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Bitmain Replaces CEO Jihan Wu After Bitcoin Cash Gamble Fails

Inside sources say that Bitmain Technologies plans to name a replacement CEO to take over from co-founders Jihan Wu and Ketuan Zhan.


New Bitmain CEO

According to the South China Morning Post (SCMP), the Bitcoin mining behemoth is looking to name a new CEO to replace the company’s co-founders. Anonymous sources say, Haichao Wang, the current Engineering Director is the front-runner for the job.

Jihan Wu

While there is no official word from Bitmain, these sources say the company entered a leadership transition period in December 2018.

Back in November 2018, Bitcoinist reported Wu’s demotion from director to a supervisor. Also, in late December 2018, reports broke out in Chinese media of the imminent resignation of both Wu and Zhan.

There is also no definite timetable for the completion of the leadership reshuffle. Sources indicate that both Wu and Zhan will become co-chairs of the company. The new CEO will handle the daily administration of the firm while the pair will still have the final say on big decisions.

According to SCMP sources, both Wu and Zhan had disagreements as co-CEO. Wu, in particular, has come under intense criticism for the company’s bet on Bitcoin Cash. Zhan, on the other hand, has led Bitmain’s diversification efforts, especially into the artificial intelligence arena.

Turning the Tide

If the reports are accurate and Bitmain does get a new CEO, a daunting task awaits the selected individual. After a stellar 2017 and a promising start to 2018, the second half of the year appeared to fizzle out for the Bitcoin mining behemoth.

Bitmain is yet to release its Q3 2018 financial report, but speculation is rife of losses north of $740 million. A lot of the financial trouble stems from inventory losses, as well as the expensive Bitcoin Cash hash war of November 2018.

Recently, the company even began laying off a significant portion of its workforce. In December 2018, Bitmain fired its R&D department based in Israel. This move was followed by another massive downsizing, nixing the company’s Bitcoin Cash development team.

The company’s IPO plan is also another casualty of the financial turmoil within the company. Despite announcing plans for an IPO listing in Hong Kong earlier in 2018, all signs point to such plans being unfeasible, for the present time, at least.

Will a new CEO be able to steer Bitmain in a better direction? Let us know your thoughts in the comments below.


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Investor: Bitmain Firing 80% Workforce is Bad for Bitcoin Cash and Litecoin

According to several reports, crypto mining giant Bitmain is running out of funds. And it could be bad for Bitcoin Cash and Litecoin.

$315.5 million worth of Crypto-Assets

Kyle Samani, the co-founder of Multicoin Capital, a crypto fund, warned in a Tweet that Bitmain would liquidate its crypto-assets to accumulate fiat-funds for its business operations. The prominent analyst cited recent media reports that have accused the Beijing company of laying off half of its staff. Among the fired – as reported – is a team that was working on the development of a Bitcoin Cash client.

According to a leaked financial document surfaced in August this year, Bitmain currently holds 930,932 LTC (~$28.6m), 1,021,316 BCH (~$176.7m), 22,082 BTC (~$83.3m), 312,424 DASH (~$26m), and 1,097 ETH (~$142k) tokens. At press time, the fiat-equivalent of Bitmain’s entire crypto asset portfolio amounts to be near $315.5 million.

Whether or not Bitmain has already encashed some part of its crypto portfolio could not be found. But, according to Samani, the fact that the Chinese crypto mining holds a large number of digital currency reserves itself leads to a possible selling scenario. That, of course, is possible only when Bitmain feels itself running out of cash despite firing half of its workforce.

Is Bitcoin Under Selling Pressure?

Bitmain, like any other retail investors in the crypto space, would be less likely to dump its Bitcoin reserves, mainly because it is among the few crypto assets that are looking at a promising future as the new year kicks in.

The same could be told about Bitcoin Cash, which Bitmain whole-heartedly supported during the November “hash war.” But since the firing of Bitcoin Cash development squad, the probability of Bitmain holding its Bitcoin Cash reserves looks meager.

Then again, layoffs itself are a kind of a bullish indicator — a company practices downsizing when it wants to govern its spending against its revenue. Bitmain, like any other crypto company, launched new products while driven the crypto euphoria of late 2017. But as the demand evaporated for its line of products – crypto-mining chips in particular – the company had to restrategize its priorities in hopes to survive the crypto’s most depressive phase.

What’s Next?

Bitmain could also choose to look for additional capital without spending many brains on selling their crypto reserves. The firm has already shared its plans to go public via a $12 billion IPO round in Hong Kong. Just recently, its application to the Hong Kong Exchanges and Clearing Limited (HKEX) met the possibilities of rejection. The company could file another IPO prospectus in the future after fixing its infrastructure, beginning with a layoff that is already taking place.

Bitmain raised $400 million from a pre-IPO funding round led by Sequoia Capital. The company currently holds a 67% share in the market for bitcoin mining equipment, and it provides about 60% of the mining industry’s entire computing power.

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Japan’s Internet Giant GMO Quits Mining Hardware Bussiness

GMO Internet says it will no longer develop, manufacture, and sell Bitcoin mining hardware following significant losses incurred in Q4 2018. The Japanese IT company will instead focus on its in-house mining activities following a comprehensive revenue review.


GMO Internet Downsizing Bitcoin Mining Operations

In a statement Dec. 25, 2018, the IT behemoth announced the shuttering of its cryptocurrency mining hardware business. The decision follows the enormous losses suffered by GMO Internet in Q4 2018 as BTC 00 hit the lowest price in over a year.

After taking into consideration changes in the current business environment, [GMO] expects that it is difficult to recover the carrying amounts of the in-house-mining-related business assets, and therefore, it has been decided to record an extraordinary loss.

Data from the company’s statement show consolidated and non-consolidated losses for Q4 2018 at ¥ 35.5 billion ($321 million) and ¥ 38 billion ($344 million), respectively.

However, despite shuttering its mining hardware sales department, GMO, which generated a total of ¥154 billion ($1.3 billion USD) in revenue in 2017, expects to continue its in-house mining operations.

Presently, the company admits that a decrease in the profitability of its in-house mining venture. This trend is mostly tied to the falling cryptocurrency prices throughout 2018.

GMO began developing, manufacturing, and selling mining hardware in September of 2017. Back in August, GMO shut down its Bitcoin Cash mining activities to focus solely on mining bitcoin.

Bitcoin Mining Firms Feel the Pinch

For most of the year, as prices fell, Bitcoin hash rate still continued to increase. This translated to increased operational costs for reduced rewards. It was thus only a matter of time before miners began to feel the pinch.

After the mid-November price crash that took BTC down to $3,200, as many as 800,000 (unprofitable) miners reportedly pulled out. However, the Bitcoin mining difficulty has adjusted a since, stabilizing the falling hash rate.

However, cryptocurrencies market woes may not be the core reason for GMO pulling out. According to BitMex Research, the company may not have been competitive to begin with and was thus unable to cope with falling prices.

Recently, Bitcoinist reported on massive downsizing going on at Bitmain. The mining behemoth closed down operations in Israel as well as its entire Bitcoin Cash development team.

Recent reports surfacing online even suggest that the staff layoffs might be as high as 85 percent of the company’s workforce.

Will Bitmain and GMO survive the bear market? Share your thoughts below.


Images courtesy of GMO and Twitter (@Excellion).

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Saying Goodbye to the Blockchain Romantics

Elly Zhang is director of partnerships of Heliocor, a leading regulatory technology company based in London. She previously lead Asia growth initiatives for the cryptocurrency wallet startup Blockchain.

The following is an exclusive contribution to CoinDesk’s 2018 Year in Review

2018 year in review
As crypto prices continue to fall, 2018 is ending on a sour note for the global blockchain community.

To some, this is a time for reflection, a time to shrug off the hype and really assess what we’ve achieved over the past few years. But it’s possible that’s just the optimistic spin on things: perhaps, it’s really time to look back and assess where DLT tech is going in the future, and whether or not we’ve all been spending our time constructively at all…

Key to this is revisiting our core assumptions. Ever since the blockchain was conceived, the debate regarding “decentralization” has been at the forefront of discourse. That’s because a primary selling point of the technology has and continues to be its promise to clear real financial transactions in a way that is fundamentally different – and better – from the system we know today.

As we’re finding out, though, it’s possible for blockchains to be centralized in some ways and decentralized in others.

Mining

The first stop for many when addressing decentralization in public cryptocurrencies is mining, or how most networks ensure the validity of their ledgers and mint new cryptocurrency. It’s safe to say that mining on most cryptocurrencies doesn’t happen as it was originally envisioned (with a great many users participating in a meaningful way).

Miners and mining machines were never envisaged to be part of the core infrastructure powering any blockchain technology. Rather, mining emerged purely as a way of controlling the partition of limited ‘coin’ resources for any given ‘blockchain’ product. In actual fact though, for the purposes of decentralization, mining should really be a redundant process.

Yet, the economies of scale of bitcoin mining – the more power you have, the more you earn – is impacting progress.

Let’s take a recent example, mining giant Bitmain’s launch of the AntMiner X3. Designed to mine Monero, the cryptocurrency’s users quickly decided to change the algorithm and remove mining machines in response to the release. Bitmain’s machines can now only continue to mine the original algorithm, now present on a new coin called XMC (Monero Classic).

Monero itself now utilizes only CPU and GPU resources on personal computers for mining. The result, we’re told, is that the system is more “decentralized,” though we have little in the way of metrics to determine if this is true.

Code

That said, the biggest challenge to decentralization (in public blockchain) remains who is in control of the code upgrades.

The bitcoin blockchain is maintained by the Bitcoin Core team. But in fact, many changes are preceded by intense negotiations and debates both on and offline. Only once consensus is reached is it then implemented. The bitcoin cash split can be seen as the result of a breakdown of such negotiations.

Yet, it’s just one example of how the development process can be decentralized (in that anyone can propose and write code), and yet very centralized and inherently political, in that it requires an incredibly specialized knowledge (and a lot of social capital) to even participate in such debates.

Another example is Ethereum, which can be said to take a different approach, one critics argue is more akin to authoritarianism. Take the failure of the DAO, which allowed many thousands of ether to be stolen. In this case, a small group of Ethereum developers obliged users to forcefully roll back its blockchain history. The original Ethereum now continues as Ethereum Classic.

In these two examples, we can see that so-called decentralization is taking place on the application level. At the development level, whether it is open source or blockchain, a certain degree of centralization appears to be in practice.

Politics

But if mining and technical centralization are issues we can overcome with time, there’s a more fundamental problem identified in the two examples above – blockchains introduce politics.

While there has always been politics in any process involving people, with regulators now piling into the mix, I predict that the politicization of blockchain will only continue to get worse. In fact, I believe it’s likely to be the biggest challenge facing the sector.

From my perspective, human beings are first and foremost decentralized creatures – we live our lives as small, distinct, autonomous units (a family structure, company or team). However, with urbanization and the course of human history, society has inevitably leaned toward centralization, as it brings numerous inevitable advantages. Administering and catering for any population within a carefully defined zone under a government is a system that has proliferated the world over for good reason.

In other words, decentralization does not have an absolute superiority over centralization. This can be applied to bitcoin as well — bitcoin does not naturally save transaction costs while achieving the same security as a centralized monetary system.

What decentralization does do, however, is remove the single point of failure caused by centralized structures, diversifying risk and making identifying problems easier. At the same time, if we adopt more transparent algorithms and mechanisms, we can spread any risks currently characteristic of blockchain technologies and cryptocurrency.

Ideology

Separate from politics, is the question of the ideologies that enable them.

Bitcoin, as an example, can be said to have been created an ideology. At the beginning of bitcoin’s birth, many people participated in and supported its development because they believed in absolute freedom, lacked trust in government and were adamant that any concentration of capital leads to corruption.

From the technical perspective, there will always be an obsession with decentralized systems.
 As touched on previously though, creating such a system in an efficient, ‘decentralized’ way might currently be beyond the thinking of this generation’s software engineering teams.

Where is the next evolution of a ‘skunkworks’ style team, removed from traditional managerial constraints and how will it reconcile the needs and wants of wildly disparate groups of end-users?

Despite the various problems of traditional institutions and organizations, the principles and design assumptions of the blockchain make it difficult to convince me that a large-scale decentralized system will be more reliable than a centralized institution that is regulated, protected and balanced. I think that the future of blockchain may become a tool for creating genuine value in some specific areas, but a successful system will be the result of a compromise between multiple design dimensions.

Expectations

What does this mean for true believers?

For one, it means people who think the blockchain will change everything are being too romantic about decentralization. If a blockchain project says they are seeking decentralization, and can safely and reliably process 100,000 transactions per second, keep in mind: many have had this goal in the past, and none have truly succeeded.

I’ve found an idiom to exactly capture my thoughts set out above: “If something is apparently too good to be true, it probably is.”

In short, it might be best to view the blockchain is a sociological revolution, not a technological revolution. The technology is not new. Just as Steve Jobs brought together many ideas in the iPhone, Satoshi Nakamoto assembled bitcoin from established technology.

In the months and years ahead, entrepreneurs and developers will need to keep this in mind. We need to understand both commercial realities and human nature, but we need a dose of realism, too.

Have an opinionated take on 2018? CoinDesk is seeking submissions for our 2018 in Review. Email news [at] coindesk.com to learn how to get involved. 

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Bitmain Closes Israel Development Arm Citing Crypto Bear Market

Cryptocurrency mining giant Bitmain is closing down its Israel-based research and development arm.

According to a report from financial news source Globes, Bitmaintech Israel, the firm’s R&D center in the city of Ra’anana, is being shuttered due to the general downturn in the crypto markets.

All 23 employees, including Bitmain’s vice president for sales and marketing Gadi Glikberg – who led the Israeli project – have been laid off. Only a few months ago, the firm had reportedly been planning to hire over 40 people at the center across research, engineering and marketing roles.

“The crypto market has undergone a shake-up in the past few months, which has forced Bitmain to examine its various activities around the globe and to refocus its business in accordance with the current situation,” Glikberg reportedly told local employees.

BitmainTech Israel was launched back in 2016, and went on to launch Bitmain’s ConnectBTC mining pool in April 2017. The unit worked on developing blockchain technology, as well as artificial intelligence for the company’s Sophon project.

CoinDesk reached out to Bitmain for comment on the closure, but had not received a reply by press time.

The extended bear market for cryptocurrencies has led to layoffs at other firms too. Just last week, ConsenSys, the ethereum production studio, axed 13 percent of its staff as it reset its priorities. And last month, blockchain startup Steemit laid off close to 70 percent of its staff as fiat returns could no longer adequately cover the growing costs of running full Steem nodes.

Bloomberg has also reported in the last week that Switzerland-based Sirin Labs, which raised $157 million earlier this year via an initial coin offering to build a blockchain phone, is also facing a cash crunch due to the poor crypto market. It may as a result abandon the hardware and focus solely on shipping its software for other phone manufacturers.

Closed sign image via Shutterstock