The road to the listing of Bitcoin mining companies: once at the Hong Kong Stock Exchange, is now seeking IPO to the US

Source: China News Weekly

Recently, the blockchain industry has ushered in a policy boom, and virtual currency prices have risen in the wind. Among them, the bitcoin price once again exceeded 10,000 US dollars, the entire currency circle is in the carnival, the direct beneficiary is the mining machine linked to it.

According to Frost & Sullivan, the world's largest corporate growth consulting firm, as of June 30, 2019, Bitcoin and Jianan were ranked first and second in the world in terms of bitcoin mining capacity and shipments. According to the CEO of the VeryHash computing platform, it is estimated that the sales of the Shenma mining machine of Bit Micro will be very good in the second half of this year, and it may exceed the Avalon mining machine of Jianan Zhizhi.

Bitcoin mining machine sales are closely related to bitcoin prices. As long as bitcoin prices keep rising, mining is profitable. In addition, mining machine performance, mine operation and maintenance, computational difficulty and regulatory policies will have an impact on mining revenue.

At the end of 2017, the price of bitcoin broke through the historical peak of 20,000 US dollars, and the mining machine industry continued to stage the myth of making rich. Bitcoin earned $19 billion in sales in 2017, which is in line with the chip giant Nvidia’s revenue. However, since March 2018, bitcoin prices have plummeted in succession, which once caused the mining industry to fall into a cold winter.

As bitcoin prices picked up in the first half of 2019 and rebounded to the $10,000 mark, mining machine sales began to heat up again. In particular, the application of the current blockchain technology has been affirmed, and the National Development and Reform Commission officially removed the “virtual currency mining” from the “Industrial Structure Adjustment Guidance Catalogue (2019)”. Under the influence of a lot of good news, a few years ago, the miners of the Hong Kong Stock Exchange had suddenly restarted the IPO, but this time they turned the listing target to Nasdaq.

At present, Jia Nan is ahead of the game, followed by Bitland, and Yibang Communication and Core Technology are also likely to compete for listing.

Mining machine distribution center

In November, the temperature in Shenzhen gradually became cooler, and the mining business of Huaqiang North SEG Plaza began to pick up.

Han Xiaohu began selling minerals in 2017. His shop is located on the 5th floor of SEG Plaza, with an area of ​​about 20 square meters, and employs more than a dozen mining machine sales staff. Han Xiaohu told China News Weekly that there are not many shops that have survived the mining winter like him. The number dropped to single digits at the beginning of this year.

As bitcoin prices rise, mining machine sales have become profitable. According to the latest statistics, there are about 82 mining businesses in the current SEG Plaza. Among them, the mining machine shops are mainly concentrated in the 4th and 5th floors of SEG Plaza, and the mining office is scattered in the office buildings on all floors of SEG Plaza.

At the end of 2017, the entire Huaqiang North mining machine industry is in the hottest time. At that time, bitcoin prices continued to skyrocket, making mining machine sales the most profitable business in Huaqiang North. Not only did the mining machine dealers flock to the market, but they rushed to grab the resources of the stalls. The merchants who originally sold mobile phones, computers and other electronic products were selling the miners.

The courier brothers of the major logistics companies will take the trailers full of mining machines and take them away. The miners from all over the world shuttled through the stalls of a mine machine, looking at the goods, bargaining, placing orders… Some shops had hundreds of mining machines and several million yuan of business in ten minutes.

“At the peak, more than half of the shops in the entire SEG Plaza are selling miners.” Han Xiaohu pointed to the shop decoration and signboards, and the words “mining” on the signboards were all newly opened stores. "In the past, we were so busy every day that there was no time to renovate. The mining machine business is also unstable. Many businesses sell short-term and don't want to waste renovation costs. Perhaps, you have just changed into the mining signboard, and the business is already difficult. ”

In fact, it is not unexpected that the world's largest mining and distribution center is located in Shenzhen. Originally, Huaqiang North was a distribution center for electronic products. Apple mobile phones, assembled computers, and memory modules were all overheated. But now that bitcoin is on the rise, mining machine sales have become a profiteering industry. The dealers who sell mobile phones and computers have started selling mineral machines.

In addition, the local government of Shenzhen has always been more tolerant of emerging technologies such as blockchain. More importantly, the strong electronics industry design and manufacturing capabilities in Shenzhen and its surrounding areas have enabled many entrepreneurs to set up mining machine chip manufacturing companies in Shenzhen.

However, starting in March 2018, as the world tightened the regulation of virtual currency, the price of virtual currency led by Bitcoin plummeted. For a time, the price of mining machines dropped and then dropped, the sales of mining machines shrank sharply, and the mining machinery industry entered a cold winter. The bear market, which lasted for more than a year, caused many mining companies to go bankrupt.

In the first half of 2019, bitcoin prices began to pick up. "The mining machines from April to July this year have been selling very well," Han Xiaohu believes, the main reason is the rise in the price of the currency. “This year, the Ant Mine and Shenma Mining Machines have been selling very well. The Avalon Mining and Wingbit Mining machines have been sold because of capacity problems.”

Talking about the favorable blockchain industry policy in October, Han Xiaohu is not very optimistic. “The sales of mining machines are still relatively deserted during this period. The sales of new mining machines are mainly sold abroad, and the sales of domestic mining machines are mainly mine mining machines. Update."

Looking around the 4th and 5th floors of SEG Plaza, there are not many shops where customers stay and talk, and most shopkeepers or sales are holding mobile phones to play games. Li Dongnan, head of the fast-frog of the mining service platform, told China News Weekly that for bitcoin mining, the policy factor is only a short-term indicator, which has little impact on long-term fundamentals.

On November 1, 2008, after the global financial crisis broke out, a self-proclaimed Satoshi Nakamoto released the Bitcoin white paper "Bitcoin: A Peer-to-Peer E-Cash System", stating his new vision for e-money. Bitcoin was born.

On January 3, 2009, the Bitcoin Creation Zone was born. Initially, the block reward was 50 bitcoins, then Bitcoin grew at a rate of 50 per 10 minutes and then halved every four years.

The total number of Bitcoins will be permanently limited to approximately 21 million. When the total amount reached 10.5 million (50% of 21 million), the block reward was halved to 25. When the total amount reached 15.75 million (new output of 5.25 million, or 50% of 1050), the block reward was halved to 12.5. In the current cycle, the system rewards 12.5 bitcoins for successful billing each time.

The bitcoin rewarded by the system after successful accounting is actually set up by the system and is issued for the first time. To some extent, this is somewhat similar to deep underground mineral resources. Therefore, the industry has vividly referred to this kind of behavior of providing computing resources and competing for billing rights as “mining”. The users involved in mining are called “miners”, and the computing resources used are called “mine mining machines”. The computing resources that the machine has are called "computing power."

Bitcoin is obtained by mining, so how to dig? This involves two concepts, mines and mine pools.

The mining of bitcoin is the same as that of coal mines and gold mines, and it needs to be excavated by mining machines. The difference is that bitcoin mining is carried out through the continuous mathematical operations of the mining machine in the network world. The so-called Bitcoin mine is to build a factory that puts dozens, hundreds or thousands of mining machines together for mathematical operations and mining bitcoin.

In general, bitcoin mining requires a lot of power. According to CCTV survey, a medium-sized mine with 5,000 mining machines consumes about 60 million kilowatt-hours of electricity a year, equivalent to one year's living electricity consumption in a township of 100,000 people. Therefore, most people who set up mines have chosen to set up mines close to power stations and where electricity costs are low.

At present, the electricity of Bitcoin mines is mainly divided into hydropower and thermal power. Hydropower is mainly distributed in Yunnan, Sichuan and other regions, and thermal power is mainly distributed in Inner Mongolia.

If the mine is a collection of bitcoin mining hardware, then the mine is a collection of miners' computing power. Specifically, the mining pool is an open, fully automatic mining platform. The miners will connect their own mining machines to the mining pool, contribute their own calculations to jointly mine, and then gain.

In the process of mining cryptocurrency, as more and more miners enter the market, the total power of mining is getting higher and higher, and the output of individual miners becomes more and more unstable, in order to obtain more stable Mining revenues, miners began to unite to compete with other miners, so the concept of bitcoin mining pool gradually emerged.

In fact, the mine itself does not perform mining calculations, but instead distributes the calculation tasks to the mines connected to the mine. By joining the mining pool, Bitcoin users can avoid running the entire node on the one hand; on the other hand, they can also reduce the variance of the mining return.

In the short term, mining is related to luck. What is related to the income of the mining pool is the lucky value, that is, the good or bad luck. The higher the lucky value, the greater the probability of digging into the bitcoin, and the greater the gain. Up to now, the income distribution of the mining pool mainly includes three forms: PPLNS, PPS and PROP.

According to's data, the top five mines currently in charge of Bitcoin computing power are Poolin, F2Pool,, AntPool and ViaBTC, of ​​which the latter three mines belong to the bit continental system.

Mining company shuffling

As the overall value of Bitcoin has grown, it has gradually formed a bitcoin industrial chain roughly divided into the upper, middle and lower reaches. The upstream is the design, production and sale of mining machines; the middle reaches are mining pools and mines; the downstream are bitcoin exchanges and wallets.

The mining machine is the key to bitcoin mining, and the unit power consumption is the core indicator for evaluating the performance of the mining machine. In the case of the same power calculation, the lower the power consumption of the mining machine means that the performance of the mining machine is better.

Initially, the Bitcoin block reward was larger and the bookkeeping success rate was higher. With the overall improvement of the overall network computing power, the difficulty of mining success will become more and more difficult, so the mining machine needs to be constantly updated to maintain revenue.

Back in 2011, Bitcoin mining chips have undergone an upgrade from the initial stage, from PC CPU and GPU mining to the era of regional programmable gate array (FPGA).

In August of that year, Zhang Nanzhen, the founder of Jianan Zhizhi, was studying for a Ph.D. in computer science at Beihang University. He appeared in the bitcoin forum Bitcoin Forum with the ID of "ngzhang", and in the following time, he promoted his own research and development of the FPGA mining machine – Icarus and Lancelot, and gradually gained fame. Since everyone does not understand their true identity, it is called "Pumpkin Zhang" by ID, and this title continues to this day.

In June 2012, Butterfly Labs, which specializes in the development of bitcoin mining machines, announced that it is preparing to develop an ASIC (Application-Specific-Integrated-Circuit chip) that is far superior to the mainstream FPGA miners at that time. Committed to the first batch of ASIC miners will be delivered in October of that year, resulting in a $1 million crowdfunding.

If the ASIC mining machine can achieve the performance of the design, the bitcoin mining revenue can be multiplied. This is undoubtedly a major positive for bitcoin mining, but it is a major blow to "Pumpkin Zhang".

Inspired by the Butterfly Lab's crowdfunding approach, in August 2012, the Chinese University of Science and Technology Junior Class Jiang Xinyu (roasted cat) and David (Fan Dawei) conducted an IPO on the GLBSE exchange. The stock name was Asicminer and the total share capital was 400,000 shares. The baked cat company Bitfountain holds 59% and the issue price is 0.1 BTC/share, with a total of 163,962 shares. Based on the exchange rate at the time, it raised about 1 million yuan. After hearing the news, Wu Jihan immediately invested in the roasting cat mining machine.

At this point, the discussion of the ASIC mining boom continued, and all three teams wanted to take the lead in research and development.

Soon, "Pumpkin Zhang" found Yifu Guo, an early aboriginal and Chinese-American programmer of Bitcoin, and announced the development of ASIC mining machines in September 2012. The "Pumpkin Zhang", which loves the Japanese, is called "Avalon" for this new mining machine.

Originally, the mining machine should be delivered in October. As a result, the Butterfly Lab was dragged and dropped, giving the "Pumpkin Zhang" and roasting cat time.

In January 2013, Jianan Zhizhi launched the world's first ASIC mining machine. Since then, Avalon and "Pumpkin Zhang", these two names have been loaded into the history of Bitcoin development, marking the bitcoin mining into the new era of ASIC.

This year, Wu Jihan and Jenke Group also decided to set up Bitland, and launched the Ant Mining Machine S1 at the end of December, which is better than Avalon A1. Since then, Bitland has been rapidly iterating its ant mining machine and phasing out other competitors.

Fight for listing

With the bitcoin price returning to the $10,000 mark, major miners have restarted the listing process.

On October 28, Jia Nan Yu Zhi officially submitted a prospectus to Nasdaq. Credit Suisse, Citibank, Huaxing Capital Holdings and CMB International jointly guarantee. With the stock code CAN listed on NASDAQ, it plans to raise US$400 million, which is a larger reduction than the amount of funds raised by IPOs in Hong Kong.

According to the prospectus, in the first half of 2019, Jianan Zhizhi’s main listing in the US was 289 million yuan, down from 1.941 billion yuan in the same period of 2018, down 85.2% year-on-year; net loss was 331 million yuan. Yuan, while the same period last year was a net profit of 216.8 million yuan.

Jianan Zhizhi's product revenue is mainly divided into two parts, blockchain products and AI products. Among them, blockchain products are the main source of income for Jianan Zhizhi, and mining machine sales have always been the pillar business of Jianan Zhizhi.

It can be seen that in the first half of 2019, Jianan Yuzhi mining machine revenue was 287 million yuan, of which the majority of income came from Avalon A8 series; AI products only earned 500,000 yuan, as a comparison, the second half of 2018 AI The revenue of the product is 300,000 yuan. Prior to this, Jia Nan Zhizhi's AI products have never had income.

Recently, Jianan Zhizhi's updated prospectus shows that it continued to lose money in the third quarter of 2019. What is puzzling is that Bitcoin prices began to pick up in the second quarter of 2019, and broke through the $10,000 mark in May, even reaching a high of $14,000. After the second quarter of this year, Bitian and Shenma Mining Machines all experienced a big increase in revenue. I did not expect Jianan Zhizhi to be losing money.

At the same time, the mining industry leader Bit China once again reported the restart of the IPO. It is reported that Bitcoin has secretly submitted a listing application to the US Securities and Exchange Commission (SEC), and the sponsor is Deutsche Bank. However, Bitcoin responded that it did not comment on market rumors.

Previously, in 2018, Jianan Zhizhi, Yibang International, and Bitian China successively submitted their prospectus to the Hong Kong Stock Exchange, and ultimately none of them succeeded. In addition, Jia Nan Zhi Zhi sprinted to A shares and the New Third Board in 2016 and 2017 respectively, and they all failed. This time, Jianan Zhizhi and Bitland, which came out of the re-launch plan, turned their listing targets to Nasdaq.

Yang Jiakang, a CFO of a fun store that once operated a number of US stocks and Hong Kong stock listed companies, told China News Weekly that the reason behind the regulatory focus of the HKEx and Nasdaq is very different.

Yang Jiakang said that for US regulation, as long as investors are willing to pay, even Internet finance companies that are not compliant in China can be listed on US stocks. The listing committee of the Hong Kong Stock Exchange has some screening criteria to determine whether companies can go public. It mainly examines whether the company has the ability to continue operations, such as whether it will be vetoed in the future, whether the business model can be unsustainable, and whether the customer concentration is too high.

Yang Jiakang further explained that the core of US regulation is the integrity and truthfulness of accounting principles and information disclosure. They see if there is a proper accounting principle; if there is a flaw, tell the investor truthfully and completely. As long as the information disclosure is complete and true, the decision-making power is judged by the investors themselves. The United States dares to do this because there is a strong class action mechanism. As long as listed companies deceive investors, they will be severely punished. The executives will go to jail and the company will go bankrupt.

On November 12th, it was reported that Jianan Zhizhi will be listed on NASDAQ on November 20th. Kong Jianzhi, chairman of Jianan Zhizhi, has begun to send invitations. However, Kong Jianping denied the news in a circle of friends, laughing and saying, "What is this invitation, who can send me to study."

(In response to interviews, Han Xiaohu and Li Dongnan are all pseudonyms)

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