Caixin Weekly Cover | Bitmain’s Wild Growth

Caixin reporters Wu Yujian, Wu Hong, Yuran and Ye Zhanqi

Bitcoin (BTC), which was born nine years ago, has set off a storm of cryptocurrency in the world in recent years. In particular, in 2017, its unit price soared from $1,000 to $19,000, attracting global attention, and entered the two major securities and futures exchanges in the United States as futures and ETF (Exchange Traded Fund) varieties, almost entering the mainstream. Since 2018, Bitcoin has experienced another sharp drop, and the current unit price is $6,000, and the global total market value of Bitcoin is about $300 billion. Amidst the ups and downs, who is the biggest winner in the Bitcoin world?

As the world's top mining machine manufacturer, Bitmain has a monopoly. According to general estimates by industry insiders, the market share of mining machines produced by Bitmain is at least 70%, and if other types of mining machines other than Bitcoin are included, it accounts for 80%. In comparison, the second-ranked mining machine manufacturer Canaan Creative calculated in its Hong Kong stock prospectus that the market share of Avalon mining machines is less than 20%. Canaan Creative is the representative of the new economy company that Jiang Yang, former vice chairman of the China Securities Regulatory Commission, visited after the National People's Congress this year. However, the fierce competition in the Bitcoin mining machine market in the early years was far beyond imagination, and Bitmain was a latecomer. At that time, the two most popular mining machines in China were Avalon and Bakecat. The former is generally regarded as the world's first ASIC mining machine, and Bakecat once occupied nearly 30% of the computing power of the entire network. After 2013, foreign mining machine companies represented by advanced technology such as KNC and Bitfury appeared, and China's Bitcoin mining machine industry was once overtaken.

Miners who have seen the ups and downs of Bitcoin are once again facing a dark cloud in 2018. Since the People's Bank of China banned ICOs and virtual currency exchanges in August 2017, the policy on Bitcoin mining has become clearer since November: not banned, but not encouraged. Simply put, it is not recommended that local governments give any preferential measures to mining, including taxes, electricity prices, land, etc. The reasons are mainly based on two points: one is that it cannot serve the real economy, and the other is that it consumes electricity and pollutes the environment. For a time, the mining industry was overcast and full of crises. Many miners were worried and planned to move their mines overseas to avoid policy risks. In the summer of 2017, many investors and media from Israel, China and other countries also visited a mine of Bitmain in Datla Banner, Ordos City, Inner Mongolia. Just half a year later, the mine was asked to be closed by the Ordos Municipal Government. "If the local government asks us to close it, we will definitely close it. We will not shirk or make excuses." A person close to the senior management of Bitmain said. The mine is actually a computer room. Due to the huge power consumption of mining, many miners choose to place mining machines in places with abundant electricity and cheap electricity prices to concentrate mining. A medium-sized mine has as many as 30,000 to 50,000 mining machines, while a large mine has about 100,000. The cables used in the mines are dozens of wires bundled together, which can be called "electricity pillars."