The glory and sin of Bitmain
"Bitmain is impressive."
Even the mining giant's competitors would grudgingly agree. Started in 2013, the company has quickly grown into a behemoth in the hardware industry, raking as much as $1 billion dollar in just one quarter. Bitmain was certainly not the first company that started building ASIC miners. KNC, Butterfly Labs and others were early pioneers. Being an ASIC manufacturer is challenging, and the path is littered with corpses of failed attempts. Those who are close to Bitmain management describe the co-founder Jihan Wu as shy and calculating, with oversight on every line item in the company budget. Co-founder Micree Zhan is a chip-design veteran with a decade of experience in specialized hardware. The company's rise to dominance is characterized by making the right strategic decisions at all the right steps(link in Mandarin). In many ways, Bitmain shaped mining as activity for enthusiasts into massive enterprises. Today, cryptocurrency mining is already a complex and highly verticalized industry, and Bitmain is gearing up for an IPO with $14 billion valuation.
But does Bitmain play dirty?
It's a common accusation. Secret self-mining, the selling of used machines, and aggressively squashing potential competitors are the tactics in question. (Link in Mandarin) A series of actions that faced huge push-back from the developer community have triggered serious discussions on ASIC resistance (see article below).
7nm 256 cores per chip ( 2x) the 16nm pic.twitter.com/hg80eG8cHr— stevenmosher (@stevenmosher) August 1, 2018
On the other hand, despite the grand ambition of pivoting to AI chips, Bitmain's core technology hasn't made much progress. The development efforts of wafers on 16nm / 12nm / 10nm all experienced failures.
(The source of the data comes from an article by a Berkeley PhD that's widely spread on Chinese social media. The article was subsequently removed from various media platforms)
Will the massive IPO help Bitmain store enough firepower to get through the winter by expanding through acquisitions? Or will ASICs, as many have predicted, become fully commoditized? One thing we know for sure is, mining as an industry is here to stay. The hardware scene is getting more competitive, more creative, and more diverse.
"In the first two sections I alluded to the underlying issue with trying to resist specialized hardware, and I’d hope the following conclusion has already been made: You can’t stop it. Instead of endlessly trying to stop something you can’t, an alternative approach would be to look at the situation rationally and find a new way to think about it."
This week's news recap
Further readings this week
"As an example of the perils of cryptocurrency insurance, consider the case of BitGo, a blockchain security company. In 2015, the company claimed to have secured insurance for coins held in its custody from XL Group. But it temporarily removed and, subsequently, reinstated a blog post making the announcement after a hack at Bitfinex, a cryptocurrency exchange which was also a customer, that resulted in theft of $70 million worth of cryptocurrency."
"As part of the effort, ICE plans to introduce a one-day futures contract in November that differs from derivatives already offered by U.S. competitors CME Group Inc. and Cboe Global Markets Inc. because it’s physically delivered, meaning owners of the contract will get Bitcoin, not cash, upon expiration. Physical delivery is important to some big players in finance who don’t trust the largely unregulated markets where Bitcoin currently trades. On the other hand, ICE is highly regulated."
"Here we have to keep track of the balances and other details of different people(states) and the details of what happens between them on blockchain(transactions). Different platforms handle this differently. Here we will see how Bitcoin and Ethereum handle this."
"A decentralized system is highly fault tolerant. If a node crashes on the Bitcoin network let’s say, it doesn’t bring the entire system down. There are other nodes on the network that run the blockchain. Decentralization also adds more security since the information stored on one computer must be copied to all nodes in the network. This means if a node were compromised, a hacker would need to be able to change the information on all nodes to manipulate the data."
"The feeling of working on open source is strangely unique and fulfilling. You feel as though you’re contributing to a greater good comprised of a network of brilliant people from all around the world. It’s a sensation that I rarely feel in my general work as a software engineer, and it reminds me of why I got into programming in the first place."
"Most investing errors are emotional or psychological. You will never stop making errors and mistakes completely. I have written often about these issues that some people refer to as behavioral economics now since this post is already running long. Batnick identifies just a few of the major causes of emotional and psychological mistakes."