Bitmain is one of the largest names in cryptocurrency, influencing the market with every announcement. Their ASIC mining rigs can make or break a currency – much to the chagrin of the more idealistic members of the community. They previously spoke of going public back in June, but new information suggests that they will be filing for an IPO in September. Part of the process involves a careful outlining of assets and debts, with recent information exposing some interesting facts.
Bitmain is known for their massive Bitcoin mining operations. However, their pre-IPO paperwork shows that they have sold more than 2/3s of their Bitcoin supply to purchase Bitcoin Cash (BCH). While the controversy between BTC and BCH slowly cooled over the course of 2018, this injects new life into the rivalry. Bitmain’s tacit support of the hard forked coin could mean that they support BCH’s dominance. Alternately, there could be more sinister intentions to holding nearly 6% of the total supply of Bitcoin Cash.
The Dangers of Centralization
Any single entity holding a significant total percentage of an asset has the potential to cause price manipulation. Even if unintentional, the act of buying or selling such sheer volume of Bitcoin Cash will cause market forces to over value or devalue the currency by a considerable amount. If Bitmain wanted to inflate their valuation for the planned IPO, buying a tremendous amount of BCH would be one way of doing so.
Cryptocurrency adds an entire layer on top of this – one that Bitmain is well aware of. Directing enough computational power or hash rate at a blockchain can potentially allow an entity to seize control of the automated system. Called a 51% attack, these actions are nearly impossible on larger blockchains where the hash rate is high. However, Bitmain generates so much of the world’s total mining power that it becomes more feasible. Given Bitmain’s propensity towards developing ASICs for ASIC resistant coins – and installing remote kill switches on mining rigs that they sell – their purchase of BCH has to be considered carefully.
Bitmain Profits Exceed $2 Billion
As the world’s foremost producer of mining rigs, Bitmain is not dependent on any sole currency for their profits. Most Antminers can mine for any cryptocurrency within a family of algorithms – and once they are sold, they are no longer a liability for Bitmain. In this way, the company is more dependent on the health of the market as a whole, rather than any single coin. Further, Bitmain operates entire warehouses full of mining rigs – allowing them to effectively strip mine coins at their desire. While this is against the very vision of blockchain technology – one cannot deny their success.
Throughout 2017, Bitmain generated $1.2 billion in net profits. Despite the cryptocurrency market downturn, they continued to prosper. In the first quarter of 2018, Bitmain’s profits exceeded $1.1 billion. These numbers will no doubt help legitimize their aim for an $18 billion dollar IPO. Their stated reasoning for the IPO is to generate the necessary funds for producing artificial intelligence hardware. The combination of AI and cryptocurrency mining could be significant – with mining rigs using machine learning to switch hash power to currencies based on predicted profit. For now, Bitmain is in one of the strongest positions in the cryptocurrency world – as always proving the adage that ‘Selling shovels is the way to make a fortune in a gold rush.’
Article By: Adam Stone