Hey everyone, I’m Jeremy Szafron. Welcome to Investor Scene. Now, we have a very, very exciting show today because we have a guest involved in the crypto space. It’s a company that is making some really, really crazy headway in terms of getting involved in this space. That company of course, is called Tokens.com. It trades on the NEO exchange under C-O-I-N or COIN, as well as the OTC under Smurf, S-M-U-R-F. And the CEO of that company, Andrew Kiguel, joining us now. Andrew, thanks for being with us.
– Thank you, Jeremy.
– Now, I didn’t really get into your background on the intro. But I want to transition a little bit because you’re not new to this space. You were involved, and in fact, you’re the co-founder of one of the largest miners in the world that was publicly traded. Let’s talk a little bit about your background here and how it relates to Tokens.
– Yeah, so I was an investment banker for 20 plus years. And back in 2017, I saw that there was a need to get public market investors access to things in crypto, specifically Bitcoin. And so it was at that time that myself and some other people decided to co-found a company called Hut 8. And that included some people like Bill Tai and Mike Novogratz from Galaxy Digital, who I had helped finance his company buyer prior to that. And they came on board and joined the board as well.
And the whole point of Hut 8 was a Bitcoin miner that held all of its Bitcoin. The benefit of that is that was the way for investors to get exposure to Bitcoin. Remember, this is back in 2017 before the Grayscale’s, the ETFs, and the funds. And so Hut 8 was really the first Bitcoin miner to hold its Bitcoin. And today, I think they have a close to a $2 billion market cap and have one of the largest holdings of Bitcoin in the world.
– Now, obviously, you learned a lot from that role. And here you are today. You have Tokens.com. It’s an incredible company.
And you’ve also figured out that it’s a tough entry point just for an average person to get involved. There was transferring here, there’s using this– what was the plan here? What was the problem with the industry that you wanted to fix with Tokens?
– Yeah. So back when I was the CEO of Hut 8, and I got calls every single week from people in the media and environmentalists, and they would say, “Andrew, we like crypto and Bitcoin, but the energy use in mining it is destroying the planet.” So that was one problem.
The other issue was is that you just had this incredibly high depreciation. So this energy use along with the hardware was really weighing on me. And I started doing research, and I came across something called crypto staking that does the exact same work as a crypto miner, but it does not use up any electricity, it does not use hardware. Instead, to crypto stake you have to buy the token.
And that’s when the light bulb went off, and I said, OK. Thought back to when we co-founded Hut 8 and said, “Here’s a way to get people exposure on the public markets to this.” I said, “There’s no way to get exposure to crypto staking in the public market. This is a company I need to start because it’s like the clean, environmentally-friendly alternative to crypto mining.” That is where the entire crypto community is going, and yet people are still just starting to learn from it.
– So Andrew, let’s talk a little bit about this staking. If it’s a new idea for somebody, elaborate on what it means as well as the fact that your company is revenue positive and you’re also reinvesting the compounded interest here. It’s a very unique idea.
– Yeah. So crypto mining, which is an area I’m very familiar with as running a large Bitcoin miner, is 12-year-old technology. And it’s got two big flaws. The one we talked about already is the environmental impact, but the second one is it doesn’t process many transactions per second, likely around 15 transactions per second, 15. So crypto staking or proof of stake was developed to improve upon the flaws of crypto mining.
The two flaws being the environmental energy use, that software. And the second is staking can process 100,000 transactions per second. So Jeremy, you may be like, why is that important? If you’ve heard of decentralized finance or DeFi, that is this new automation of financial services that’s taking place all over the world. And that requires extremely high transaction volumes per second.
And what’s happening is that this traditional system, not only is it sort of consuming a lot of energy and electricity, it just is too slow. It’s too slow. And so this new system solves those flaws. And that’s why when you hear about Solana, Polkadot, Cardano, NFTs, everything happened in DeFi. It’s all being built on staking. Staking technology is where Wall Street and Silicon Valley are putting their money.
– Well let’s talk about the revenue sources here. The company is doing quite well. It’s been an interesting crypto market, but that’s part of the security about holding this type of a position, as you guys are actually involved in it from a little bit of a different perspective. So let’s talk about the fact that it’s an easier way of holding crypto. Is being involved in a company like yours– what’s the idea behind that?
– Yeah. So we started putting together a cryptocurrency inventory last year and we continue to build upon it. And we use that inventory for staking which, means we’re constantly earning more tokens. So every single day, we receive more Ethereum, more DOT, more Binance coin. And then we take that and we redeploy it back into staking so that we’re continuing to earn more. So we’re constantly compounding.
The second piece of it is that the inventory continues to appreciate. So since the end of Q2, into this quarter, our inventory has already appreciated close to 70%. And that’s including the pullback we saw a little bit this week.
On top of that, that inventory is generating revenue for us of approximately on an annualized basis about 24% of what we’ve deployed. So we put out a press release today that we own about over 2,500 ETH 2.0 that we’re staking. We’re continuing to redeploy that.
We started staking it at around $1,000 and now it’s close to $3,500. Those huge leverage, that’s huge returns. And that’s why I always tell people the fact that we’re staking and on this inventory of crypto really makes us poised to high torque in a crypto bull market, which I think we’re going to get into right now.
– Yeah, I think we’re getting into it now as well. And it’s interesting because you talk about that. You have a 32%, roughly, insider ownership, so that’s a positive. And then on that side, Andrew, I wanted to go into the fact that about 10% of the company is owned by Canada’s largest tech fund. Explain that relationship and, obviously, why it’s such a benefit for a company, or sorry, for a fund like that to get involved.
– Yeah. So CI Signatures Technology Fund is the largest technology mutual fund in Canada. And when we were doing our raise back in March, they came to us and said, “Look, we really like crypto. We want to invest in DOT. DOT specifically is the crypto we like because it’s used to build things in DeFi.
“We’re not set up to do this from a tax perspective, from a security perspective. We’re not set up to buy crypto directly, but we can buy you. You provide us the liquidity.” And so they went to their compliance department and asked, “How much of a piece of Tokens.com can we buy?” And it had to be sort of 9.9%, which is what they own.
So that’s part of the problem that we solve for institutions, high net worth, family offices, and people that say, I don’t want to miss out on all the stuff happening in the crypto world, but it’s complicated. The taxes, the security, the strategy, we do that for you. We use our balance sheet and we invest directly into crypto. Thus, our shareholders get the benefit of that as crypto appreciates.
– Now, we can’t give away future-looking information, but a little bit of the lay of the land. Because in my perspective, this company is quite undervalued in comparison to the peers. So what is the next? It seems like you’re just getting started.
– Yeah. So we’re looking at a whole bunch of new verticals that we’ll do. Again, we will look to buy crypto that we can use to generate revenue. We are definitely undervalued relative to our peers. If you look at the crypto miners, keeping in mind, staking, we’re doing the same work as the crypto miners, but in an environmentally-friendly way and they’re trading at very large multiples with a lot of money going in.
We are sort of where the puck is going. We are the next generation of crypto technology. And so we’re getting the word out there. And I think as we get the word out there, we’ll see our volumes and our share price increase over time.
– Well, we’re excited to be a part of the story. I know as future updates come out, Andrew, we’ll have you on the show. Looking forward to that. Thanks for joining us.
Again, this company trades on the NEO Exchange under COIN. Pretty easy to remember, C-O-I-N. And on the OTC under Smurf, S-M-U-R-F. Andrew, thanks for joining us today.
– Thank you, Jeremy.