Bitman May Have Bigger Challenges than Its IPO Listing

BlockTalkChain
Sep 1, 2018 · 4 min read

Bitman, which is about to be valued at $50 billion in the IPO of the Stock Exchange of Hong Kong, is likely to fall into a predicament that is more serious than the rejection of the listing application.

Bitman has always been regarded as the most important and powerful force in the industry: the mining machine produced by Bitman accounts for 70% of the entire mining machine market. The calculation capacity of the mining pool exceeds 50% of the computing power of Bitcoin. The total profit of the past 9 quarters is 3.2 billion US dollars. The turnover in the first quarter of this year is as high as 2 billion US dollars.

In August 2017, the CEO of Bitman, Jihan Wu, launched a hard fork project for the Bitcoin blockchain : Bitcoin Cash (BCH). In a very short period of time, Bitcoin cash became the top three currencies in the digital cryptocurrency market with a total market capitalization of 10% bitcoin.

In 2018, during the IPO Roadshow, Jihan Wu stated: Bitman will invest 20–30 private central banks that use blockchain technology to issue currency.

This speech spread throughout the blockchain world on the second day, and everyone sees this as an important step in BCH’s replacement of BTC as the most valuable digital currency.

However, the current situation of Bitman is that

  • BCH’s value is far less than Bitcoin
  • the mining machine business is difficult to sell and develop
  • artificial intelligence chips are lagging behind

Affected by these three hundreds of millions of business, Bitman’s asset and currency are continually consumed during the cryptocurrency bear market.

In May of this year, IDG Capital’s investment report shows that Bitman used the company’s main profits to purchase BCH. The founders of Bitman, Wu Jihan and Ketuan Zhan, would also use all of their net worth to purchase BCH, totaling 2.5 billion US dollars.

In the bear market of 2018, BCH did not rise significantly. The BCH user volume was only 3.3–10% of the BTC, and its value did not exceed 20% of Bitcoin.

On the other hand, the mining machine business is also not going well. The S9i mining machine, which went on sale in May, fell from 6,500 RMB to 4,100 RMB in less than three months. The price of this price is inevitably too fast. The V9 mining machine, which is almost identical in performance to the Antminer S7, is still selling at a low price of 650 RMB, confirming the rumored inventory backlog.

Balance sheet of Pre-IPO document shows that Bitman currently has $1.2 billion in inventory in Q1 in 2018, an increase of $200 million from last year. This part of the inventory includes the V9 miners that could not be sold.

The core competitiveness of the mining industry, in addition to the cost of the chip, is the power consumption ratio, which is the cost of electricity required of digging bitcoin.

Since 2016, the technology development of mining machines has been stagnant. The 16nm optimized version, 12nm and 10nm version of BTC mining machine have all failed. That is to say, the latest mining machine S9 of Bitman has not been updated for 3 years.

At the same time, competitors have already caught up, e.g. the Shenma mining machine is even 40% better than the mainland. The power consumption of mining machines in other currencies is also seriously behind. LTC is 25% behind, DASH is twice behind, ZCASH is twice behind, ETH is twice behind, and SC chips are 5 times behind.

Bitman’s artificial intelligence department has yet to deliver convincing business results. SOPHON Technology (Beijing) Co., Ltd., which undertakes the transformation of AI, was established in September 2016 with a registered capital of only 1 million RMB. The actual controller is Bitmain Technologies Limited registered in Hong Kong.

Bitman’s AI business is focused on three sub-areas of public security, Internet and urban big data. It plans to provide integrated solutions of cloud ASIC chips plus algorithms with partners.

However, in the bidding meeting for projects such as security and smart cities. It is rare to see a vendor that uses ASIC chips to provide computing power, the most common solution is built on FPGA. Bitman’s strategy remains to be verified.

The compliance of digital assets and whether the HKEx recognizes these assets will determine the listing trend of Bitman.

Bitman differs from other mining competitors in that Bitman has dominated and re-stocked BCH in addition to selling mining machines. Even investment institutions believe that BCH is the token of Bitman. Because Bitman holds more than 1 million BCH and records it on the company’s accounts as an asset.

Facing challenges from the bear market, business model and HKEx, Bitman will definitely have a taught year to go.

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