Russia’s Internet Ombudsman takes on China’s Bitcoin mining industry

A Russian Government-linked startup named RMC One published a presentation on Tuesday that describes an upcoming Initial Coin Offering (ICO). The organization is looking to raise US$100 million to become a leading cryptocurrency mining hardware manufacturer.

Formally referring to themselves as the ‘Russian Mining Company,’ RMC One was founded by Dmitry Marinichev, better known as Russia’s Internet Ombudsman, the technology advisor to Russian President Vladimir Putin.

Marinichev is joined by several state officials and at least four Russian technology companies in attempting to create both a mining industry, and a leading mining farm that produces its own mining chips.

A token pre-sale is currently underway, where each token is selling for US$4,000 worth of bitcoin or ether. A minimum purchase of US$250,000 is required. The main sale begins on the 28th, when the remaining assets will be sold for $4,100 to $4,900, depending on demand. The company states that token holders will collectively own the rights to 18 percent of the mining farm’s revenue, and no more tokens will be issued after the ICO is complete.

- Marinichev

Marinichev is also the CEO of an internet services and systems integration company named the Radius Group, and was appointed as Internet Ombudsmen of the Russian Federation in July 2016. He answers directly to President Putin, and his primary responsibility is to boost the development of the national internet sector. The office website has increasingly focused on cryptocurrency mining and mining chip fabrication in recent months.

Additionally, the Ombudsmen was recently nominated as one of the four Russian Growth Party presidential candidates for next year’s election, assuming that Putin relinquishes his office at the end of the current term.

Marinichev has been discussing the bitcoin mining industry in Russia since at least April of this year when he spoke to a local newspaper about bitcoin mining and stated "We are planning to return Russian miners to Russia - this has almost come about.”

In May, Marinichev revealed that he has been mining both bitcoin and ether at his Technolopolis facility near Moscow, using mostly Bitfury mining equipment so far. The RMC's aim is to fabricate its own brand of mining hardware on the premises this year. Using a specialized ducting system, Marinichev has designed the facility to use the excess mining heat as the primary heating source for the whole Technolopolis complex.

TechnopolisTechnolopolis Moscow   Photo: Dmitry Marinichev

In July, RMC first announced their plans to build mining hardware and hold the ICO. The company reportedly houses chip manufacturing, equipment production including the assembly of the finished hardware, and mining, all within the 220,000 square meter Technopolis facility.

The presentation mentions two new mining hardware devices, with the largest called the “Sunrise s11i.” It further claims that it is a 16-nanometer design and is now the most powerful mining rig on on the planet in terms of hashing power, with the “Best [Return On Investment] in its class,” consuming between 2.3-2.5 kW.

Available in September 2017, RMC’s document explains, the new rig costs RMC US$1,600 per unit to produce and will deliver 22.6 Th/s of mining power. Of this, 18 Th/s goes to “the physical owner” while 4.6 Th/s goes towards paying a “joint mining club,” presumably token owners and RMC.

The leading competitor, from Chinese manufacturer Bitmain, is called the Antminer s9, and costs around US$2,500 for only 14 Th/s. However, the s9 does so more efficiently, with a consumption of only 1.3 kW of energy. Nonetheless, RMC claims that S9s offer a Return On Investment of 12 months, while there S11i is profitable in only 5.  

The company states that one of their goals is acquiring market share from Chinese producers, “and their centralization.” Their neighbors to the south currently dominate the markets for both mining chip manufacturing and mining pools. For instance, all of the top six Bitcoin Mining pools are currently located in China. These pools and several smaller ones in the country represent well over 70 percent of the total Bitcoin hashrate, and the vast majority of their mining hardware was made by Beijing-based Bitmain Technologies.

Mining centralization in China has been a concern of the bitcoin community for some time. BTCC CEO Bobby Lee stated that Bitcoin mining has become centralized in China, but does not see it as a worrying trend. During a press conference about the launch, an RMC representative told Bloomberg news that "Russia has the potential to reach up to 30 percent share in global cryptocurrency mining in the future."

According to RMC’s presentation, Russia is the ideal home for bitcoin mining globally because of the cold climate and the extremely low consumer electricity rates, as little as 1.3 cents per kW/hour. Prices for energy this low are simply unavailable throughout most of the world, including China, RMC claims.