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Cryptocoin exchange valuations: mcxNOW & mcxFEE

Posted by Kate Craig-Wood on September 28th, 2013

mcxNOW and mcxFEE

One of the things that got me into cryptocoin mining was cryptocoin trading. I’ve repeatedly demonstrated that I’m pretty bad at it in reality (I’m too easily swayed by the crowd and not disciplined enough), but I do still dabble now and then. Of late I have been using mcxNOW and hanging out in their chatbox (aka. trollbox).

mcxNOW is a pure cryptocoin exchange; you can trade a selection of alt-coins for Bitcoin (BTC) there but cannot trade cryptocoins against fiat (eg. USD). mcxNOW’s founder recently took the interesting step of issuing a pseudo-coin which conferred rights to a profit share (dividends) from trading income, paid every 6 hours. They are called mcxFEE. There has been a lot of debate in the mcxNOW chatbox there about what mcxFEEs should be worth, so I have decided to share my calculations.

There are 100,000 mcxFEEs in existence which represent the entire value of mcxNOW’s revenues (generated from a 0.2% fee on both sides of any currency pair transaction). 25,000 of those are used to pay interest on deposits; that 25% of the fees goes to account holders in proportion to their balance in that coin – another rather cool innovation from RealSolid (the founder and developer). He owns 69,000 shares at present and is remunerated through them. 1,000 are used to pay the lottery and at present 5,000 are in the public domain (ie. the mcxFEE “shares”/coins).

mcxFEEs are currently trading at roughly 0.75 BTC/share. Multiplied up that theoretically gives the exchange a market capitalisation of 75,000 BTC which is about $9.4m. It certainly seems quite high.

Comparative valuations with VirCurEx based on total trade volumes

Happily, we do have something to compare it to. A competing cryptocoin exchange, VirCurEx, is quoted on the virtual securities exchange CryptoStocks under ticket VCX. CryptoStocks is a very illiquid exchange and there have been rumors of the operators (VirCurEx themselves) being scammers. However, let’s assume for the moment that the current highest bid price of 0.0950 BTC/share is a realistic valuation; someone has put up >40 BTC to place the buy order after all, and at the time of writing that was the value of the last trade. This would give VCX a market capitalisation of 2,727 BTC, or roughly $340k.

Next we need to compare the relative sizes of the exchanges. According to, my favorite cryptocoin information site, VirCurEx’s total volume in the last 24 hours was 576 BTC. By contrast, mcxNOW’s total volume was 468 BTC (excluding trades in mcxFEEs themselves). Recently mcxNOW’s volumes have been much higher; over 1,000 BTC, so let’s assume that the exchanges have roughly equal volumes.

In a comparison with VirCurEx mcxFEE should be worth about 0.027 BTC/share; less than 5% of current valuations. However, mcxNOW is innovative and growing fast which counts for something.

Additionally, as mentioned CryptoStocks is a tiny, illiquid and possibly dodgy exchange, and VCX has suspisciously not seen any dividends since April. Let’s wind the clock back and look at VCX in June; then it was trading at around 0.3 BTC/share so a market cap of 8,610 BTC (~$1.1m).

mcxNOW does have other another source of trades too which is not included on; mcxFEE trades themselves. There are fees only on the BTC side of mcxFEE transactions, and based on the visible order book between  28 Sep 16:23:09 and 28 Sep 18:46:35 (~2.5 hours) there were 58.9 BTC-worth of trades. Let’s be generous and assume that is typical for a 24 hour period (although peak time it is a Saturday which are more quiet so not wholly unreasonable), that’s 565 BTC/day.

In other words, mcxFEE trades could currently account for roughly half of mcxNOW’s volumes and based on that its total volumes are about twice that of VirCurEx. However, we can only count half of the mcxFEE transactions so to adjust let’s assume 1.5x VirCurEx’s volumes. By that metric mcxFEEs and generously using the June VCX valuations, mcxFEEs should be worth around 0.13 BTC/share; 17% of current prices.

User numbers

Another metric we have for mcxNOW is total number of accounts. That has been growing swiftly lately and recently passed 10,000. Other exchanges don’t share this information so we can’t use it for a comparative analysis, but as a sanity check it helps us. By the current valuations it would place a value of $9,000 on each user. This again seems rather high, even when accounting for potential future growth.

For example, I would expect that one could acquire each of those customers through marketing activities for much less than 10% of that value. The remaining $8m would then be vastly more than adequate to replicate the current site’s functionality (indeed I estimate it would be only 1-3 months effort for a dedicated team of three software developers).

Valuations based on P/E ratios

A final approach, since business valuations are all about price/earnings ratios, what is mcxNOW’s total revenue? Let’s be generous and assume 1,000 BTC volume per day of normal currency pairs (I have seen it at this level recently) and another 600 BTC/day of mcxFEEs, of which half attract fees. The total trading revenue would therefore be:

( ( 1,000 x 0.4 ) + ( 600 x 0.2 ) ) / 100 = 5.2 BTC/day

There is another “but” however; Real Solid’s ingenuity is relentless and he recently introduced paid bans. If you don’t like someone in the trollbox you can pay to silence them at a rate of 0.01 BTC per 5 minutes. My last feeshare for having 10 mcxFEE was 0 .000195 BTC. If we base it solely on the above it should have been just 0.00013 BTC. Multiplied up, this difference suggests that paybans are bringing in an additional 2.6 BTC/day.

This brings our estimate of mcxNOW’s total daily revenues to 7.8 BTC/day, or 237 BTC/month (~$30k/month).

At its height last week (things change fast in crypto-land, and it is now closing down), shares in Litecoin Global, and BTC Trading Company, a pair of formerly-leading virtual security exchanges (ticker LTC-GLOBAL), were trading at 400 LTC/share (~$960 @ $2.4/LTC). The monthly dividend paid on 5th September was 2.05 LTC (~$4.90/share). Annualised that gives us a P/E ratio of 16 (in other words, the yield on an investment in LTC-GLOBAL was 1/16 or 6.3%). That is a huge P/E ratio for crypto-space, bested only by CIPHERMINE in recent weeks. ;)

Crypto-securities’ P/E ratios are generally much lower due to the ultra-high risk nature of the investments, as demonstrated by Litecoin Global’s abrupt closure this week. However, let’s run with LTC-GLOBAL’s ratio for now; like that security mcxNOW has demonstrated strong growth recently and RealSolid has a loyal following, not dissimlar to Burnside’s (LTC-GLOBAL’s operator) before recent events. He also has an outstanding track record of innovation, the next being MicroCash (but that’s separate to mcxNOW itself).

mcxNOW’s estimated 7.8 BTC/day revenues annualised is 2,850 BTC (~$356k). Let’s assume costs of $1k/month hosting, $3k/month DDoS protection and $2.5k/month for a full-time administrator; $6.5k total. mcxNOW also advertises on some sites including Clark Moody’s. Let’s assume another $3.5k/month for advertising; $10k total. Annualised that’s $120k, leaving profits of ~$240k (~1,920 BTC).  If we apply LTC-GLOBAL’s P/E ratio that brings us to 30,720 BTC (~$3.8m). This would make each mcxFEE worth 0.31 BTC/share; 41% of current prices.


Despite assertions to the contrary in mcxNOW’s trollbox earlier this week, I think my previous calculations were wrong and have now concluded that mcxFEEs are significantly overpriced. I have cashed out at 0.8BTC/share (I’ve used 0.75 BTC/share in the calculations though).

However, I do think mcxNOW has great potential. If RealSolid were to implement fiat pairs (ie. BTC/USD, LTC/USD etc) this could significantly increase the value of the exchange. This would especially be the case since it resides in a thus-far crypto-friendly jurisdiction (Australia). There is a great shortage of fiat-to-crypto exchanges; Mt. Gox is near-impossible to get fiat in and out of and BitStamp is apparently problematic for US bank account holders, though personally I do not understand why.

The product itself, ie. the Web site / trading platform, is superior to all others in my opinion. Unlike Cryptsy, whose USP is the huge range of supported coins, mcxNOW has a carefully considered cryptocoin selection which I see as a strength. The closest competitor to mcxNOW is BTC-E; they are quite similar in many ways, except that mcxNOW has several unique advantages:

  • Clean, simple design
  • Ultra-fast site thanks to C++ implementation
  • Interest on deposits
  • No limits on withdrawals

The only thing missing is the aforementioned fiat currency handling. With that mcxNOW could easily overtake BTC-E as the alt-coin trading site of choice.

This does not change my assessment that the mcxFEEs are overvalued however. For one thing they are not shares, even in the virtual security sense, so convey no rights and the terms could be changed at any time. Also while RealSolid is doing great works this remains an ultra-high risk investment. Finally, any potential future gain is more than accounted for in the generous P/E multiple. To get the sort of valuations currently seen I would expect the following:

  • A real shareholder contract so mcxFEEs convey voting rights.
  • A clause in the contract to the effect that in the event of real-world a sale or floatation of the business mcxFEE holders get their proportional share of the proceed or shares.
  •  Bring MicroCash into the fold (though arguably he is since mcxNOW might be the only MicroCash exchange).

Sadly RealSolid seems quite unwilling to do anything on the first two; he is vehemently against anything which might result in regulation. Personally I think he’s got it wrong anyway. Most jurisdictions are finding that cryptocoins are fiat so he’ll likely come under the cosh anyway.

I might put a few some cash back into mcxFEE if the price settles down a little; it is an exciting and interesting virtual security. RealSolid is certainly a very gifted and innovative individual. However, there is controversy in his history (ref) and, as with most crypto-land investments, there is no guarantee he won’t vanish with the cash. His fan posse would argue that the lack of a limit on withdrawals shows trustworthiness, but that too could be a rouse to engender trust and encourage further deposits (he could do a running instantaneously). Ultimately you need to make up your own minds and remember crypto-security rule #1: Do Not Invest More Than You Can Afford To Lose! ;)


The Rise Of BitCoins (info graphic)

Posted by Katie Olver on August 20th, 2013

Internet Marketing Agency, @Phcreative have put together this fab infographic charting the theories of where Bitcoins originated and the various peaks and troughs the currency has been through. They have credited our MD, Kate Craig-Wood’a articles as providing an invaluable resource in helping them put together this infographic,

See more at:[infographic].aspx#sthash.1dXtjldf.dpuf


Smidge.Com invests in Ciphermine

Posted by Katie Olver on August 12th, 2013

Smidge.Com has announced that it has invested 2,500 shares of its own stock of “Smidge.Com A” in CipherMine, a virtual company currently listed on LTC Global, specializing in cryptocoin mining and high-performance computing. The deal was agreed upon in the first week after launch of “Smidge.Com A”, a new fund that aims to become the largest digital currency fund by market capitalization.

Kate Craig-Wood, CEO of CipherMine, said, “I am excited to have some of our shares being included in this fund. Virtual crypto-securities are the next frontier of cipherspace financial innovation. As a busy individual with my various enterprises I am looking forward to being able to take advantage of the growth potential in this marketplace without the effort by investing in the fund.”

Alex “Smidge” Metz, CEO of Smidge.Com, describes the move as “a long term investment into a promising company led by professionals in the space”.

The two companies decided not to disclose financial details of the deal. The share swap will be completed during the week of July 22nd, 2013.

Smidge.Com A ( is a virtual, actively managed, multi-asset digital currency fund announced on July 21st, 2013 by Smidge.Com. The fund is currently pre-IPO, offering direct shares to individuals and companies before going public. It aims to become the largest BTC investment fund by market capitalization.

Litecoins v Bitcoins?

Posted by Katie Olver on July 16th, 2013

Litecoin is colloquially known as the silver to Bitcoin’s gold, and a prominent emerging crypto-currency alternative. There are different opinions on the security aspects of Litecoin, compared to Bitcoin. Some say it is more secure, while some have a totally opposite view. Here is what Kate Craig-Wood, founder of CipherMine thinks.

Why are Litecoins safer?

Bitcoins (BTC_ are mined (discovered) by performing lots of SHA256 (a common password hashing function). Litecoins (LTC) are mined using an algorithm called scrypt, and it was deliberately designed to be more difficult to mine, including with custom hardware. Litecoin/scrypt mining requires a lot of RAM thanks to it “proof of work” system, whereas Bitcoins/SHA256 lends itself to processing with low-RAM, very cheap application specific integrated circuits (ASICs) which are now coming on the market. To mine Litecoins you currently need to buy expensive, high-performance Graphics processors costing at least 200 EUR each. Two ASICs can do the equivalent amount of SHA256 mining as one GPU and cost just 6 EUR each.

This means that bitcoin is susceptible to what’s called “51% attacks”. If one party is able to mine more than 50% of the new blocks the they can perform an attack where they dupe the system resulting in “orphaned blocked” which appear to have value but do not. ASICminer, the first cryptocurrency-quoted mining company (on BTC Trading Co) already has about 30% of total network hashrate, demonstrating this vulnerability.

In the early days of Litecoin it was vulnerable to a 51% attack also, however today the network hashrate is ~30 Gigahashes/sec (as an aside, 1 scrypt Megahash/s ~= 1 SHA256 Gigahash/s in terms of mining rate). A typical scrypt-mining GPU costing EUR 200 would do about 0.6 MH/sec, so to get 50% of the network hashrate (30 GHs – you’d need to double it) you would need to spend around EUR 10 million. It is generally considered that this renders it unattractive given the relatively small size of the total litecoin market (about EUR 40m). By contrast, to purchase enough ASICs to double the current network hashrate for BTC would only need to spend about EUR 3.5m. The current value of the BTC market is around 750m EUR.

There are other reasons why Litecoins are more secure, beyond their resilience to cheap, high-performance ASICs. Thanks to its architecture even the transactions are more secure, with it being posible to have very high confidence in a transaction’s authenticity after about 20 minutes, versus 60 minutes with bitcoin. There is more information here:

Can you buy Bitcoin on the LTC Exchange? Or do they have separate exchange?

Do not conflate cryptocurrency exchanges (such as Mt Gox, BTC-E and Cryptsy) with cryptocurrency-quoted securities exchanges (such as BTC Trading Co and Litecoin Global. In the case of the former you can buy and sell cryptocoin and fiat currencies. Mt Gox’s markets are only between fiat (USD, EUR, GBP etc) and BTC. BTC-E offers markets between USD/BTC, EUR/BTC, EUR/LTC, and a bunch of alt-coins paired with BTC. Cryptsy does not handle any fiat at this stage so most of its market are against BTC with some LTC markets – their niche is the long-tail of alt-cryptocurrencies (over 30 there at last count).

BTC Trading Co does not allow you to buy or sell currencies (fiat or crypto), it merely allows you to buy and sell shares in virtual securities (company stocks, bonds, etc) quoted in BTC. The volumes there are nonetheless impressive, and the star is the aforementioned ASICminer with volumes in the 2,000-5,000 BTC/day (EUR 100k – EUR 0.5m/day) – indeed they are who we at CipherMine are trying to emulate and ultimately beat. Litecoin Global is run by the same guys as BTC Trading Co and it uses the same software, except that the securities there are quoted in LTC.

What is the Bitcoin exchange?

Mt. Gox. However, they are having problems since it is not practical to get money out in a meaningful timescale. BTC-E is number two, and last time I checked was doing about 30-40% of the volumes seen on Gox – they have the advantage of more diverse markets (most people don’t care about having BTC vs their local fiat since BTC/USD is sufficient thanks to the comparably very slow rate of change in fiat exchange rates)

If Litecoin is 2.76 per Dollar does this work the same with BitCoin?

No. They are separate cryptocurrencies with their own exchange rates (see above). BTC is currently USD $77 each on my favourite UK exchange, BitStamp (I like them because you can move lots of real money in and out quickly, unlike Gox). However, historically LTC’s value has risen and fallen in proportion to BTC, with BTC clearly being the “master” cryptocoin. What is exciting about recent events is that LTC’s value has been moving independently from BTC for the first time.

How many Litecoins can you mine v Bitcoins?

There can only ever be a maximum of 21 million Bitcoins, and 84 million Litecoins. It is because of this larger number than Litecoin is often billed as “silver” compared to Bitcoin’s “gold”.

How is Litecoins different?

Litecoin is that the blocks (chunks of data containing coins – what the miners are looking for) are found on average every 2.5 minutes, 4 times faster than BTC (which is also sort-of why there can be 4x as many).

This means that Litecoins have a faster first comfirmation. If I send you some LTC you know I have done so within 2.5 minutes whereas with BTC it can take up to 10 minutes. They still need the same number of confirmations (usual 6) to validate the transaction however.

It is also mined differently, as described above. Its main distinguishing feature though is that it costs a lot less than BTC at the moment (~EUR 2 vs ~EUR 60). The question is, for how much longer.

About CipherMine

Posted by Kate Craig-Wood on July 12th, 2013

CipherMine is a virtual company founded by Kate Craig-Wood in partnership with Giles, a hardware specialist, Ross and Simon from Memset Ltd, and Jan, a DevOps specialist. This is an excerpt from the full, latest version of the business plan which is available at

CipherMine is listed on the LTC Global virtual cryptocurrencies stock exchange. You can view the CIPHERMINE security here. If you’re interested in buying shares, first please read the business plan in full, including the warning! Then, you’ll need some LiteCoins, which this post explains and a LTC Global account.

1. Executive summary

CipherMine is a virtual cryptocoin mining business. All shares are listed on on the LTC Global exchange.

1.1 Goals

  1. To provide a vehicle through which Litecoin (ŁTC) can be invested in mining cryptocoins.
  2. To give shareholders a high, reliable, long-term return on investment via regular dividends and equity growth.
  3. To aggressively invest in ASIC mining hardware to maximise early-mover advantage.
  4. To promote ŁTC and the LTC Global exchange as a good alternate to Bitcoin (฿TC) and associated crypto-exchanges by being successful, and in doing so encourage a growth in value of ŁTC similar to ฿TC’s.
  5. To operate in a sustainable and environmentally-friendly manner.

1.2 Strategy summary

CipherMine is already in operation, at present mining scrypt cryptocoins with a combination of heavily discounted CPU resources and GPU rigs, and SHA256 cryptocoins with FPGAs. Although our models and discussion herein focus on ฿TC and ŁTC, we apply mining clusters to whichever coins are most profitable (see 5.1.8). We have an aggressive strategy of hardware re-investment and have recently issued new shares to fund the purchase of BitFury ASIC hardware.

We have chosen LTC- Global since there is currently a dearth of mining companies on that exchange and because we believe that by being successful we can encourage ŁTC and LTC Global to become a main stream cryptocurrency and exchange with similar value explosions to that witnessed with ฿TC and shares on the ฿TC Trading Co exchange.

We shall invest 50% of profits back into hardware, as well as a 3-year straight-line amortisation / depreciation of existing hardware, and pay our 50% of profits as dividends. We have a detailed business model and forecast (available on request), the dividend forecast from which is shown in the figure 1.

Most importantly, we assume that ฿TC mining productivity will decrease significantly due to difficulty increasing, and have based our difficulty forecast on the last three months trend. We also assume a fixed price for both ฿TC (€60) and ŁTC (€2). Should they appreciate, as we hope, then our profitability will rise significantly. We shall be accounting in Euros, not cryptocoins, though dividends will be in ŁTC.

EDIT: Since launch, difficulty has gone up faster than expected, but cryptocoin values have increased by an order of magnitude, more than compensating. We are a little behind these original forecasts due to late shipments, but that too plays to our advantage thanks to our purchase of HashFast’s Miner Protection Programme.

1.3 Key strengths / differentiators and assets

  1. An outstanding, publicly visible principal with a wealth of technical and business expertise, backed up by a superb team of professionals with demonstrable experience.
  2. A carefully considered, detailed and realistic business plan and model showing the growth potential.
  3. 3,250 Avalon SHA256/฿TC-mining ASICs on order (~900 GH/sec, delivery late July – mid August).
  4. 4, soon to be 6 or 7, 400 GH/s SHA256 BitFury mining rigs (delivery October)
  5. 100 SHA256/฿TC-mining FPGAs deployed (~20 GH/sec)
  6. 3 quintuple-AMD 7950 GPU scrypt/ŁTC mining rigs deployed (~9 MH/sec), 3 on order (~18 MH/s total).
  7. Cluster of 60 VMs ŁTC mining with Memset’s spare compute (expandable).
  8. We have the following arrangements with Memset Ltd:
    1. Use of their ultra-efficient, high-security (to British government standards) data centre for which CipherMine will only be charged power at cost (and there is a lot of spare space).
    2. Use of the spare compute in their virtual machine estate with a minimal at-cost charge.
    3. The expectation that they will purchase end of life GPU rigs from CipherMine for use in their GPU cloud.
  9. A proprietary, scalable software suite for the automation of mining workers as well as auto-selection of best value cryptocoin to mine and automatic conversion of alternate cryptocoins into ŁTC (CipherMiner).

EDIT: We now have 4 TH/s of BitFuries hashing away, 2 KNC’s at 0.8 TH/s, and two Avalons at ~0.15 TH/s complimenting the above. We have another ~10 TH/s on order from HashFast and CoinTerra.