https://3mgj4y44nc15fnv8d303d8zb-wpengine.netdna-ssl.com/wp-content/uploads/2018/09/Is-Bitmain-IPO-Responsible-for-the-20-Percent-Surge-in-Bitcoin-Cash-696x449.jpg

* China’s **Bitmain has filed for its IPO** in Hong Kong, reports the FT.

* The filing document shows revenues grew 9-fold to $2.84bn in first half of 2018, but also show that Q2 revenues eased to $1bn versus $1.86bn in Q1 – presumably reflecting the sharp decline in the price of bitcoin and other crypto currencies since early 2018.

* Bitmain equipment mines half world’s bitcoins, and is used for mining other cryptocurrencies too. Bitmain also mines cryptocurrencies for its own account, and the filing reveals that 28 pct of its total assets are denominated in cryptocurrency.

* The FT notes that the listing is sponsored by only one bank – CICC, observing that Chinese company listings are usually backed by a long line of sponsoring banks.

### Comments

* Demand for Bitmain’s product has been driven by the rapid expansion of ‘hashing’ power in crypto currency networks – primarily the bitcoin network, where such power has grown 21-fold since the start of 2017, and 3-fold since the start of 2018.

* Growth in demand for hash-power is hard coded into the majority of cryptocurrency consensus protocols which automatically increase the difficulty of the hashing process in response to increases in hashing power – a nice formula for a hash power arms race.

* However, when the value of cryptocurrency falls, as **with bitcoin’s 67% fall since the start of 2018, the income to mining companies falls as well, reducing the return on investment in hashing equipment**.

* **New generations of blockchain technology (eg payment channels, EOS, Ethereum’s Casper) are eschewing the hash- and energy-intensive ‘proof-of-work’ protocol that underpins demand for Bitmain’s kit**, and are instead choosing more efficient ‘proof-of-stake’ or ‘byzantine fault tolerant’ protocols which rely less on hash-intensive mining – seen as improving crypto’s scalability.

* The key question for crypto-currency miners, and in turn for suppliers of mining kit, is therefore this: **over what period are cryptocurrency miners depreciating their mining kit?**

### What do you think?

[Source](https://www.ft.com/content/a013c048-c1f6-11e8-8d55-54197280d3f7)

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