Editor’s note

One of the most highly anticipated events in the cryptocurrency space, and arguably in equity capital markets, is the massive IPO prepared by Bitmain, the Chinese ASIC manufacturer and miner. A capital raise of such scale in traditional markets would certainly be a milestone for the cryptocurrency industry in general. However, the mining giant’s ascension has been anything but frictionless. Their market narrative, about a crypto-hardware company in transition towards artificial intelligence, has been undermined by criticism that Bitmain’s secret money-maker is simply Bitcoin mining. Another counter-narrative was spawned by the disclosure that Bitmain now sits on over $600 million of Bitcoin Cash, and may have cornered the currency, whose price is now dropping. A few private equity funds threatened to pull out of the IPO due to the management’s misrepresentation on certain financials. According to disclosures, Bitmain is a $14 billion empire which owns owns about 70% of the mining hardware market, and over 50% of Bitcoin’s total hashrate — still a promising position, despite the company’s missteps.

Since the controversial Bitcoin hard fork in August 2017, Bitmain decided to commit resources to support the alternative fork, Bitcoin Cash. Bitmain co-founder Jihan Wu discussed his amibition for Bitcoin Cash at a conference in Washington, DC in March of this year, telling reporters he wanted it to become the foundation for cryptocurrency-native central banks. Not a word was uttered about mining machine or AI; instead, Wu talked about the economist Hayek’s ideas on privitazing money and freeing the people from government-induced inflation. Yet Bitcoin Cash is suffering from messy internal politics, lack of adoption, and stalling technological progress. The reality is, in a bear market, the Bitcoin Cash cause might deter Bitmain’s increasingly cautious investors from an otherwise plum deal.

On its hardware products, margins have suffered. The depressed market and new market entrants have pushed down retail miner prices: the S9i miner announced in May dropped from $6,500 to $4,100 in just three months. The excess inventory will also become a headache for the company’s balance sheet; in order to liquidate excess chips, the company has rolled out undesirable products such as mining Wifi routers.

The new S9i was not an upgrade from the Antminer S9. This derivative model is made with chips binned out from manufacturing, a common practice of salvaging saleable chips using waste created in the semiconductor manufacturing process. Since Bitmain established its dominance in the mining world in 2016, the company has made almost no meaningful progress on its flagship product line.

In the article below, Allen Guo from 2048 Capital discusses in great detail where Bitmain is failing in development.

Bitmain: IPO and technical challenges
 (The Lion’s Den, translated from an article by Allen Guo)

“The core of a chip company will always be its chip design technology, and this core technology often comes from the founding team. The advantage enjoyed by Bitmain’s BM1385 and BM1387 came from its custom design methodology, which made full use of power consumption using the same process. However, as far as we know, this methodology did not come from the founding team of Bitmain. Ignorant of the importance of talent and technologies, Bitmain relinquished ownership of the core technology for competitive chip design after the design team left.”

The Crypto Miner podcast

“The Crypto Miner Podcast -Episode #004- The Grey Market for Miners, Newly released Miners, All things Bitmain IPO.

The Crypto Miner Podcast returns with its 4th episode and we try to provide a bit of relief from this never ending bear market! As we enter mid August your hosts Matt & Tommy discuss The quickly changing Grey market of ASIC mining, the release of new miners and how that will effect the market. Lastly we discuss all things regarding the upcoming Bitmain IPO.”

This week’s news recap

Tuesday: Bitcoin development is more robust than ever
 Thursday: Why don’t we just mine Bitcoin with perpetual motion machines?

Further readings this week

How the FOMO3d player won the pot by gaming the bots

A thread on on-chain governance

The architecture of Decred’s Politeia system

Bitcoin history: timeline, origins and founder
 (The Street, by Steve Fiorillo)

“But how did we get to where we are today with Bitcoin? How did it begin, what were its forebearers, and what have been the unexpected turns of the Bitcoin journey? Let’s take a walk through the timeline and find out.”

Can smart contracts replace lawyers?
 (Hackernoon, by Joakim Hjønnevåg)

“Because smart contracts provide the highest level of safety for all data that is included, they reduce the incidence of fraud or manipulation. In a digital world that’s offering more transparency and data safety, smart contracts are time-saving, cost-reducing, and represent ingenious digital solutions for transactions. Though they may not replace lawyers yet, they can start eating away at their market-share already.”

Originally published on Iterative Capital News. Sign up for our newsletter here.