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Former S&P President Leads Seed Round for ICO Compliance Startup

Regtech and compliance startup iComply has just completed a seed funding round led by former Standard and Poor’s president Deven Sharma. The firm – which seeks to develop standard compliance tools and services for other blockchain startups and in particular those which launch initial coin offerings or ICOs – announced …

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Wanchain’s Bridge to the Ethereum Blockchain Is Now Open

Amber Baldet, former JPMorgan blockchain program lead (and current CEO of Clovyr), has expressed her doubts about the proliferation of blockchain protocols: “Each of these blockchains speaks a different language,” she said in April. Getting different blockchains to talk to one another has become a pressing issue, as more and …

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Ponzi Games Are Breaking Out on the Ethereum Blockchain

The hottest new apps on ethereum resemble an old favorite: the Ponzi scheme. At least that’s the early consensus on FOMO 3D and PoWH3D, two of the platform’s top three apps entering Tuesday. According to data website DappRadar, both games have amassed 20,000 ether ($9 million) in trading volume over …

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Ethereum’s Vision for Apps Is Only Growing Bolder

Borderless, permissionless and free from coercion. That’s the dream underlying web 3.0, in which unstoppable, decentralized applications (dapps) combine with web 2.0 technology, eventually corroding the power structures that traditional infrastructures encode. But that vision hasn’t come as fast as some expected or hoped, and moreover, some ethereum applications seem …

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Ethereum Is Testing Code for Its Next Hard Fork

Ethereum developers are already implementing code for Constantinople, the network’s next system-wide upgrade. The second part of a series of upgrades to make the ethereum network more efficient and less costly in terms of fees, Constantinople will be activated sometime before October’s Devcon4 ethereum conference, according to stakeholders during a …

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Monero-Style Privacy Is Ready for Ethereum – Who Will Implement It?

What if ethereum looked more like monero? Fusing the privacy features of the latter into ethereum would make many of the platform’s stakeholders, including developers who have been working on privacy-enhancing features for some time, excited. But privacy techniques are rarely utilized because of the serious trade-offs presented – such …

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BBVA Can’t Hold Cryptocurrency – And That’s a Problem

After becoming the first financial institution to combine public and private blockchains in a live transaction, Spanish multinational bank BBVA has hit something of a quandary. Specifically, it’s unsure how to take its forward-thinking work … forward. In the process of executing what was expected to be the third in …

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Ethereum Is Getting Its First Top-Level Domain Name

A new partnership will soon enable ethereum users to attach their addresses to a top-level internet domain name, making it easier to remember the identifiers associated with their assets, wallets and services. The Ethereum Name Service (ENS), which allows ethereum users to replace long addresses with “human readable names” attached …

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Where Roads Can’t Reach, Blockchain Drones Just Might Travel

A metal frame with four small and two large propellers – carrying a container the size of a refrigerator – rises into the air with a roar, hovering above an empty road amidst snowy fields.

The video was shot on the airfield near the Russian city of Kazan, which is located to the south-east of Moscow, and the machine is a SKYF drone, designed by a team of Russian aviation engineers.

According to its makers, the drone can carry up to 880 pounds, travel as far as 220 miles and work up to 8 hours. And everything that happens to these drones is going to be recorded on the project's own blockchain, SKYFchain.

The SKYF team is trying to crack into a rapidly growing ecosystem, with PwC valuing the emerging global market for drones at over $127 billion in 2016. As of today, drones can only carry small objects, but the SKYF team aims to open a totally new market for heavy-duty cargo drones.

The idea is that they'll serve multiple purposes, such as delivering large amounts of cargo, fighting fires and spraying insecticides and fertilizers on agricultural lands.

SKYF is a decidedly Russian project. The drones are being produced domestically by OKB Aviareshenia Ltd., a subsidiary of British entity ARDN Technologies. Both entities were founded by the same team of engineers and tech entrepreneurs: Aleksander Timofeev and Ilya Rodin – managing partners of the FPI venture fund – engineers Dmitry Arsentyev, Marat Sabirov and Nail Zinnurov, and others.

To financially support the project, the team is holding an initial coin offering (ICO). In February, Skyfdrones Services OU, a company registered in Estonia by Alexander Timofeev, registered the token sale with the U.S. Securities and Exchange Commission under the Form D (Rule 506(c)) exemption, declaring a goal to raise $30 million.

Recently, this plan was adjusted – thus far, the project has managed to raise around $6 million, and they plan to raise some $500,000 more before the end of the ICO. Timofeev told CoinDesk that 45 percent of the funds will be spent on R&D.

Trusted delivery

According to Ilya Rodin, SKYF's GR manager, the use of blockchain in this context is aimed at creating a trust layer between stakeholders, including public and private sector interests.

"We need a blockchain to create trust between the counterparts: the banks, leasing and insurance companies, drone manufacturers and users, government agencies, licensing bodies, self-regulating organizations, and so on," Rodin told CoinDesk.

The idea is that the data being stored will encompass various pieces of information about the drones. This includes information about what licenses the manufacturers possess, the drones' flight paths, their performance and data on the people operating them.

"Drones are a new thing, banks don't know how to evaluate them and calculate interest rates for them, how to monitor their use," added Olga Budnik, a PR director of ARDN. "So they would rather deny a loan or a leasing agreement than take a risk. And we give them a tool to follow the entire life of a drone."

The idea for the startup came about in 2014, when Dmitry Arsentyev was trying to create a flying motorbike – but in the end, he wound up working on an industrial drone with Sabirov and Zinnurov. Soon after, they got investment and support from FPI back in 2014, Inc. magazine wrote.

"Initially, the guys had a prototype of a self-piloting flying taxi," Alexander Timofeev explained. "We realized that the system was new and viable, but we convinced them to transform it into an unmanned cargo platform."

Timofeev believes that drone delivery will be in demand in the areas with bad road infrastructure. This is especially the case in places like northern Russia and the banks of large Siberian rivers, where bridges are far apart from one another and getting from one side to the other using road vehicles means miles of extra driving.

Putting drones to work

Even though things are in the early stage, the startup is pushing ahead with its ambitious plans for its blockchain-connected fleet.

At the heart of the project is the token, which the team says will serve a key role in managing the fleet.

"From the start of SKYFchain the SKYF drone autopilot will require authorization in the SKYFchain to lift off," the project's white paper states.

ARDN has manufactured three drones so far, but the plan is that, by 2021, there will be more than 1100 SKYF drones operating worldwide. Looking farther, the aim is for other manufacturers of air-borne, sea-borne, and ground-borne cargo drones to join the SKYFchain network.

And within that time, the project's backers hope to see as many as 12.5 million transactions made on their purpose-built blockchain.

What's more, company has already secured partnerships with Vietnamese port ITC, a Chinese delivery company ZTO Express and a number of Russian entities, including agricultural, delivery and oil and gas companies, as well as the Department of Transportation of the Far East region of Khabarovsk, ARDN says.

The parties involved have signed preliminary agreements to test the SKYF drones for possible applications in their businesses.

Drone image via SKYFchain website

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Blockchain Social Network Minds Is Migrating to Ethereum for Launch

Blockchain-based social network Minds is migrating its platform to the ethereum network, the startup announced Monday.

After roughly four-and-a-half months on its Rinkeby test network, the startup will be moving to ethereum for its full live launch. The firm claims to provide a censorship-resistant, accessible social network for users, especially those in potentially authoritarian nations, according to a press release.

The platform already sees around 500,000 daily page views, CEO Bill Ottman told CoinDesk. The platform also claims roughly 1.25 million registered users, about 75 percent of whom have already earned test tokens. These users will be eligible to receive the platform's live token via a free "airdrop" distribution as a result.

"We expect an overall increase in transactions, both on-chain and off-chain, due to the activation of token withdrawals, purchases and rewards," he said.

Ottman continued to say that the team had engineered a "hybrid on-chain, off-chain model" to ensure that the system can handle the volume Minds is seeing and to provide a simple user experience for crypto newcomers.

The on-chain and off-chain model will also help the platform handle large user volumes without congesting the ethereum network, according to the company.

Users can pay tokens to ensure a greater number of people see their posts, or earn tokens by interacting with content. Users can also use it to pay creators directly and subscribe to premium content.

Ottman said the use case has been popular on the testnet, predicting that the decentralized platform will become one of the more popular apps on ethereum as a result of the launch.

The CEO anticipated few issues ahead, saying "the only disruption will be a 24-hour pause in [peer-to-peer] transfers between users via our Wire and Boost features ... this is necessary only to ensure the airdrop to our beta users accurately reflects their prior token balance of earnings thus far."

Elizabeth McCauley, blockchain business developer and Minds adviser, said in the release:

"When governments crack down on free speech and team with centralized social media surveillance companies, [Minds] provides a refuge for individuals seeking an avenue for global interaction and idea exchange."

Ether on a keyboard image via CoinDesk

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Barclays Is Pitting Blockchains Against Each Other (For a Cause)

U.K. banking giant Barclays is challenging up-and-coming blockchain coders to help revamp the global derivatives market at a hackathon next month.

Revealed exclusively to CoinDesk, DerivHack will take place simultaneously in London and New York on September 20-21 at Barclays' Rise accelerator spaces. The International Swaps and Derivatives Association (ISDA), Deloitte and Thomson Reuters are co-sponsoring the event.

Those taking part will be asked to apply ISDA's Common Domain Model (CDM), a set of process and data standards, using their choice of distributed ledger technology (DLT) platform, to efficiently model post-trade processing of derivatives contracts.

CDM attempts to harmonize the way data is presented and reported across different firms and platforms. As such, its adoption is widely viewed as a prerequisite for the financial industry to adopt DLT and smart contracts.

One goal of the hackathon is to suss out which of the commonly used enterprise DLT platforms – R3's Corda, Hyperledger Fabric or ethereum – handles derivative life cycle smart contracts most elegantly.

"It's up to each team to decide what they code on," Dr. Lee Braine of the CTO Office at Barclays Investment Bank told CoinDesk, adding that it is a "good, and genuinely open, question" which will perform the most efficiently.

"I think the sort of things that will come out of this hackathon will include exactly that," he said.

Braine said, by way of an example, there may be cases where existing blockchain platforms benefit from some enhancements to make them more naturally compatible with the CDM.

Referring to object-oriented computing languages such as Java, which use classes to define data formats and available procedures for a given type or class of object, he said, "you could imagine this being equivalent to adding some extra classes to raise the level of abstraction closer to that of the CDM."

Braine pointed out that the CDM, which is all about how you alter the data structure before and after each life cycle event in a trade (such as an amendment, modification or termination of a contract), will give the judges a neat way to assess those solutions.

"Because it is the ISDA CDM, it will be very clear what are the inputs and expected outputs for each life cycle event – but it will be up to the hackathon coders to implement the smart contracts using a programming language and platform they think is appropriate," he said.

Fresh eyes

For ISDA, the hackathon presents an opportunity to get some feedback from members of the industry (and newbies) about the CDM.

"Following the release of ISDA CDM 1.0, it is important that the model is explored and validated by a broad set of industry participants," said Clive Ansell, head of market infrastructure and technology at ISDA.

A key component in the standardization of smart contract-enabled post-trade processing of derivatives are smart oracles which pipe in data to the contacts. Thomson Reuters was the first large industry player to launch a smart oracle back in June 2017 with BlockOne IQ.

"Making this capability available during the hackathon is a great opportunity to explore the evolution of standards for blockchain-based financial instruments, as they are a much-needed component in shaping the industry's future infrastructure," said Sam Chadwick, director of strategy in innovation and blockchain at Thomson Reuters.

Also, the two intensive days will give participants access to derivatives experts providing guidance on applying the ISDA CDM, said Braine, which should be useful whether the team is a fintech startup looking to implement derivatives smart contracts or a group of students looking to build skills and enhance their CVs.

Summing up, Sunil Challa from the business architect team at Barclays said:

"If the industry is to realize potential efficiencies and reduce costs via the adoption of standards, then there needs to be greater compatibility across different solutions in capital markets."

Image via Barclays

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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94 Companies Join IBM and Maersk’s Blockchain Supply Chain

IBM and shipping giant Maersk have recruited a sturdy crew for their global trade blockchain platform.

Revealed Wednesday, the companies have already signed up 94 firms for the platform since it was spun off from Maersk in January. They have also finally given it a name: TradeLens.

Leveraging Maersk's leviathan-like scale, TradeLens has attracted a wide variety of entities, ranging from dozens of port operators and customs authorities to logistics companies and even rival ocean-going carriers, such as Pacific International Lines, all of whom have been testing the platform.

The pilot stage now complete, TradeLens is available for participation through an early adopter program and is expected to be fully commercially available by the end of this year.

And to drive home the message that TradeLens is an open and neutral platform, IBM and Maersk have updated their marketing strategy, now describing the project as "joint collaboration" rather than a joint venture.

"At the time of the launch, we wanted to be clear that we were not offering a bespoke Maersk- or IBM-only solution," Michael White, head of global trade digitization at Maersk, told CoinDesk

While Maersk and IBM remain the only two shareholders, and both invested in the technology and jointly own the IP, White emphasized it is completely open to ecosystem participants.

"It was never about a joint venture," he said, although the Maersk press release for the launch described it as such.

But an IBM spokesperson said the original 49/51 percent ownership split will no longer apply under the collaboration model the two are now going to market with, in response to feedback from the industry.

Both IBM and Maersk will sell access to the TradeLens platform. The selling party will contract with the customer and receive all the fees and revenue rather than sharing it with the other partner, the IBM representative added.

This new model allows them to bring the solution to market faster, and be more flexible than the previously planned joint venture model, the spokesperson said.

Common tongue

TradeLens is built on the IBM Blockchain platform, which uses the open source relative of Linux, Hyperledger Fabric, and this presents a possible interplay with other IBM and Hyperledger projects.

"We have architected all of these solutions so that it's very easy for data to be exchanged between the two different blockchains – take TradeLens and IBM Food Trust for example – if clients were to be inclined," said Todd Scott, the vice president of global trade at IBM Blockchain.

To help foster this open supply chain ecosystem, TradeLens is pushing its open APIs for shipping as well as work being done with shipping standards bodies such as CEFACT and industry groups such as OpenShipping.org.

"On top of the bedrock of blockchain technology we are working with standards, and also have 125 or so APIs, and we are going to give all that access to the developer community so they can even create additional technologies of their own on top of it, " said Scott.

However, not everyone will see this as such a great and gregarious invitation to the industry.

"It's fine for them [IBM and Maersk] to say 'we are open for everyone to join,' but all they are really saying is 'come and use our system,'" said Sean Edwards, chairman of the International Trade and Forfaiting Association.

Edwards, who is also head of legal at Sumitomo Mitsui Banking Corporation Europe, said getting everybody to speak together is not a new problem and the answer, he said, has been to try and create ecosystems like Universal Trade Network (UTN), only they haven't really got off the ground yet.

Referring to other blockchain solutions aimed specifically at banks to optimize trade finance (which is related to but different than the supply chain processes TradeLens is digitizing), Edwards said the situation may become one where, just as consumers have a multiplicity of passwords and systems that we use, banks and other entities may have to be present on a number of different platforms.

"Either there are common enough standards that all the different underlying technologies can actually speak to each other, or you have initiatives that are so big everybody uses it," said Edwards, adding:

"I don't think somebody like Maersk is going to solve that."

Courting HSBC

And notably, TradeLens is not the only boat in this race.

In addition to the well-established supply chain payments platform TradeShift, which connects over 1.5 million companies across 190 countries, banking giant Citigroup is in stealth with a combined trade finance and supply chain platform which will leverage not only distributed ledger technology (DLT) but also the internet of things (IoT) and artificial intelligence.

Hence, TradeLens is at pains to come across as neutral and therefore appeal to the widest possible audience.

Speaking to potential data privacy concerns for companies that compete with Maersk's subsidiaries, White said the Maersk side of the collaboration team is a distinct and separate entity with no involvement with the commercial activities of either Maersk Line (the shipping container business) or Damco (the logistics provider).

On top of these Chinese walls, the platform itself features privacy protections, White said. "Sensitive information from other carriers are kept on separate nodes, so Carrier A cannot see Carrier B 's information or carrier C's information," he said.

Looking ahead, another possible blockchain interoperability play for TradeLens would be some of the trade finance blockchain platforms built on IBM Blockchain and Hyperledger, such as we.trade and Batavia.

Although it's probably still rather far off in the future, you could imagine an all-encompassing platform, so that if radio frequency identification (RFID) trackers indicate physical proximity to something, a payment can be released or a document signed, or similar.

On the subject of trade finance, IBM said banks were present among the 92 TradeLens pilot partners, but these were not being named. However, CoinDesk learned from a source in the trade finance arena that HSBC has "met with TradeLens a couple of times and agreed to reconnect post-launch."

And both IBM and Maersk agreed a world of opportunity awaits with regard to bringing trade finance banks, marine insurers and the like on to TradeLens as the platform takes to the waves.

Maersk's White concluded,

"We have found is there are number of industries and institutions including financial institutions and insurance companies, that are looking to take advantage of this platform."

Shipping container image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Microsoft Rolls Out ‘Proof-of-Authority’ Ethereum Consensus on Azure

Microsoft has just rolled out an additional consensus mechanism for clients building ethereum-based apps on Azure that does away with mining.

Called "proof-of-authority," the mechanism notably replaces the proof-of-work mining process that is common in public blockchains. However, it is only applicable in a permissioned network scenario – that is, on private or consortium blockchains where only invited parties may participate as nodes, Azure software engineer Cody Born wrote in a post on Tuesday.

The addition of proof-of-authority allows Azure's institutional clients to verify transactions more efficiently and maintains high levels of security, Born said, although "the underlying ether has no value."

He explained:

"An alternative protocol, Proof-of-Authority, is more suitable for permissioned networks where all consensus participants are known and reputable. Without the need for mining, Proof-of-Authority is more efficient while still retaining Byzantine fault tolerance."

Proof-of-authority consensus essentially requires the presence of invited parties as a proof of their participation in the decentralized network.

To that effort, the post said the mechanism allows "each consensus participant to delegate multiple nodes to run on their behalf" – the goal being to ensure that even if one node goes down, a consensus authority can still maintain its presence on the network.

It should be noted that proof-of-authority is not new, and was first conceived by developers from ethereum client Parity. It has also been deployed on the VeChain blockchain.

The addition follows Microsoft's May launch of the Azure Blockchain Workbench – a tool designed to streamline the process for enterprises building decentralized applications on the cloud computing platform.

Microsoft image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Overstock Blockchain Spin-Off Raises $134 Million – With Millions More Committed

Overstock.com subsidiary tZero raised $134 million in its security token offering, the company said Thursday.

The announcement – revealed as part of Overstock's second-quarter results – was paired with a separate disclosure revealing that Hong Kong-based equity firm GSR Capital has agreed to invest as much as $400 million in both tZero and Overstock. TZero said earlier this week that it had completed its token sale, though the firm originally had set a goal of raising $250 million through the offering.

During an earnings call, CEO Patrick Byrne reiterated a previous claim that tZero received $100 million in commitments when it first opened its token sale, saying "we did the very best we could ... eventually we went to Asia. In Asia it was quite different. The first three people we met ... all said 'we'd take $60 million' [but] it proved extremely difficult to get money out of Asia for many different reasons."

"That's what slowed things down so much," he said, referencing multiple extensions to the company's token sale.

Specifically, the deal would see GSR acquiring up to $270 million in tZero equity – at a valuation of $1.5 billion – as well as up to roughly $104 million in Overstock shares. As well, GSR has agreed to buy $30 million worth of tZero Security Tokens from Overstock, according to statements.

Overstock first announced GSR's intention to purchase equity in the firm in June 2018, according to a press release. At the time, Overstock said GSR would purchase $160 million in tZero security tokens.

The company said that it ended its sale "raising $134 million in aggregate consideration," adding that "this sum includes $30 million from repayment of intercompany debt between tZero and Overstock."

GSR is purchasing the same security tokens from Overstock that Overstock bought from tZero as part of "a repurchase agreement," according to Thursday's press release.

CEO Patrick Byrne said that the funding would help support tZero efforts, particularly when accounting for the amount kicked in by GSR.

"When GSR completes its planned investments, we should have over half-a-billion dollars," Byrne wrote in a statement Thursday. "We believe this will provide ample capitalization with which to build a company that can upend global capital markets."

Editor's note: This article has been updated with statements from an Overstock earnings call. Brady Dale contributed reporting to this story. CoinDesk is monitoring this developing story.

Image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Crypto Unicorn Bitmain Weighs $18 Billion IPO, One of World’s Largest

Bitmain Technologies, Ltd. is about to go public.

According to documents obtained by CoinDesk, the cryptocurrency mining company is filing for an initial public offering (IPO) potentially as high as $18 billion this September at a market capitalization of $40 to $50 billion. It will be underwritten by ABC Capital Management and listed on the Hong Kong Stock Exchange in Q4 2018 or Q1 2019 amid a wave of Chinese unicorns hitting the public markets, including bitcoin mining competitors Canaan Creative and Ebang Communication.

One of the most valuable cryptocurrency companies, Bitmain closed a $100 million pre-IPO financing round led by China International Capital Corporation on July 23 at a $15 billion valuation, nearly two times cryptocurrency exchange Coinbase's $8 billion valuation, reported in April.

Now, a possible $18 billion IPO sticker price positions Bitmain to displace social media giant Facebook as one of the largest public offerings in history. SoftBank Group and Tencent Music are expected to top Alibaba and Spotify for the number one and two IPOs of all-time in the same fiscal period.

Tencent Holdings, Ltd., Softbank Group, China National Gold Group and an unnamed sovereign wealth fund managing $15 billion in assets participated in the pre-IPO round. A minimum commitment of $5 million was deadlined by July 18 and signed over to Bitmain Technologies Holding Company, the offshore Cayman Islands investment holding group that has been linked to Chinese technology billionaire Lei Jun, founder of consumer electronics company Xiaomi, Inc.

Before this latest funding, Sequoia Capital China had led Bitmain's $50 million Series A and $400 million Series B rounds with the help of San Francisco's IDG Capital, Menlo Park's Coatue Management, Russia's DST Global and Singapore's EDBI and GIC. The Series A round accounted for 5 percent of shares at a post-mortem valuation of $1 billion and the Series B round valued the company at $12 billion. Both rounds were closed in the first and second halves of 2017.

Projected share price and volume are not disclosed, but investment banks close to the IPO are calculating the P/E ratio to be 20 within the first publicly traded year.

Financial numbers supporting this multiple indicate that Bitmain profited $2.3 billion in total across 2016, 2017 and Q1 2018, with revenues of $2.5 billion in 2017 and $2 billion in Q1 2018. Bitmain is forecasting $2 billion in profit by year's end.

A diversified crypto strategy

Five years ago, Jihan Wu approached Micree Zhan with the purpose of engineering advanced application-specific integrated circuit (ASIC) chips to mine bitcoin more efficiently. That work established Bitmain, the leading market player in the cryptocurrency mining industry. Operations have since expanded to the alternative cryptocurrencies bitcoin cash, litecoin, dash, siacoin and ethereum.

With the IPO, the co-founders' combined holdings could amount to roughly $30 billion, assuming they have retained 60 percent of the company together, per a January 2018 Bloomberg interview.

An investor prospectus for the IPO proves exactly how significant Bitmain's mining business has been. Last year, Bitmain machines accounted for 66.6 percent of the total mining volume and Bitmain-run cryptocurrency mining pools covered 40 percent of the total mining network.

When the prospectus was drafted, BTC.com, the largest mining pool in the world, counted over 560,000 machines that mined approximately 11,200 out of 36,000 total bitcoin blocks. The second largest mining pool AntPool served more than 440,000 machines for bitcoin and alternative cryptocurrencies.

In addition to income generated by hardware costs and pool transaction fees, Bitmain oversees its own international mining operation and has made $100 million, $1.1 billion and $1 billion off of its 2016, 2017 and 2018 Q1 cryptocurrency holdings, respectively, revealed to the public for the first time here.

Some of the funds have been set aside to back up to 30 blockchain companies for a blockchain research division, which shouldered blockchain data analytics service Blocktrail as early as 2016.

Outside investments are said to represent a broader effort to turn Bitmain into a digital currency infrastructure conglomerate, and this has appeared to be increasingly true in recent months.

Since May, Bitmain has invested in cryptocurrency point-of-sale system BizKey, incubated decentralized exchange DEx.top, financed cryptocurrency payments system Circle, added an ethereum extension to the Opera web browser, bankrolled blockchain developer block.one and partnered with Huawei Mobile Services on a mobile cryptocurrency application.

Bitmain is also using these technologies to build a wallet, exchange and trading platform that will facilitate the bitcoin cash ecosystem, a spin-off of the original bitcoin cryptocurrency that is seen as a likely breadwinner. The investor prospectus says Bitmain is "strategically developing" bitcoin cash by mining, investing and trading the coin and its peripheral technologies for the purpose of realizing substantial returns down the line.

The day before yesterday, Bitmain disclosed an investment in tribeOS, a bitcoin cash advertising network.

Computing the chips

In 2013, the Bitmain graphics chip progenitor BM1380 utilized the 55-nanometer process, a mode of circuit dimensionality considered to be the most cutting-edge at the time. The company then shuffled through the 28-nanometer BM1382, BM1384 and BM1385 chips from 2014 to 2015, before advancing to the 16-nanometer BM1387 chip in 2016 to keep up with the competition.

Today, the older generation of chip makers has been struggling to play catch-up. Bitmain has surpassed Spreadtrum Communications, a 17-year-old company, as the second largest integrated circuit design maker in China, according to the investor prospectus.

Huawei HiSilicon, the Chinese chip industry's frontrunner, is slipping as well.

As of December 2017, Bitmain matched Huawei HiSilicon in 16 nanometer chip sales, while Taiwan Semiconductor Manufacturing Company, Ltd., the world's largest semiconductor company to consumer goods vendors like Apple, Inc., supplied a greater quantity of 10 nanometer chips for Bitmain than the Kirin 970 chip equivalent for Huawei HiSilicon. The unreleased 10 nanometer chip joins a new class of 7 nanometer and 12 nanometer chips that Bitmain will roll out later this year.

In half a decade, Bitmain has captured 8 percent of the domestic chip design market where Huawei HiSilicon has taken 14 years to achieve 17 percent. At this rate, Bitmain could near or overcome Huawei HiSilicon's local stronghold very soon and, as the investor prospectus suggests, go head-to-head with the U.S. chip industry.

The Chinese market is already nudging out the American market within the worldwide chip economy, although Intel continues to lead the pack.

Silicon Valley has felt the pressure. It was reported back in February that Bitmain was as profitable as 24-year-old Nvidia, which had its stock price target lowered along with AMD's in April.

Analysts pointed to a likely drop-off in Nvidia and AMD chip orders due to an upcoming Bitmain ethereum mining rig. They feared cryptocurrency miners would be less inclined to purchase from Nvidia and AMD because Bitmain would outperform them at a lower cost. Ethereum had been the last major cryptocurrency to be untouched by the Chinese company's ASICs.

Aiming at AI

Still, U.S. chip makers have not been worried. AMD, 32 years Nvidia's senior, has assured investors that personal computers, gaming and data centers will sustain the business, with or without cryptocurrencies.

But the logic applies both ways. When almost every electronic device imaginable is powered by a graphics chip, making ends meet outside of cryptocurrencies is an opportunity for Bitmain as well, and the geopolitical incentive in China is stronger than ever.

Bitmain seems to be entirely aware of this fact. The investor prospectus outlines ambitions to enter into other technology fields, in part to "cope with the Chinese government's ban on ICOs, cryptocurrencies and mining activities," and in part to grow the company into a supercomputing titan with artificial intelligence.

An in-house artificial intelligence arm is predicted to generate 40 percent of revenue in the next 5 years for this reason. Bitmain is betting that neural network machine learning methods will heighten processing capacity in graphics chips for cryptocurrency and non-cryptocurrency applications alike, as with the BM1680 processor-based tensor computing card, deep learning accelerating card and intelligent server unit.

Bitmain claims testing has even shown that its AI chips have stacked up against the computing power found in Google's corresponding AI products.

With a team of "nearly 500 people" working on "R&D, platform architecture, algorithm development, software and hardware development," Bitmain has rapidly drawn on new and existing research from academic institutions and technology companies to pioneer artificially intelligent software and hardware, well beyond the scope of cryptocurrency mining tools.

Right now, the first move is robotics: the acquisition of smart robotics company Luobetec and the production of the Luo Xiaodou robotic pet.

Jihan Wu image via CoinDesk archives

Correction: A previous version of this article displayed incorrect financial numbers for the pre-IPO investment round, 2016-2018 profits and 2016-2018 cryptocurrency earnings due to translation errors in the investor documents. The charts and text have been updated to accurately reflect the accounting data.

Correction: A previous version of this article stated that China International Capital Corporation will be underwriting the IPO. CoinDesk has learned that China International Capital Corporation led the pre-IPO investment round, but the IPO will instead be underwritten by ABC Capital Management.

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