Crypto Opinion

Bitmain Expansion: Multi Billion IPO on the Horizon

Cryptomining giant Bitmain is about to go public in what could be one of the biggest Initial Public Offerrings ever.

The company is filing for an IPO in September with a valuation possibly reaching as high as $18 billion and running at a market cap of $40 – $50 billion.

The IPO will be underwritten by ABC Capital Management and listed on the Hong Kong Stock Exchange in Q4 2018 or Q1 2019. Bitmain already closed a $1 billion pre-IPO financing round led by China International Capital Corporation on July 23 at a $15 billion valuation, double that of Coinbase’s $8 billion valuation.

The Pre ICO round also saw invesments from groups like Tencent Holdings, Ltd., Softbank Group, China National Gold Group and an unnamed sovereign wealth fund managing $15 billion in assets with a minimum investment of $5 million per group.

Prior to this, Sequoia Capital China led Bitmain’s $50 million Series A and $400 million Series B rounds. Sequoia Capital is a VC firm which got in early on ventures like Google and Apple, taking Binance to court over an alleged breach of contract earlier this year.

There are some major players lining up to provide the funding ready for Bitmain’s expansion into the public domain, and the IPO is set to be so big that it could even take the top spot from Facebook as the biggest IPO in the history of the world.

What then?


Bitmain founder and CEO Jihan Wu spoke with Bloomberg in June describing a massive AI expansion as well as providing some information on what the company has been earning so far.

Wu said Bitmain booked $2.5 billion of revenue last year and that he and co-founder Micree Zhan together own about 60 percent of the business. While Bitmain has few direct comparables, applying a multiple similar to that of publicly traded chipmakers such as Nvidia Corp. and MediaTek Inc. would give the company a valuation of about $8.8 billion. That would make the co-founders’ holdings worth a combined $5.3 billion, according to the Bloomberg Billionaires Index.

Wu said that an IPO had advantages like allowing early investors such as Sequoia and IDG Capital to cash out.

While it’s too soon to say just how big Bitmain’s IPO will be, one of their main competitors (Canaan Inc) filed for a Hong Kong IPO slated for a $1 billion funding, and in 2017 Bitmain’s revenue was 12 times greater than Canaan’s.

The interview also points to the nature of Bimain’s plans:

“Both companies design custom chips known as application-specific integrated circuits, or ASICs. These are particularly good for the brute-force number crunching required by cryptocurrency miners, who verify virtual currency transactions and earn crypto-denominated rewards by solving complex math problems. ASICs are also useful for the heavy workloads associated with some forms of AI, such as machine learning.”

Wu has stated that AI will be a big part of their business going forward. In October, Bitmain began selling early prototypes of its Sophon BM1680. The ASIC chip, which is sold as part of a $600 accelerator card that you attach to a computer, is designed expressly to speed up machine learning.

Although it doesn’t do everything that high-end graphics cards made by the likes of Nvidia and Advanced Micro Devices Inc. do, it’s more powerful for some kinds of deep learning, and much cheaper. “We are just trying to do something that they cannot take care of well enough,” says Wu, who estimates that as much as 40 percent of Bitmain’s revenue will come from AI chips within five years.

Bitmain already released an AI chip called Sophon 3 months after a competing product from Google already launched – however, Google does not have a foothold in China which gives Bitmain a competetive home advantage.

How Much Could Bitmain Make?

It’s too soon to say – CoinDesk sensationally claimed that the IPO would be worth $18 billion while Bloomberg have published a more conservative $3 billion figure. Whatever the precise figure is, the cryptomining giant stands to make a lot of money enabling it to break into the AI market in an even bigger way. If it’s successful, that is.

Blockstream CSO Samson Mow took to Twitter to point out that valuations of around $14 billion were based off of net profit projects for 2018 in excess of $1.8 billion, stating his belief that the company was unlikely to clear that much profit due to the heavy losses sustained in Q2 and Q3 for miners everywhere, which leads in to the next question on whether the IPO can be pulled off.

Here’s the thing – just because the company is worth a lot of money doesn’t mean the IPO will take off and shares will sell like hot cakes.

Investors are wary of cryptocurrency and related companies at the moment with Bitcoin and co tumbling over 75% in value since January. Institutional investors simply aren’t used to dealing with that kind of volatility when it comes to billion dollar investments.

“I don’t think people will be too interested,” said Alex Wong, Hong Kong-based director of asset management at Ample Capital Ltd., in reference to share sales by crypto mining companies. “When the demand for Bitcoin diminishes, their revenue can drop very fast.”

However, if anyone can pull it off it’s Jihan Wu.

Say what you want about the guy, but he’s tenacious – despite only entering the crypto space in 2011, he has created a multi billion dollar company, totally dominated the global ASIC mining market and become a self made billionare in the space a few years.

The company was founded in 2013, with Wu favouring mining over forming an exchange because it came with less legal risks, something that turned out to be a pretty wise move.

In a way, the IPO may prove to be something of a tippping point for the cryptocurrency space as a whole – if Wu can convince institutional investors to support his company even in a bear market, the world will begin to see cryptocurrency as an increasingly legitimized area.

However, if the company fails to go public because no-one wants to touch crypto at the moment, the market could lose confidence and that could lead to an even worse decline than we’re seeing now. We’ll have to wait until September to see how it turns out.

The study further explored the development of blockchain technology in the country and found it to be in its earlier stages.

Remember folks, Crypto is comin!

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The most controversial figure in Bitcoin – Jihan Wu

Who is Jihan Wu?

You may know Wu as the founder of Bitmain, or as the person who translated Bitcoin inventor Satoshi Nakomoto’s white paper into Chinese, or as “that guy with the weird, offensive tweets on social media”. You may not even know him at all, but for better or worse, he’s a key figure of influence in the cryptosphere.

After becoming enamoured with Bitcoin and blockchain technology (as have we all), Wu pitched the idea of using ASIC chips for Bitcoin mining. ASIC = Application Specific Integrated Circuit, chips for a specific as opposed to a general purpose. This completely revolutionized crypto mining as miners moved away from CPUs and GPUs made for gaming, editing, and broader applications and began to use custom-made chips specifically designed for mining crypto.

Wu founded Bitmain, the company behind a lot of the Bitcoin mining hardware used by professional mining pools today, and owns brands like Antminer, Hashnest, and Antpool, one of the largest Bitcoin mining pools. Antpool mines over 16% of all Bitcoin blocks, allowing it to wield a huge amount of influence in term of community consensus and decision making.

Wu reached further fame and some notoriety as well by supporting a number of controversial projects. He’s closely connected to Bitcoin Cash and a vocal advocate of Bitcoin Unlimited, a potential solution to Bitcoin’s scalability problem.

What problem? Bitcoin blocks are limited to 1MB of data each. As more and more miners enter the game, that data restriction leads to network congestion and slows things down. Mining a block only yields 1MB of Bitcoin, which (as all digital currencies) is essentially made of data.

Yeah… about data and stuff…

Not everyone in the space understands the basics, and that’s OK! We’re here to learn, and everybody starts somewhere. So, super quick data breakdown for the uninitiated: Digital information is binary, meaning it’s measured in ones and zeroes. Think of them as little lights that can either be on or off, like LED bulbs on a screen.

Let’s say you have 100 bulbs, and they’re all off, or set to “zero”. If want to convey a message or image (like a smiley face!) you switch on some bulbs, set to “one”. The bulbs being either on or off make a pattern, and that pattern is information. The smallest piece of binary information is a bit – Bitcoin! 8 bits is one byte, and 1 megabyte is 1 million bytes, or 8 million bits, 8 million ones and zeros.


Well, OK then. So there are two options for scalability (allowing Bitcoin network to scale up in terms of size and input/output, accommodating for the increased amount of users).


Option 1: SegWit, or Segregated Witnessing. This has been in the news a lot lately recently and seems to be achieving widespread adoption – 30% of the network is using it, major exchanges are adopting it, and transaction fees are dropping as a result. With SegWit, data is compressed and the block size is increased to about 1.8 MB, allowing the network run more smoothly. Blocks of this size are needed for Lightning Network compatibility – if you haven’t heard of the Lightning Network, it’s a system that will operate on top of the Bitcoin network and allow most of the network processes take place in a “side chain”.

Imagine a queue of people lining up to fill out a form in order to buy something. The Lightning Network essentially proposes two queues – one for filling out the form, and one for making the transaction. Most processes will be handled outside of the Bitcoin blockchain (in the Lightning Network), and only the actual transaction itself will be on chain, which decongests the network.

A major benefit of SegWit for many people is that it’s backwards compatible – that means using SegWit doesn’t require splitting Bitcoin into another currency, like Bitcoin Cash. This is appealing for a number of reasons, a major one simply being brand awareness.

One of the reasons Bitcoin is more valuable than Bitcoin Cash is simply because it’s Bitcoin, the first major cryptocurrency. People recognise the name, and other coins can sound “off brand” in comparison. SegWit allows the network to update without becoming something else and forcing people to pick between the new system and the old.

Bitcoin Unlimited

Then we have the second option, Bitcoin Unlimited. This project aims to remove the 1MB limit and allow miners to opt for bigger blocks if they want to, which should enable smoother transaction processes and decongest the network significantly. Sounds good, right?

Here’s the catch. There’s a good chance that Bitcoin Unlimited could cause a hard fork in the currency (again), splitting off to create its own new coin. This divides the community and is generally perceived as something to be avoided if possible. People against BU also believe that miners being allowed to choose bigger blocks over smaller ones will squeeze out the smaller independent miners with fewer resources at their disposal to tackle larger blocks, much like big business coming to town and shutting down all the family-owned corner stores.

This would probably put even more power into the hands of mining pools and result in even more centralization of what was supposed to be a centralized currency, something that a lot of people already feel has gone way too far with Bitcoin.
Now, why would the man who controls a huge mining pool and the biggest crypto-ASIC manufacturing operation in the world want something like that?

Back to Jihan Wu

Why do I say things have gone too far? Well, Satoshi’s vision was one of a decentralized currency that empowered ordinary people to control their own finances, taking power away from banking conglomerates, world governments, and hedge funds. It never mentioned mining pools one way or another, but while it’s human nature to capitalize on opportunities, the concept certainly doesn’t sit well with the original plan.

Wu has attracted attention for his willingness to manipulate community consensus on the scaling problem through his hugely influential mining pool. He was even accused of trying to take down Bitcoin in an infamous (alleged) attack during which huge amounts of Bitcoin Cash mining resources were suddenly diverted to Bitcoin all at once, clogging up the network. Wu denied involvement, saying he had no desire to hurt Bitcoin Core (the current protocol). Of course, in the days preceding the Bitcoin Cash fork, which Wu did his utmost to help bring about, he’s also quoted as referring to Bitcoin Core as a “trap”, saying “don’t give core too much money”.

It’s not difficult to imagine why someone controlling the pools and the mining hardware would want something like Bitcoin Unlimited to come about, and it’s difficult to get behind something with such a seemingly nefarious agenda attached to it. Having said that, SegWit and Bitcoin Unlimited are more or less neck and neck when it comes to community consensus, which is how the decision will eventually be made, meaning that it could still go either way.

Wu’s controversy doesn’t end there. He’s been accused of and implicated in a number of other Bitcoin conspiracies, and whether there’s any truth to them or not, it’s made him something of a blockchain supervillain in the eyes of many.

Wu is clearly aware of his public perception however, and handles things smoothly when confronted.

Well. Relatively smoothly.