Ether Capital Corp

OTC:DTSRF

Earnings Call Transcript 2022-Q4

[Ashley Stanhope, Director, Communications]

Okay. Hey, everyone. Thanks so much for joining us today. My name is Ashley Stanhope. I'm the Director of Communications for Ether Capital and I'm joined by our CEO, Brian Mosoff; and President and CFO, Ian McPherson. We're here to talk about our 2022 year-end financials and we’re also going to touch on the big Ethereum upgrade that's set to take place next week, Shanghai, and what this means for invest and businesses alike.

We're going to try to keep the presentation to 30 minutes and we'll have a brief Q&A at the very end to answer any questions, you may have. If you don't – if we unfortunately don't get to your questions, feel free to email me at [e-mail], and I'll be happy to respond to you.

And the last thing I mentioned, we're not here to provide any investment advice. We're just here to strictly talk about our business, and we'll be recording the session as well and publishing it to our YouTube channel later on.

And with that, I will kick things off or hand things over to Brian to kick things off.

[Brian Mosoff, Chief Executive Officer]

Thanks Ashley for the introduction. Hello, everyone. Good afternoon. I'm Brian Mosoff, CEO of Ether Capital. I'm very happy to chat with everyone today with some updates. Do you want to go to the next slide, Ashley? Yeah. Perfect. So, I'm just very high level color. I'm assuming most people know hopefully all this information, but just for recap, we're one of the biggest Ethereum believers and holders in the capital markets.

We have over 45,000 ETH. A large portion of that we have staked, which is generating a yield. It's a relatively new activity. Hopefully, most people are familiar with staking. It's really exciting. And our revenue was basically equal to our operating expenses in 2022, which is a first for us. And we are, of course, a public company listed on the NEO under the ticker ETHC.

Next slide. So, we have a three-pronged strategy. And again, this is just very high level. The stuffs also on our website. You know, we very much believe in Ether. It's a strategic asset for us, so we want to be a net accumulator of ETH.

We believe that the future for Ethereum and that ecosystem is very bright. So, we want to always be a net accumulator of ETH. We want to use that ETH in a productive way through staking and other activities to generate yields. And then we want to take a portion of that yield to build out new operating businesses, monetize our IP, our networks, things that we're seeing that the ecosystem is going to need.

So, rather than, you know, I think that historically, the market has seen us as someone who's just holding ETH, kind of close to a closed fund and we over time believe that that's not the best thing for us. We want to be an operating business and we think that it may take us some time to get there, but there are products and services for us to build to generate that revenue.

We're going to do a bit of a financial recap, so I'm going to turn it over to Ian for a little bit, and then I'll come back to talk about market commentary and color. Ian?

[Ian McPherson, President and Chief Financial Officer]

Thank you, Brian. We released our financial results on late Friday, and here are just some of the highlights that you can read on the screen. Our revenue increased nearly 150%. We have a new source of revenue that is significant, and I'll talk about that later on. And interestingly, our operating expenses were just slightly above the revenue. Our net loss per share from an accounting perspective does take into account the change in price of Ether throughout the year, so it was a net loss.

Our digital assets decline in value materially as you can see there, last year, it was $210 million and year-end was 73. We still have cash in the bank, no debt. And our shareholders' equity is about 76 million.

Next slide. The dominant factor in our financial results that drives so many things is the price of Ether and last year was not a good year. It was down 65%, December 31 to December 31, although it has rebound here. And on the right, you can see, although the price at year-end in Canadian dollar terms is 1,620, we're over $2,500 today. So that's an increase over 50%.

Next slide. What we really want to do is start to emphasize our operational aspects and what our revenue is as compared to an ETF. So, there's two sources there. I'm going to drill down into both of them briefly. But the staking revenue is on our treasury Ether and the percentage change is so massive. We're staking for less than a month last year.

So, next page. The staking revenue we have by quarter, sort of shares with you, how much we were staking of our 45,000 ETH over the period. Brian will talk about why we did not stake more later on. And the yields varied by quarter, on our staking awards. But overall, the year, we earned 5.13% for staking on that staked ETH and earned $2.5 million.

Next slide. The other source of revenue that we've had now for this was a second full-year of it, is that one of our affiliates is purpose investments. It has one of the largest portfolios of crypto ETFs in Canada, in fact, in the world. And we earned a share of the management fee. Last year, that was about $1.2 million, slightly down from 1.4 and we think that's a bit of a win given the decline in cryptocurrency prices over the year.

Next slide. Operating expenses went up materially. Brian will discuss our transition from a more passive hold and stake company into an operating business. And we invested in hiring new people. We went from three people to 10. So, the salaries and benefits increased materially. But it's also important to note in addition to that, in our expenses of 3.9 million, 800,000 is an accounting estimate of the value of cash or share based options, which is non-cash.

So, really, we're investing in the people and systems to both internalize some of the things that we're outsourcing and to generate external revenue and profits.

Next page. So, this is the accounting summary for the year. Want to highlight the one in yellow. In 2021, our revenue was about $0.5 million more than our operating expenses. We're in the right trends in 2022. It's just $173,000 and our net income per share last year was $0.05 versus a loss of $1.73 this year. But the financial results of net income loss after other comprehensive income, $128 million is totally a reflection of the mark-to-market difference in our digital assets.

Next page. Now, one of the things that we announced in our results is the necessity to restate our, what we call, our comparative 2021 financials. And I'll explain what it is. Wasn't a re-audit of the whole set of financials. There was only one item that was missing due to IFRS last year. There's no cash impact and that really was to put under the balance sheet an estimate of what the deferred tax expense or liability would be.

We began doing that in Q2 last year, but hadn't done it for the full 2021 financial year. So, we did that and it's only going to happen if we triggered the capital gains, these deferred income taxes. So, it's somewhat theoretical. We have no intention to sell our Ether and trigger those capital gains. And I think that's an important thing. These tax expenses vary nearly every day.

Next page. So, what is our asset values? We have a comparison there. Our Ether went from 204 million down to 73. Although that has rebounded today, it would be closer to 115 million, a big rebound in the price. We had a non-core portfolio investment called wire-based in San Francisco.

We wrote that off. There's more detail in our AIF and financial statements. So, we thought it would be interesting for everyone to understand, what's the book value for tax of our assets? And so, it's about $59.8 million in 2022 at year-end. We had unrealized capital gains of 13.1. We have no intention to trigger those capital gains. And so we’ve put forth a deferred tax liability of $2 million for that, but we have tax loss carry forwards over $20 million. On a net basis, we have no deferred tax liability at year-end.

Next page. This is what our balance sheet looks like. It's really clean. We have no debt. No debt last year, no debt this year. The only thing that was legacy last year we had to restate is, the deferred tax liability of $15.6 million. We don't have that tax liability this year. And our shareowners equity, as you can see, was down 63%, largely due to the decline in the Ether price.

Next page. One of the key sources of revenue is the yield that we have on our treasury Ether, the Staked Ether. And a big difference, compared to the previous year’s development, there's now two categories or components to the Ether Rewards. It's paid in Ether. Historic source was called Consensus Layer Rewards, and we gave it the blanket term Ether Staked Rewards. But post merge, one of the upgrades on September 15 last year, we got incremental fees, which are now called Execution Layer Rewards.

These were fees that were paid in the mining, proof of work mining that the stakers now get. As a result, our yield in 2022 was 5.13%, and we've shown here in the, sort of light blue table, we now have increased our staked ETH from 20,500 to 36,000 as of the end of last quarter out of our 45,000 ETH. So, we're about 79% staked and one thing I will say is, the year to date, our yield was about 5.6% in the Q1.

Next page. I'm going to turn it over to Brian.

[Brian Mosoff, Chief Executive Officer]

Thanks, Ian, and also thanks for the questions that are coming into the Q&A. Some of that will be covered, but anyone also feel free to post any additional questions you have down into the Q&A, and we'll get to it either in the presentation or at the end.

So, some high level comments, you know, and I might actually frame a lot of this towards our stock to help provide some color there. So, people are asking about, I think it was Bill who commented or asked, you know, the state of what's happening in the U.S. with regulators and does that affect Ether Capital?

And for those who don't know, one of the big exchanges called Kraken was told to shut down their staking operations. Coinbase received the Wells notice. Some of that was to do with their staking operations. A lot of it has to do with disclosure when facing retail investors. We don't face retail direct. We're not taking in people's Ether. We're not staking it on their behalf.

So those are not issues that we are seeing at the present time. I can also say that in conversations with the regulators in Canada, it's a far friendlier set of conversations that the platforms are having. I think there is a path – well there is a path towards registration in Canada for the crypto-trading platforms.

So, it's much better environment to operate in. How Ether Capital will build businesses out facing some U.S. customers may change. This is, of course, an ongoing situation, but it is much better to operate up here currently. I'm not going to say too much about the stable coin stuff that was going on recently with Silicon Valley Bank and USDC, one of the biggest stable coins in the industry. But certainly, there's a lot of eyes from government and regulators in the U.S. on what the future of this industry is going to look like. And us not running an exchange or facing retail, I think, is going to work to our advantage.

How has crypto evolved over the last quarter? One of the things when we think about the discount to NAV is a lot of the sentiment in the market, both from institutions either their sentiment or just ability to buy our stock. There's a lot of pens down that happened in the post FTX world, my suspicion is that they will want to come back to the asset class and participate.

They'll look for access points. Whether that's in the near term or a year or two away, I don't know. But if you look at trade volume for our stocks, certainly, there is a high correlation to just overall market sentiment very different in 2021 during that big bull market to what happened throughout the course of 2022. Sentiment did start shifting around, I suppose, spring with the fall of a number of players in the industry before FTX, there was Voyager, Three Arrows Capital, BlockFi, other high profile players.

That does impact our stock even though we have no relationship with those businesses. It does just affect overall sentiment and people wanting crypto exposure. Trouble in traditional finance actually might be a good thing. We've seen a rebound in prices of bitcoin and Ether a lot since the collapse of Silicon Valley Bank about 40% plus for both Bitcoin and ETH. And so maybe that is the catalyst for people shifting their attention back to the asset class and realizing that, you know, it didn't die and go away and that, again, they should have a piece of their portfolio exposed to this asset class.

And then as Ethereum continues to assert its dominance. For anyone who's been on our webinars before, you know that I'm a big ETHBowl, you know, that the company's DNA is rooted in our belief in Ethereum specifically over, you know, Bitcoin or other smart contract platforms.

If we go to the next slide, you'll be able to see – I referenced this a fair amount. This is on the right, a screenshot of a website called CryptoFees.info. And you can see that Ethereum is one of, not one of, it is the biggest daily collector of fees. People are paying to use this network more than any other block chain in existence. This has remained true for the last number of years, and it points back towards our conviction of why we want to hold a large amount of ETH on our treasury.

Some investors have asked over the last couple of years would we diversify? Would we buy some other smart contract platforms? And we remain convinced that Ethereum is the thing that you want to hold. And we're starting to see that other competing layer 1 blockchains, other smart contract platforms are now starting to lose out in terms of fees against layer 2.

So, layer 2's for anyone who doesn't know are, I don't want to say sister networks to Ethereum, but they work in tandem with one another. And maybe they offer slightly cheaper transaction fees, maybe they're faster to transact on, but they're part of the Ethereum ecosystem and we're seeing in the middle, I guess it's just below the middle, things like optimism and just above that as arbitrage.

Those are layer 2's and those point back towards an Ethereum future, an Ethereum ecosystem future. And what might this signal? What are the opportunities for Ether Capital or why are we thinking about this so much?

Well, there's going to be staking, which we already have today, but there's going to be an evolution in staking, an opportunity to those who have large ETH on their treasury in their treasuries to likely use that in more strategic ways. There's things being spoken about now called re-staking, where perhaps you're able to earn additional yield than just your ETH security staking.

Maybe you can use something else to use that as security for some of the other layer 2s or other blockchains or applications. So, those are things that aren't opportunities today, but there are things that Ether Capital is very well-positioned to take advantage of in the near future, and we're very excited about.

Next slide. So, the Shanghai upgrade in its implications. So, what is this? Well, for those who don't know, Ethereum transition from proof-of-work to proof-of-stake, we got rid of the equipment and electricity need to secure Ethereum. There was an event called The Merge, back in, I suppose, September of last year where now all of the activity is being secured through proof of stake.

So that's great from an electricity standpoint. It means people like Ether Capital can use their balance sheet to generate a yield, but there was one caveat, which is that you weren't able to get liquidity on that ETH if you needed to. It was permanently locked until some later point in time. This upgrade to unlock that liquidity is referred to as the Shanghai Upgrade, and it's around the corner. It's expected to happen within the next couple weeks.

It could be delayed further. No one knows for sure, but it is expected to happen very soon. And that's really exciting. Because it means that people who do need liquidity on that ETH will be able to get it. It means ETH is sitting on the sidelines, not sure if that upgrade will overtake place or if it'll be successful or if there'll be a bug, you know, during these big network upgrades. Can see that it did take place, you know, proficiently and everything went smooth, the same as the transition from proof-of-work to proof-of-stake during that event called The Merge.

A lot of people were watching and wondering, is something going to go wrong? Will there be a glitch? It is pretty intense every time you see these network upgrades happen, but I'm sure that it'll be smooth. I hope it'll be smooth. And that's important because I think it continues to give people confidence that Ethereum again is – it the premier smart contract platform.

The development team is able to deliver these updates. And those who are doubting if it's going to be an Ethereum future, saying maybe it'll be another smart contract platform. This is just one less thing for them to point to once this update does happen. It also means that idle ETH on the sidelines may be able to stake. They'll feel more comfortable staking when they know that they'll be able to get that liquidity if they want. And so that could be an opportunity for institutions to feel more comfortable getting exposure to the asset class.

The network will be more mature. These major milestones and upgrades will have happened. So, that's also a very good thing. You know, what will this mean for Ether Capital’s shareholders? It means that we're able to again get liquidity on that ETH. We said we have 36,000 ETH currently staked. I would love to see us get to a point where we're staking, you know, 90% plus of our treasury, but we need to make sure that we would get liquidity if we ever needed to. For those who have been following our story for years, we went public in, I guess, the spring of 2018 when the price of ETH was [USD$687, USD$700] [ph]. And at times it was as low as a $100.

So it's, of course have always been a very volatile asset class. And so having liquidity on our balance sheet is very important. So, when we can stake and unstake, that means we'll be able to generate more yields. There are, of course, potential risks with this update. I already mentioned some of them. Something goes wrong, maybe it gets further delayed and we don't get that liquidity as soon as we had hoped. We'll see what happens over the he coming weeks. And I already talked about the last point.

Next slide. So, new business update. We launched a beta version of this dashboard. And the genesis of this product for those who don't get our newsletter, monitoring your validator performance and doing the financial reporting is something that is not yet mature in the ecosystem. It's not easy to do. It's a bit of a Black Box when you stake some of the staking providers will offer some financial reports every month.

They don't really show you what's happening daily. And the future that we see coming, especially in a post FTX world is, you're going to need diversification. If people are going to stake at scale institutions, big structured products. You shouldn't just have one provider, one custodian, one staking provider, and hope for the best. And we want to enable the future where people are able to have multiple validators, multiple service providers, monitor it in one place, and deal with the financial reporting.

And this is the first product that we put out there to the community to give us feedback, to tell us what features we're going to need. The first feature is we implement the ones we wanted internally to do our own reports and our own monitoring. But we think that this is going to be an important tool for the ecosystem. And it also tells the market and everyone on this call that as we said before, we want to play at that infrastructure and base layer of the protocol level.

We're not looking to build businesses around the Metaverse or Defi or NFTs. Doesn't mean maybe one day we wouldn't consider it. But we think that our [real house] [ph] is really about core infrastructure for other institutions, large treasury holders like us. You know, what kind of things are they going to need? And what do you think you can charge for? This is not the final product. This is not what we thought, you know, the business is just forever going to be.

This is the beginning of something. This is the beginning of reorienting ourselves from just being an asset holder to one who has technical in-house capabilities to build these types of products. So, that's really exciting.

Next slide. So, we had a question in the comments from Clark asking about the discounts to NAV. I spoke about it a little bit. And of course, we do think that, you know, or we recognize that it is frustrating. Our discount has been there now for I suppose about two years to varying degrees and it has widened in the last number of months.

We share in the frustration, so I want to make sure I make that clear that we are aware that it exists. It is as frustrating to us as it is to our shareholders. We do think it is going to take some time to completely eliminate. I'd like to see it at close as best it can over the coming months and hopefully market sentiment will shift some of that. But the last big piece to close that, either back to NAV or to a premium, is going to be about doing more than just holding ETH and staking it.

It is going to require building these businesses out over the next year and showing that we are an operating business enabled to deliver on those. So, the investors or the right investors for us are ones who are long-term believers in Ethereum. The ones who understand that there's an opportunity here to build-out some of these types of business lines for people who want daily liquidity at NAV, you know, there are other products in the market that may be more appropriate for those investors. But we really believe that long-term, Ether Capital has a very strong value proposition and the right team to deliver on that.

Next slide? Here's a slide that just does that comparison to what Ether Capital is versus other structured products in the market. We've talked about the discount. The ETFs currently are not able to stake. It's also unclear if when they will be able to stake what percentage of their treasury, the regulators will feel comfortable with.

So, it doesn't mean that forever that can be our only value proposition. It's just something to keep in mind over the coming months or perhaps year or two. That's something unique to us being structured as a corporation and being able to make our almost entire treasury productive, the ETFs, I don't think are going to be able to do that.

And, of course, There's no potential to launch any business lines inside of those ETFs. They have a fixed management fee. We don't. We do have an increase in our headcount. Ian mentioned that before, and it may increase a little bit further, but we are very sensitive to how aggressive we are hiring and how much we're spending relative to what our revenue is between our arrangement with purpose, as well as our staking yield. So, we are very aware of both those things.

Next slide. So, we've kind of highlighted, you know, where we're at on our journey. I think if we go back to even the beginning of Ether Capital, we believed on day one that Ethereum was the ecosystem we wanted to bet on. In the last year, we started to see meaningful revenue off that treasury, the ability to stake. And now it's about transitioning fully into the operating business.

Things that we actually did talk about in 2018 when I joined, I wasn't around for the company's formation, but I came on a few months later. And this is something that always was the goal. It was never just to hold a bunch of ETH and that was it. We always fantasized about investing in other businesses or building around internally. And as the market matured and we saw the valuations of what acquisitions would look like or investing in others, we believe that our capital and mindshare is best spent building internally.

So, I think last year was a big year for us and this year will continue to be even better as we're able to stake more. Getting more clarity on exactly the infrastructure. We think we're well positioned to build and what we're passionate about, seeing the opportunities in the eco system evolve around staking and core infrastructure at that custody, staking, reporting layer 4 institutions. And we still believe that long-term, we think that we are a better value proposition than an ETF, despite the frustrations we share with shareholders to date.

Ian, any other comments you want to add before I go to the Q&A?

[Ian McPherson, President and Chief Financial Officer]

No. None. Great, Brian.

[Brian Mosoff, Chief Executive Officer]

Okay. Thank you. So, I spoke to Clark's comment at the top about the discount. We appreciate the continued support. Thank you. Bill, I think we spoke about the clampdown from regulators on the industry. So, someone's asking here about new job positions, how they contribute to new businesses?

Our blend right now is, kind of 50% or 60% tech. People who are on that side, who are involved directly in building out the technical products that we want to launch. And then we have a product manager, and then a few people who are on the, you know, between myself, Ian, our COO, a few people focused on outward facing business development and communications.

So, we're still a relatively small team, especially in tech or in the industry, many teams are in the 20 to multiple hundreds of people, but we need to balance out how aggressively we hire with what we're burning. So, as I mentioned before, you know, we are sensitive to that ratio and we need to be respectful of what risks we're taking because there is a great opportunity around just making our treasury productive, and that's it. But we think that there's more we can do.

So, we'll hire slowly over time. We probably will hire more tech members in the future. And that's exciting for us. We have not made our Ethereum addresses public, although I think that there are ways people have found our addresses online and people are welcome to do that. Of course, the Ethereum blockchain is a public ledger that anyone can view.

So, people have found clever ways to find our addresses, but we don't put it on our website. And just for some color on that if anyone wonders why, there have been times in the past where, let's say, we needed to move something to an exchange. We are changing wallets. We were upgrading wallets. And we don't want people to be spooked out in the market if all of a sudden they see our balance drastically go up or down because we were upgrading, you know, migrating from one address to another because we're going to use a different smart contract for ETH balance. That's why we've decided not to do that.

It's not really for any other reason. It's mainly because we want to make sure that what we're disclosing is accurate. How do you protect the state ETH in your [holding] [ph] from a security perspective?

Our ETH does not rely on a third-party custodian. We run a, what's called, a multi-signature wallet, meaning that there's multiple directors in management required to sign-off on any transaction. So, if anyone was planning to come over to my house, buy me a nice dinner and say, why don't you just send me some of the Ether? I’d love to do that. But, unfortunately, that's not possible because it does require a sign-off from multiple independent members on our board, as well as management to move any of that ETH.

We do monitor our staked position. We've disclosed before that we have partnered with a company called Figment who are currently running our validators, as well as one validator being run by another service provider, and in the future, perhaps we'll use other providers or internal. Don't know. We'll see what happens. But we have this software now specifically to monitor their performance to look to see if they missed blocks, missed attestations, make sure we're on top of what's happening beyond just what they're reporting to us.

Doesn't mean that it's perfect. You know, this space is someone who's been around for a decade now. I've learned that there's all sorts of things that you just never see coming that that happen is all sorts of black swans that are unfortunate, but we're doing the best we can and of course believe that we're taking the gold standard approach in the industry, and that's where we want to play. We want to be the leading experts in staking at scale for institutions.

Elliot's question, if institutions want exposure to ETH, wouldn't they just buy an ETF?

Absolutely, that is possible. It really depends on, I suppose, the time horizon of what they wanted their position to look like. If they believed in our management team in long-term value proposition. I think we have a compelling one. If they're looking for a short-term hold or just wanted to trade around the price of ETH, then perhaps an ETF as a structured product would be more appropriate for them. But we'd love to engage, of course, in any of those conversations and make our case.

Do layer 2 networks add value to ETH or do you expect they will eventually become obsolete?

Really interesting question. We are seeing a lot of layer 2's launch and start to get a lot of asset activity on these networks. So again, for anyone who doesn't remember or follow this as closely, you have Ethereum as kind of a base layer and then you can port your asset onto what's called the layer 2. There's many of them out there. They have different value propositions. And the question is, if all this activity happens on this layer 2, why do we care about the base layer or do the layer 2's over time become obsolete?

It's really early on to see how this plays out. My suspicion is that the gold standard of security where you know the network will exist, that there will be security or the best security in the industry, that is still at the base layer. That is still on the Ethereum, you know, protocol, not on these layer twos. If I were to consider, you know, even personally moving some ETH somewhere, would I want to do that for a long-term hold on a layer 2 or the base layer?

I'd probably prefer it on the base layer because I know that the base layer will be there. I don't know how things will shape up over time. And we've also seen issues with bridges. The ability to port between 1 and 2. So, this is an ongoing situation. I'm happy if you'd like to set up a separate discussion and kind of get into the [indiscernible]. Very happy to discuss that.

The next question is, isn't that a good outcome you will be able to repurchase shares at a discount create more value?

I suppose what we're talking about here is an NCIB, which we have done in the past. You know, our view is that we can do it. It's not something that we would rule out. We haven't communicated anything to the market at this point. If we plan to or not. It's something certainly on the table, but it does erode a lot of the cash that we have if we wanted to use some of our Ether or Staked Ether Rewards, we would have to sell that, take on, you know, the tax gain or gain or loss, deal with some of the accounting, and use that in something that may or may not, you know, help build our business long-term.

There's arguments for and against this, something that is certainly not lost on us. But it's something we continue to debate back and forth. And again, long-term, our plan isn't just to be an ETH holder in the capital markets that trade around NAV, we want to trade at a premium. And the only way to get there is going to be through re-orienting our shareholder base from an asset manager towards an operating business with meaningful revenue.

The next question, kind of is the same, you know, sell Ether payout cash to shareholders. We have no plans to pay a dividend at this point. Perhaps one day in the future, but right now, our efforts are all set on operating businesses and generating meaningful revenue beyond just that we've taken in from our consulting arrangement with purpose. And some of that will come through more staking, and then some of it will be through some of the products that we have in the pipe.

Next question. Which layer 2 [Technical Difficulty] most excited about? Are there any underlying verticals you believe, see an uptick?

Already talked about, you know, I follow Defi the NFTs and the Metaverse, so probably less of the NFTs and the Metaverse lately. Not that we're not excited about them. Don't know which ones will pop. My view is that Defy has a lot of regulatory risk that needs to be sorted out over the coming 6 to 24 months. And there's better ways to get yield. Almost all the Defi lending protocols right now are not paying out much more you can get on just [USP] [ph], and they carry different risks not just regulatory, but smart contracts.

So, we'll see what happens there. Specific layer 2s that are interesting to us, can't really comment, you know, we have a board member who's behind optimism. So, I follow that closely and excited about what will come there. But I don't – to be very candid, I don't spend a huge amount of my day reading through the white papers of these layer 2s, but very exciting to see the ecosystem evolve.

Bill's apologizing. No problem. Do we think things will move towards the Bitcoin network?

Before I answer this, by the way, we'll say thank you for everyone who's attended. If you have to hop off, not a problem, if you have any additional questions, please either email Ashley or myself, [e-mail]. It may take a few days to get back, but please feel free for any question not even related to our stock, but just the ecosystem. Happy to chat about that. So, and thanks for joining if anyone has to hop. But I will continue on with the Q&A and probably the most engaged I think we've ever had. So, that's nice to see.

So, Bill's question was about ordinals. Ordinals is an NFT project that launched on Bitcoin. And what he's asking here is, do we think that Ethereum is going to lose some of its value proposition now that you're able to do some of the really interesting activity on Bitcoin. My answer is no. The reason Ethereum basically came into existence is that Bitcoin at its base layer just is not flexible enough to do all this activity.

There's ways that you can get creative about how you create a transaction to try and include that in the Bitcoin blockchain. There's ways you can do side chains on Bitcoin. There's something called rootstock and stacks that enables smart contracts on Bitcoin, but they're not as native to the protocol. Doesn't mean that activity won't move over there or shape up. That's interesting. But right now, I just don't see the mind share leakage from the Ethereum community, so that I'm not alarmed at this point, but interesting to see that happening in the Bitcoin community.

So, the next question is about the price appreciation of ETH relative to our stock. Again, we're not an ETF, so we don't trade, you know, in-line with the price of ETH. There's been times where we've traded higher than the price appreciation in ETH. There was a period in late 2020 to the first few months of 2021 where we're actually trading at a large premium to our NAV. So again, you know, we're not going to track perfectly in-line with ETH.

We hope to do some of that over time with a closed discount and ultimately add some premium once we have more clarity provided to the market on what our revenue looks like from our operating businesses. And then, of course, as someone's pointing out in the comments here, we do have added costs.

We're adding new employees. And so, yes, as we add to our headcount, our burn does go up, so we are sensitive to that and have to be careful how quickly we hire staff. And unfortunately, you know, someone’s saying here, [patience] [ph] running thin. Again, we share in the frustration, but we're not going to be a company or a ticker that trades at NAV daily anytime in the future.

So, for those who want daily liquidity at NAV, they'd have to consider why hold our stock. We hope and believe that there are reasons too, but that's up to the individual investor.

Last comment, question at the very bottom here. How many weekly active users do you have on the dashboard right now? When do you expect to generate revenue from one of your services? The market needs more insight on timing and the size of the potential.

Yeah. No problem. So, the number of beta testers we haven't disclosed, it's sub a hundred, but the feedback has been very valuable because it's given us intel on the type of customers who need this product. And we've had beta testers everything from a solo staker running one validator to solo stakers who run hundreds of validators, as well as institutions people who look closer to either capital who are trying to figure out how they're going to monitor either a third party service provider or validators that they're running in house.

We've not charged for the product yet. That's part of what we're assessing out right now, what the most appropriate strategy should be on charging for that product. We do think that it needs to evolve a little bit further, but we're not far off from that and hope to share some more soon.

So, with that, I'm going to close my Q&A box and thank everyone for joining us today. Again, if you have any further questions, please feel free to email me, [e-mail] or Ian or Ashley. I believe our emails also are on the website or you can find us on LinkedIn, and thank you everyone for joining and hope you have a good rest of the afternoon. Bye everyone.