Moonlite is an initial coin offering (ICO) that’s getting a lot of attention at the start of 2018 and so we set our team the task of reviewing the company’s white paper in an attempt to offer our readers some insight into exactly what the company is trying to achieve.
Here’s what we found.
Introduction and background
First, then, let’s kick things off with a bit of background and an introduction to the Moonlite project.
Here’s the company’s opening blurb:
“The MoonLite Project will operate in the Crypto-Currency Mining space, and plans to begin by mining predominantly Bitcoin, Bitcoin Cash, DASH & Litecoin on an industrial scale. Operations are set to begin in August 2018, and aims to be in time, one of the larger global crypto-mining companies.”
From that intro, readers can glean that this one is a mining-type company and that, as a starting point, Moonlite intends to focus on the major coins – bitcoin, Litecoin, etc. We’ll get into this in a bit more detail shortly but it’s worth noting now that, as things stand, there don’t seem to be any plans in place to expand beyond these ‘major’ coins, at least for the foreseeable future.
That’s not necessarily a bad thing (indeed, many might see it as a strong positive) but it’s worth keeping in mind as we move forward through this review.
In terms of where things stand right now (and, again, this is something we’ll get into in more detail shortly), Moonlite is in the early development stages, working towards the launching of its first data center, or mining facility, at some point before the end of the third quarter of this year.
Ahead of its launch, Moonlite is seeking to raise both operational and development capital as part of the above mentioned ICO, with the ICO split into three distinct phases, with each phase unique based on differing levels of participation bonuses available in each.
So that’s a brief outline of where things stand, now let’s get into the nitty-gritty of exactly what Moonlite is trying to achieve.
The opportunity here is substantial. As the mainstream adoption of cryptocurrencies continues to advance, a few things are happening. One is that the price of the coins that are leading the bunch (and the ones that Moonlite is setting out to mine, primarily) is rising. Two is that the transaction rate is increasing, which translates to an increased load on the network of the coins in question.
When network load increases, things slow down and a coin can run into scalability issues.
The larger the network of miners, the lower the chance that scalability issues will affect the viability of a coin. To put this another way, the higher the level of hash power that’s dedicated to a network, the faster transactions get processed and the lower the fees associated with the transactions in question (more miners competing for fees should reduce the fees organically).
Right now, as many reading are likely already aware, the bigger coins are running into scalability issues. Bitcoin fees are high and transaction times are extended. There’s a large unmet need, then, for additional hash power in the market.
Moonlite is attempting to fill this need.
But that’s not all. The price of mining equipment coupled with the scale required to mine profitably means it’s unfeasible for many smaller operations. By raising the capital required to operate a very large scale mining operation, Moonlite is positioning itself to be one of the few bitcoin and other cryptocurrency mining operations that can mine profitably at current levels and current prices.
Some operational specifics
How is Moonlite looking to take advantage of this opportunity? We will discuss the company’s target hash power in the next section but it’s worth noting now that Moonlite will initially start mining bitcoin and Litecoin and, subsequently, expand to include Dash in the fold.
The company is locating its data center in Iceland which, right off the bat, seems like a sensible choice. The climate in Iceland is congenial setting up a data center such as that which Moonlite intends to build, primarily because the air temperature means that the company won’t have to spend substantial amounts of capital on cooling equipment. This also serves to reduce the potential for overheating (even without cooling equipment), which is one of the primary reasons for equipment failure in this side of the tech space.
Iceland is also a strong choice from a talent pool perspective. The nation has a 100% literacy rate and is strong educationally. This means that Moonlite shouldn’t have any major issues in its search for a team to monitor and operate the center once it’s operational.
Sticking with the operational team for a moment, it will break down as illustrated below:
Moonlite addresses its HR efforts in the white paper, outlining the fact that the data center teams have not been placed yet, and there are currently 3 candidates for the operations management post. These teams will be assembled closer to the launch date, and as and when needed. Additionally, each new team member will go through thorough company induction and training courses prior to being placed in operations.
In terms of equipment, Moonlite aims to secure a combination of the following:
- Bit Fury B8 Mining Server – 47 TH/s
- Bitmain Antminer S9 – 14TH/s
- Bitmain Antminer D3 – 15GH/s
- Bitmain Antminer L3+ – 504MH/s
- Pinidea DR100 – 19GH/s
There’s not too much to say about this from a review perspective other than the company has chosen industry-leading equipment.
Further, the equipment will remain on the company balance sheet (free of finance) as a hedge against project failure as the vast majority of investment capital will be used in the purchase of mining equipment.
For us, this is a very important point and serves to mitigate the risk associated with picking up an exposure to this company by way of its ICO considerably.
This is a relatively short review section but it’s well worth touching on before continuing. Moonlite intends to break the cryptocurrency that its mining operations produce into three distinct portions, each of which will be allocated and treated differently to the other.
Specifically, the company is going to break down its mining revenues as follows:
- The company will liquidate 60% of its newly mined currency into fiat currency. This will be used for the payment of running costs to vendors who do not accept bitcoin as a payment method.
- 20% of mined currency will be retained and will be ring-fenced for the purchase of additional equipment to expand the operation.
- 20% of mined currency will be stored in the cold wallets and held as an investment in cryptocurrencies, and actively traded by our team of dedicated crypto traders.
For us, this is a sensible breakdown. Crypto enthusiasts would likely argue that more than 20% should be retained as crypto investments but given that this is, right now, a very volatile market, a limited long term cold-holding looks smart.
The 60% fiat conversion again might seem high to some but it’s necessary while the vast majority of the company’s costs will only accept fiat. If this changes longer term (i.e. employees or suppliers are happy to accept crypto as opposed to fiat), there’s a good chance we’ll see the 60% reduce.
In order to validate this statement and, in turn, to assess the viability of the Moonlite’s operational strategy, we’ve got to look at whether the company’s planned operations can meet the scale required to mine profitably. So, take a look at the chart below, pulled directly from the Moonlite whitepaper:
As illustrated, Moonlite’s operational strategy is split into three distinct phases.
The first will see the company start mining just bitcoin and Litecoin, dedications 28,000 Ths ad 504,000 Mhs to the former and the latter respectively.
Right off the bat, this is some substantial processing power.
As Moonlite’s flagship operation moves into phase 2, the company will add Dash to the mix, with 15,000 Ghs hash power, while simultaneously upping its bitcoin power to 56,000 Ths and maintaining 504,000 Mhs on the Litecoin side of the equation.
When the final phase comes into force, phase 3, and the mining operation scales up to full capacity, Moonlite expects to be dedicating 120,000 Ths, 30,000 Ghs and a little over 1 million Mhs to bitcoin, Dash and Litecoin mining respectively.
This will position the company as one of the leading bitcoin and other cryptocurrency miners in the world.
And there are a few key addendum points worth noting here, as relates to the ongoing and long-term viability of the project.
First, Moonlite expects that equipment will be sold and replaced periodically to prevent a decrease in income due to increased mining difficulty levels. Second, the company points out that cash reserves may be used to supplement the above figures. Finally, a focus on more stable currencies (both price and difficulty) might mean that resources are diverted away from one coin and towards another at certain points.
As far as the viability of the company’s planned operations is concerned, then, we think things are pretty solid.
When we look at a company’s roadmap, we primarily look for two things.
First, a degree of strategic and operational aggression. That is, we like to see a company push itself to achieve its goals quickly.
However, and second, at the same time, we also want to make sure that these aggressive goals are realistic. It’s not good putting forward a super aggressive roadmap if you can’t perform it.
Here’s the Moonlite roadmap:
For us, this is a perfect mix of aggression and achievability. The company has a solid operational strategy and a strong team driving it forward, so a reasonable aggression is warranted. However, at the same time, it’s clear Moonlite understands the limitations associated with setting up a capital-intensive operation like a large scale mining center and, on the back of this realization, the company has avoided the temptation to overpromise on its efforts.
So Moonlite looks to have a solid operational strategy in place and, assuming the company can raise the capital it’s looking for, we see no reason why it won’t have its data center up and running by its August 2018 target date.
There remains the question, however, what’s in this for investors? To put that another way, why should anyone buy tokens in the ongoing ICO?
Take a look at the image below:
The image details the company’s planned profit distribution (so, what it’s going to do with the mining income once costs have been removed from the equation.
Team bonus, expansion, and provisions are all relatively self-explanatory. It’s the Share Buy Back portion that we’re most interested in here.
As the image outlines, 35% of profits will be allocated towards a share buyback program. What this means is that the company will take 35% of the profits it generates and use the money to buy its own tokens on the open market.
Once these tokens have been purchased, Moonlite then intends to burn them, meaning it will remove them from circulation.
And it’s in this removal that the incentive to take part exists.
As the total circulating supply of tokens decreases, the individual value of each of the tokens should increase. This is based on both supply and demand economics as well as the concept of each remaining token representing a larger portion of the overall company valuation than it did ahead of the token burning.
Not only is there value in holding in anticipation of a long-term increase in value as the company grows, then, but there’s also an incentive to hold based on the price increase that should be driven solely by the frequent token burns.
We are firmly of the belief that any ICO is only as good as the team that’s behind it. An idea can be incredible on paper but if the men and woman steering the ship aren’t the right people for the job, it will likely never get off the ground.
Which is why our team think what they’ve seen from the team behind this one is highly indicative of future success.
Founder and CEO is Eric Krige. Krige is a successful entrepreneur and experienced Chief Executive Officer, with 10 years’ worth of experience in growing and directing companies in a variety of industries towards their commercial goals.
Advisors include Shahar Namer, founder of The ICO Rocket and co-founder of a London based Venture Capital Fund together with the former CEO & Chairman of Warner Music International.
Also in an advisory role is Simon Cocking, a Senior Editor at Irish Tech News, Editor in Chief at CryptoCoinNews, and freelancer for Sunday Business Post, Irish Times, Southern Star, IBM, G+D, and other publications. ICO success is often about exposure (outside of having a great project, of course) and to have a guy on board with the sort of media connections that Cocking has is a real plus point in our eyes.
Finally, Sean Kirtz is also an advisor. Kirtz is a fintech solution architect and a recognized entrepreneur who has played a part in a number of successful ICOs over the past twelve months. His proven track record serves to strengthen this one as an ICO prospect considerably.
The Bottom Line
So let’s bring this all together – what’s our final take on Moonlite, its ICO and its prospects going forward?
In short, we think that this is a strong portfolio choice. There’s a large unmet need in this space right now and Moonlite has put together a strong team with a clear and aggressive (but achievable) strategy that we feel can more than meet this need.
There’s a clear path to value increase for the tokens that early investors receive, which is something that’s often lacking in the ICO space, and this, for us, justifies an exposure.
Readers can check out the white paper here.
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and/or its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency.
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