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The Quick Take
With one month left until another filing update with the Hong Kong Stock Exchange, Bitmain is going through a comprehensive business transformation in an attempt to preserve capital. In addition to the massive layoffs that we heard about in December which included the lay off of the entire Bitcoin Cash team, Bitmain has also initiated a joint mining business and is divesting its non-core AI businesses. One of the new business model includes a partnership with a mining farm under a company led by former co-CEO Micree Zhan.
Recently, it is reported that Zhan hurriedly deployed 100,000 mining units in Sichuan, China, the first two months before the arrival of the flood season around May, to purely mining Bitcoin. If it is fully loaded, 100,000 sets of mining machines will be equivalent to 1.33EH/s, which accounts for about 3% of Bitmain’s total network computing power, and is equivalent to the sum of Huobi mining pool power.
And as for Jihan Wu, the other co-founder of Bitmain, we’ve learned that he is looking to be join a blockchain company called Matrix with a number of employees from the former Bitmain Bitcoin Cash team.Read the entire article here
However, according to sources, this is probably a development that came out of Bitmain ’s “joint mining” strategy since the bear market last year.
It is worth noting that this is a huge deployment. It is reported that Zhan hurriedly deployed 100,000 mining units in the first two months before the arrival of the flood season, to purely mining Bitcoin. If it is fully loaded, 100,000 sets of mining machines will be equivalent to 1.33EH/s, which accounts for about 3% of Bitmain’s total network computing power, and is equivalent to the sum of Huobi mining pool power.
For the past six months, the cryptocurrency space has been in a downward trend, and most of the companies associated with it have endured poor financials. Three major miners such as Bitmain, Canaan, and Ebang International went to Hong Kong to apply for IPO last year, with a goal to expand financing channels. But as of now, the IPO applications of the latter two miners have expired, and the results of Bitmain are unpredictable.
At the end of last year, Odaily reported that Micree Zhan and Jihan had simultaneously resigned as CEO positions in Bitmain. Subsequently, Bitmain continued to decline along with Bitcoin prices, with large-scale demolition of its mines, layoffing 50% of its employees, and so on.
Bitmain official rarely reveals its true operating status, latest developments, etc., so it is difficult for the outside world to really understand what’s happening. But at this year’s annual company meeting, a photograph showed that Micree Zhan covering his face and weeping, and Jihan standing beside him comforting him. Perhaps, this image can show how complex and bitter the situation is for Bitmain.
On March 4th,
Bitmain’s 100,000 mining machines are in preparation for China’s flood season, with Micree Zhan taking over the responsibility
“Zhan came out to create a mining farm in Sichuan with 160,000 loads, 100,000 mining units.” A mining insider named Zhao Yiming (a pseudonym) revealed.
In the past two months, Bitmain has been demolishing, selling machines, and conducting mass layoffs. But on the other hand, the company is still on the move.
According to industry data, on November 22, 2018, a company named Hainan Continental Ark Data Technology Co., Ltd. (hereinafter referred to as “Ark”) was incorporated in Hainan, China, with a registered capital of 30 million RMB and a person named Wang Ming accounting for 100% of the ownership.
Two months later, Fujian Chuangke Technology Co., Ltd. (hereinafter referred to as “Fujian Chuangke”) joined and acquired 40% of Ark. Fujian Chuangke is a 100% shareholding company owned by
And joined by Fujian Chuangke also came
It is suggested that Ark is behind the mining farm in Sichuan referred by Zhao Yiming.
Zhao Yiming said that the cost of electricity for Bitmain domestically in China was generally really high. Recently, they finally found a way to get cheap electricity prices in Sichuan. The mines are to be deployed in Sichuan using hydropower, and it is expected to begin operations in May.
May is the peak flood period of Sichuan, the cost of electricity can be less than two cents RMB or $0.07. In recent years, every time after the Spring Festival/Chinese New Year, there are always a large number of mines chasing low electricity prices by moving to Sichuan.
Bitmain’s Joint Mining Model and Its Effort to Become Asset Light
So what does this new mining pool mean for Bitmain?
In December last year,
This is the way Bitmain is looking to get rid of its inventory, in order to preserve capital during crypto winter.
A person familiar with the matter said: “The companies that cooperate with Bitmain also need to advance the electricity bill to reduce the capital investment in Bitmain.”
However, for such a model, mine owner Lu Yuan (pseudonym) has revealed that the progress has not been smooth: “In this model, Bitmain only provides machines and does not pay a deposit, so, so far few mine owners are willing to cooperate.” Lu Yuan said.
While the mining pools are unwilling to cooperate with Bitmain, apparently outsiders are willing. Before the Spring Festival in early February, some industry insiders revealed that an executive from the real estate industry had already agreed to cooperate with Bitmain to mine.
It is worth noting that Ark, the company now run by
In addition, Wang Ming, the largest shareholder of the company Ark, is also unknown to the mining
Turning to An Asset-Light Model Amid Crypto Winter
At the moment, Bitmain is experiencing the most serious dilemma since its inception.
According to publicly available data, on January 28th,
In December last year, Bitmain saw over 50% of the layoffs, nearly 1,700 people, and all BCH employees were fired.
According to a report by Texas local media in December, Bitmain has stopped its mining business in Texas when just five months ago, it announced that it would create 400 jobs and invest $500 million USD in the city.
And according to news at the end of last year, Bitmain will cut all the mining operations: “There are at most 10 people left to do some light asset operations”. Nevertheless, after all this time, it seems that the Bitmain mining business has not stopped but rather that it has changed to the “joint mining” method with less capital intensive investments.
Lu Yuan revealed to
For the adjustment of the Bitmain business, Lu Yuan said: “Before Jihan Wu was responsible for the mining pool, but it wasn’t run professionally- they had a bunch of people sitting doing nothing and also they couldn’t find cheap electricity, operation and maintenance wasn’t good either. Now they are separating the mining farm out of Bitmain and are managed by co-founder
With layoffs, joint mining models, selling cloud computing power, and divesting its mining businesses, Bitmain looks to make its original heavy asset model as light as possible and create a steady stream of cash flow. On the side, it
What’s Left of Bitmain; Jihan Wu to a New Company called Matrix
Recently, Odaily received a picture of Bitmain’s end of year annual meeting.
Under the bright lights,
Jihan’s Twitter has been active until now, but he seems to have disappeared since December 18 last year. Only on February 18th, a tweet was introduced to introduce the BM1397 chip.
On the 26th of February, Lu Yuan saw Micree Zhan appear at the Beijing International Airport and flew from Beijing to Shenzhen.
Bitmain is slowly divesting itself. It’s cutting out the BCH team, cutting the mining farms, divesting its non-core AI businesses, and even the two founders are moving farther away.
On December 28 last year,
“Micree and Jihan both understand that the double CEO titles are not good for Bitmain, so they let go.” Zhao Yiming said.
“Joint CEOs are very prone to problems. In the history of joint CEOs, the results haven’t been good.” Litecoin Pool CEO Jiang Zhuoer said to
On March 1st, according to Quan Tian Hou Technology report, Jihan may become responsible for a company named Matrix soon, with the former senior investment director of Bitmain, Ge Yueyu, being the current CEO.
Matrix is a
It is worth noting that Ge Yueyu, who is only 27 years old, was also the co-founder and executive director of Bitmain. In its 2013 annual report when the company was founded, there
Although many people from Matrix come from Bitmain BCH team, the main business seems to be focused on blockchain instead of BCH.
Zhao Yiming revealed that Jihan had been laid off before the preparation of the new company. But the layoff progress was not smooth. “There were many people who were dissatisfied with the last layoffs, around BCH 40 employees, many choose not to go back [to the new company].”
In less than a month,