This text was up to date on Jan. 14 to incorporate latest developments.
On Jan. 10, news emerged that Chinese Bitcoin mining big Bitmain’s co-founders, Jihan Wu and Micree Zhan Ketuan, will step down as co-CEOs of the corporate. The transfer follows a streak of studies suggesting that Bitmain has been going through mass layoffs, class motion lawsuits and difficulties associated to its preliminary public providing (IPO) over the past quarter of 2018. So what precisely is going on with one of many world’s most influential crypto outfits?
Temporary introduction to Bitmain, the world’s strongest crypto mining big
Bitmain was founded in 2013 by Jihan Wu and Micree Zhan Ketuan. Previous to that, Wu was a non-public fairness fund supervisor who studied economics and psychology at Peking College, whereas Zhan, a graduate of the Chinese language Academy of Sciences, was attempting to lift funds for a startup that allowed customers to stream tv reveals to a pc display screen through a set-top field.
After discovering Bitcoin (BTC) in early 2011, Wu allegedly spent all his life financial savings to purchase the cryptocurrency. When the Bitcoin’s worth soared in 2013, he determined not solely to commerce the digital asset, however to create it as properly. Wu requested Zhan to hitch him, and collectively they started growing an ASIC chip that will mine BTC at most effectivity. In November 2013, Zhan, the duo’s technical mastermind, offered their first mining rig, the Antminer S1, and Bitmain’s gross sales took off.
Based on Wu, the corporate skilled a troublesome interval near the top of 2014, when the infamous Mt.Gox crash occurred and the entire crypto market collapsed. The scenario ultimately stabilized when BTC’s worth started climbing up once more the following yr. Consequently, when the 2017 crypto growth kicked in, the enterprise grew to become extraordinarily profitable.
Thus, Bitmain booked $2.5 billion of income in 2017 alone, as Wu told Bloomberg, whereas this yr turned out to be much more worthwhile: Based on the company’s prospectus, its income was set at $2.eight billion by the top of June 2018. Based on a unique report issued by funding analysis firm Bernstein, Bitmain made between $three billion and $four billion in working revenue in 2017 and allegedly outraced Nvidia, which made about $three billion throughout the identical interval.
In Might 2018, Bitmain announced its enlargement to the realm of synthetic intelligence (AI), the place it deliberate to compete in opposition to Nvidia, Intel and AMD utilizing its present chip designs to energy AI methods and software program. The plan was disclosed in opposition to the backdrop of increasing scrutiny regarding crypto mining operations in China. “As a China firm,” mentioned Wu, “we’ve got to be ready.” He added that Bitmain plans to start out incomes as a lot as 40 p.c of its income from AI chips inside 5 years.
Gross sales of Bitmain’s mining chips and circuits reportedly account for round 70 to 80 p.c of the entire market. As per the corporate’s LinkedIn page, Bitmain is at present headquartered in Beijing and employs round 2,500 individuals internationally. Nonetheless, it’s unclear whether or not this info is updated, contemplating the latest studies concerning job cuts.
Present state of affairs: Bear market-induced losses
As of January 2019, the 2 mining swimming pools operated by Bitmain, AntPool and BTC.com, contribute to almost 23 percent of the total hashing power of all the Bitcoin mining pool. Nonetheless, simply six months in the past, the corporate’s mining swimming pools represented 41 percent of the market share, which means that its share has been steadily declining. Certainly, the bear market has been taking its toll, and 2018 turned out to be a problematic yr for the mining big.
Based on a BitMEX Research report launched on Aug. 30, Bitmain offered a whole lot of its mining items at a loss all through 2018. The paper steered that it was a deliberate technique “to squeeze out [Bitmain’s] competitors by inflicting them to expertise decrease gross sales and due to this fact monetary difficulties”:
“This evaluation implies Bitmain are at present loss-making, with a adverse revenue margin of 11.6% for the primary S9 product and a margin of over adverse 100% on the L3 product. In actuality prices are prone to have declined so the scenario might not be as dangerous, nonetheless we predict it’s probably Bitmain are at present making important losses.”
As previously noted by Cointelegraph, on the time the BitMEX analysis was printed, the value of Bitcoin was hovering round $7,000, which was nonetheless above the breakeven value of mining. Subsequently, the demand was prone to be there, which might make the Bitmain’s worth battle justified. Nonetheless, when the full-blown bear market hit in November, and the value of Bitcoin fell beneath the breakeven cost of mining of $6,900, Bitmain ought to have began to expertise harsher monetary difficulties as a consequence of lesser demand for mining gadgets.
Bitmain workers cuts: From Israel division to CEO place
One of the evident indicators that Bitmain’s enterprise has taken a success are the reported layoffs. On Dec. 26, Hong Kong newspaper South China Morning Submit (SCMP) quoted Bitmain’s alleged assertion concerning inside job cuts. The announcement reportedly learn:
“Part of [building a sustainable business] is having to actually deal with issues which are core to that mission and never issues which are auxiliary. As we transfer into the brand new yr we’ll proceed to double down on hiring the perfect expertise from a various vary of backgrounds.”
As SCMP famous, the precise variety of layoffs had not been disclosed, however a spokesperson for the agency reportedly denied that Bitmain would lay off over half of its workers, a suggestion first circulated in Chinese language social media.
Beforehand, on Dec. 23, Blockstream’s chief safety officer, Samson Mow, stated that Bitmain fired its total workers of Bitcoin Money (BCH) builders, citing Chinese language social media. The builders had shaped Bitmain’s Copernicus staff and have been engaged on the corporate’s Bitcoin Money GO consumer. “Only one week discover. Some had simply joined the corporate,” Mow specified.
On Dec. 10, Israeli enterprise information outlet Globes reported that Bitmain was closing its native growth middle and firing its workers. Dubbed Bitmaintech Israel, it was based in 2016 to discover using blockchain, work on the Join BTC mining pool, and develop the infrastructure behind Bitmain’s AI venture titled “Sophon.” All 23 workers have been fired, together with Gadi Glikberg, head of the Israeli department in addition to Bitmain’s vice chairman of worldwide gross sales and advertising and marketing. Glikberg linked the layoffs to the crypto market collapse:
“The crypto market has undergone a shake-up prior to now few months, which has compelled Bitmain to look at its numerous actions across the globe and to refocus its enterprise in accordance with the present scenario.”
Bitmain’s austerity measures continued in 2019, suggesting that the corporate is certainly off to a nasty begin this yr. On Jan. 10, Texas Public Radio announced that the Chinese language firm had suspended its operations in Rockdale, Texas. The agency was going to construct a $500 million blockchain knowledge middle and mining facility within the state as a part of its enlargement into the US market.
Initially, as per the publication, Steve Younger, a Milam County decide, issued a statement reporting that each one Bitmain workers however two engineers and the director of human relations had been fired, and all operations had been halted.
Younger was then allegedly approached by the Chinese language firm’s representatives, who informed him that Bitmain will scale down the operation moderately than shut it down fully, now working with solely 5 workers as a substitute of 15. Whereas Bitmain reportedly declined to touch upon the problem for Texas Public Radio, the article cites their alleged assertion shared with Younger:
“The best-sized staff at Rockdale now has the experience to re-start the venture at small scale anytime. Bitmain want to ramp up the location at a slower tempo and scale primarily based on market situations.”
Then, on Jan. 14, Bitmain announced it was closing yet one more workplace, lowering its abroad operations even additional. The mining big shared an announcement, the place it cited its long-term scalable enterprise technique as a main motive to close down its operation within the Netherlands.
“As we construct a long-term, sustainable and scalable enterprise, we’re making changes to our workers and operations. This contains the choice to shut our Amsterdam and Israel places of work. […] We’re actually specializing in issues which are core to our mission and never issues which are auxiliary.”
Lastly, in keeping with a collection of yet-to-be-finally-confirmed studies, adjustments occurred even on the senior stage of the mining big. Thus, on Jan. 10, SCMP wrote that each Bitmain’s co-founders, Jihan Wu and Micree Zhan Ketuan, will stop their posts as co-CEOs, however nonetheless steer the corporate’s essential choices. Citing “individuals accustomed to the matter,” the media outlet mentioned Bitmain’s director of product engineering, Wang Haichao, would probably take over as CEO at an unspecified future date, whereas he has allegedly already taken over a few of the duo’s former duties. In accordance to the September IPO filing, Wu and Zhan management 21 and 37 p.c of the enterprise respectively.
Bitmain IPO plans develop into uncertain as properly
In June 2018, media started to report that Jihan Wu was planning to conduct an abroad IPO in a market with United States greenback denominated shares — like Hong Kong — as it might permit early backers to money in funds. An IPO is a extra conventional and regulatory-friendly means for a corporation to hunt investments from a broader viewers within the public market, which Cointelegraph has covered in depth before.
Later in July, a analysis unit for crypto trade BitMEX analyzed alleged leaked knowledge on Bitmain’s potential IPO and acknowledged that the mining big had carried out a pre-IPO spherical that reportedly raised round $14 billion, main them to consider that it may increase a minimum of $20 billion on the IPO stage.
Nonetheless, as Cointelegraph reported earlier, there had been a whole lot of rumors and uncertainty round Bitmain’s upcoming IPO. In December, they have been reignited by Hong Kong-based newspaper SCMP, which reported that the Hong Kong Inventory Alternate (HKEX) is reluctant to permit Bitmain to conduct an providing within the metropolis.
Based on the publication’s nameless sources, the regulator thinks it’s “untimely for any cryptocurrency buying and selling platform – or enterprise related to the business – to lift funds by means of an IPO in Hong Kong earlier than the right regulatory framework is in place.” In consequence, SCMP suggests present situations “might be an insurmountable hurdle” for Bitmain and different cryptocurrency corporations planning to launch an IPO. Equally, in November, HKEX lapsed the IPO utility of Canaan, Bitmain’s competitors on the mining market, which additionally was going to carry an providing there. Now, the corporate is trying to move its IPO plans to New York.
Apparently, only a day previous to the SCMP article, the HKEX told Cointelegraph that any studies concerning hesitation on the a part of Bitmain have been “rumors,” suggesting that negotiations between the regulator and the mining big have been in progress.
The mining big is going through two class motion lawsuits on high of different issues
Along with workers cuts and different issues, Bitmain appears to be going through no less than two class motion lawsuits. The primary one was filed by Los Angeles County resident Gor Gevorkyan, who allegedly bought their gadgets, together with its S9 Antminer machine, in January 2018. Based on the filing submitted to the North District Courtroom of California in November, the product was “troublesome to configure” and lapsed throughout a “substantial period of time.” Gevorkyan claims that earlier than he may absolutely initialize the gadgets, they operated at cost-intensive “full energy mode” at his expense. The plaintiff is in search of damages in extra of $5 million on behalf of all miners “equally located” as Bitmain purchasers.
The newer lawsuit was initiated by UnitedCorp, a growth and administration agency with a deal with telecommunications and data applied sciences. On Dec. 6, it reported suing Bitmain together with Bitcoin.com, Roger Ver and the Kraken trade, which reportedly deliberate a scheme to take management of the Bitcoin Money (BCH) community through the November hard fork.