defi is short for decentralized finance, and new applications are focused on disrupting financial intermediaries. Defi reached new heights over the past 12 months as dozens of projects launched and large amounts of capital flowed in. The majority of Defi apps uses Ethereum's ERC token standard to create new coins. Defi has pushed Ethereum prices to new highs this year, and it is accelerating innovation and experimentation. It is estimated that more than $1-trillion in transaction passed through the Ethereum ecosystem in 2020, putting it roughly on par with payment giant Paypal. This megatrend in Defi is a big tailwind for Ethereum demand, and Hive believes it is in early innings. Bitcoin was up 300 per cent in 2020 while Ethereum surged 470 per cent due to the demand from Defi apps like Stablecoins to decentralized exchanges known as DEXs. Hive is the only public crypto mining company mining Ethereum, and it wishes to invest in the Defi sector and will consider distributing its shares as a dividend to Hive shareholders over the next year.
Blockchain analysis firm Chainalysis says Defi is growing at warp speed, and Defi's explosive growth has much farther to grow. Since most Defi applications are built on top of Ethereum, the world's second-largest cryptocurrency platform, and it is a smart contract, the future looks very attractive with Defi becoming a sustainable demand driver for Ethereum prices.
Darcy Daubaras, chief financial officer of Hive, said: "The additional revenue that Hive has been making and reporting from its flagship Ethereum data centres in Sweden and Iceland in recent times is partially due to the growth in Defi. This strength and growth in Defi is a reason that Hive is supporting innovative companies like Defi Technologies."
Frank Holmes, executive chairman of Hive, said: "We are excited about this strategic partnership with Defi Technologies and see strong synergies between the two companies. As Hive is the only publicly traded company mining Ethereum on an industrial scale, we see opportunities in the work that Defi Technologies is doing around miner extractable value and the potential ensuing benefits to Hive."
Wouter Witvoet, chief executive officer of Defi Technologies, said: "Hive is one of the first publicly traded companies that realized the potential of bringing cryptocurrency mining to the public markets. As the only public company with industrial-scale Ethereum operations, Frank Holmes and the team have solidified their position as leaders in the space. As Ethereum is the infrastructure on which Defi is built, we regard Hive as the backbone and cornerstone of the ecosystem, and I couldn't be more thrilled to be partners at this stage."
About Hive Blockchain Technologies Ltd.
Hive is a growth-oriented, TSX Venture Exchange-listed company, building a bridge from the blockchain sector to traditional capital markets. Hive owns state-of-the-art green-energy-powered data centre facilities in Canada, Sweden and Iceland, which produce newly minted digital currencies like Bitcoin and Ethereum continuously on the cloud. Its deployments provide shareholders with exposure to the operating margins of digital currency mining, as well as a portfolio of crypto-coins.
About Defi Technologies Inc.
Defi Technologies is a Canadian company that carries on business with the objective of enhancing shareholder value through building and managing assets in the decentralized finance sector.
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