A look into China’s biggest Bitcoin company — Bitmain

Bitmain is a Chinese company that operates two of the world’s largest Bitcoin mining pools, contributing to almost 1/3 of all Bitcoin mining pool’s hashing rate. However, Bitmain is more than running mining pools. It also manufactures ASIC mining equipment, and recently tapped into the machine learning area.

Mining Pool Operation

The market share of the most popular Bitcoin mining pools

The two mining pools operated by Bitmain, AntPool and BTC.com, contribute to almost 1/3 of the total hashing power for all the Bitcoin mining pool. In addition, the third largest pool, ViaBTC, has received a significant investment from Bitmain as well. When combining the two mining pools directly operated by Bitmain and ViaBTC, this is almost 1/2 of the total hashing power for all the Bitcoin mining pool.

While ViaBTC, BTC.com, and AntPool are all public pools, there is still a great concern that a single company like Bitmain is affiliated to almost 50% of all the hashing power on the Bitcoin network. Being a public pool means that anyone can join or leave the pool at any time, thus Bitmain does not actually own almost 50% of all the hashing power. However, because the pool operator coordinates the mining process, the operator can effectively control the 50% of all hashing power. Concentrating this much of hashing power in one entity can give that entity the opportunity to conduct a 51% attack (more on 51% attack). On the contrary, some argue that since the mining pool operators are benefitting from mining Bitcoin, the pool operators do not have the incentive to conduct a 51% attack which will destroy the value of Bitcoin. Still, it is ironic to see that Bitcoin, which was proposed to be a decentralized technology, now is being controlled by a few major players such as Bitmain.

ASIC Designing

Bitmain started in 2013 by designing ASIC and manufacturing mining rigs. 2013 was the year that began ASIC mining for Bitcoin, where other ASIC chip designers, such as Avalon, were also surfacing with their chips. Interestingly, when Bitmain launched their first ASIC chip, BM1380, Bitmain accepted Bitcoin as a form of payment. Although Bitmain’s mining pool operation takes a significant market share, in its official statement, Bitmain defines itself as an ASIC chip design company.

However, it is notable that Bitmain only designs ASIC chips. Most of its chips are manufactured by TSMC (Taiwan Semiconductor Manufacturing Company). TSMC also manufactures chips for the graphics chip designer NVIDIA, whose products are also commonly used in the crypto mining world.

Bitmain does not only design ASIC chips for Bitcoin mining but also for Litecoin and Dash. However, at the time of writing this article, all of Bitmain’s mining rigs are out of stock. Because ASIC chips are specialized in mining cryptocurrencies, ASIC chips have an unparalleled advantage to graphics cards in hashing power and energy efficiency. Because Bitcoin adjusts its mining difficulty based on the network’s hashing power, adding more ASICs to the network will significantly increase the mining difficulty and making it extremely hard to mine Bitcoin with a graphics card. The scarcity of ASIC mining chips further exacerbates the inequality in retail miners running graphics card versus mining farms running ASICs.

Tapping into AI and Machine Learning

Just a month ago, at AI World 2017 Conference, Bitmain’s CEO introduced an AI accelerator chip designed by Bitmain and announced that Bitmain will be offering a series of products ranging from computing cards to dedicated servers, branded by the name “SOPHON”. The AI accelerator chip can speed up the training process of AI, and major technology companies such as Google and NVIDIA have already been releasing AI accelerator products.

This makes sense from a strategic point of view for Bitmain. Bitmain has been developing ASIC hardware since 2013 and accumulated engineering talents in this field. In an interview with Jihan, the founder of Bitmain, Jihan mentioned that the Bitcoin price downturn in late 2014 almost bankrupted Bitmain. Moving into the machine learning hardware business diversifies Bitmain from its blockchain-related business and reduces its exposure to systematic risk in the blockchain industry.

The North American Bitcoin Conference will take place on January 18th in Miami. I will be at the conference and can’t wait for the great networking opportunity. See more detail about the conference here.

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