The last piece of the puzzle: Will Bitcoin mining machine research and development also move from China to North America?

Wu said author | Colin Wu

Editor of this issue | Colin Wu

Bitcoin infrastructure company Blockstream has raised $210 million at a $3.2 billion valuation as part of its Series B funding round, Forbes reported August 24.

The new funding comes with the acquisition of intellectual property from Spondoolies, an Israeli bitcoin mining hardware manufacturer specializing in ASIC chips, for an undisclosed sum.

The Spondoolies team will also join Blockstream to build the company's ASIC division. By raising funds, the company hopes to expand its mining operations and develop new products. "We actually expect to have Blockstream-branded miners on the market in the third quarter of next year," said Adam Back, CEO of Blockstream.

Everyone is familiar with Blockstream. It is a Bitcoin technology company led by Adam Back. It is headquartered in Canada and has offices and employees around the world. It has developed a series of products and services for the storage and transfer of Bitcoin and other digital assets.

Coindesk introduced: Blockstream was founded by CEO Adam Back, Bitcoin core developer Gregory Maxwell and 9 others (including Pieter Wuille, Erik Svenson, Jonathan Wilkins, Austin Hill and Jorge Timon). Famous people who have worked at the company include Andrew Poelstra, Samson Mow, Lawrence Nahum, Christopher Allen and Matt Corallo. It provides a source of funding for Bitcoin developers.

Blockstream, whose mining facilities have a total capacity of 300 megawatts, has also purchased a large number of Bitcoin mining machines from Shenma. On January 28, 2021, Blockstream announced that it had purchased $25 million worth of Bitcoin Shenma mining machines from MicroBT.

Spondoolies is an Israeli mining machine company. According to people familiar with the matter, it had a certain strength before 2016, but with the shipment of new models such as Antminer S9, which swept overseas mining machine manufacturers, Spondoolies had to withdraw from the market.

According to CCN, as of May 4, 2016, Spondoolies-tech has ceased operations, and its seven employees requested the dissolution and liquidation of the company "due to competition with Chinese Bitcoin hardware developers". Spondoolies' third-generation chip design still remains at 28nm, while the S9 has come to the position of 16nm chips. Guy Core, the founder of Spondoolies, turned to privacy coins and founded BEAM shortly after leaving.

Due to the 521 crackdown, almost all large mining farms in China were closed, and a large number of mining farms moved to the United States. The US mining pools, led by DCG Foundry Mining Pool, are also providing lending services to mining farms through the powerful financial groups behind them, thereby introducing their computing power. On August 15, DCG founder Barry tweeted a screenshot saying that the Foundry Mining Pool from the United States has ranked first in the world (computing power). However, this should only be a short 24-hour total number of blocks mined, and the current ranking is stable at the 7th position.

In the short term, mining machine manufacturers will not face too much domestic policy risk. Their policy risk actually comes from the United States. Therefore, high-process chips are an area that the United States strictly examines. In addition, if there are changes on both sides of the Taiwan Strait in the future, Bitmain, which relies on TSMC, will be under great pressure, and the production capacity side may also be an opportunity for North American chip companies.

However, it is very difficult for North American companies to catch up in terms of design. Unlike mining farms and mining pools, Bitcoin chips have huge design barriers. Except for Shenma, which has been relatively smooth (to a certain extent, it has followed the experience of its predecessors), Bitmain and Canaan have invested huge amounts of money and continued trial and error to reach today's competitive mining machine chip level.

Although the logic of Bitcoin mining machine design is simple, the technical difficulty is not small: it is necessary to design a hash core with the highest possible efficiency at a low voltage close to the physical process limit, and to perform calculations at the extreme voltage. It is necessary to be familiar with the chip backend design and the process nodes of the wafer factory, and use a lot of unconventional designs to design a competitive mining machine chip. Take Bitcoin chips as an example. The difficulty of the chip front end is very low, and the difficulty lies in the back-end optimization.

With the strength of the above-mentioned Israeli companies, although they were still able to compete at the 28nm level in 2015, Spondoolies' patents at that time did not play a big role in the current industry competition for high-end processes around 7nm. On the other hand, the competition for chips is more about design talents. The shortage of chip talents in North America is not conducive to the development of local mining machines. On the contrary, China is vigorously promoting hard technology and chip industries, and chip talents are constantly and abundantly available.

Finally, chip companies in mainland China also have the advantage of being close to TSMC, Samsung, and SMIC. It is very difficult for Blockstream to establish cooperation with wafer fabs and obtain production capacity. The financing amount of 210 million US dollars may be enough to build a team and conduct tape-out, but it is not enough for a few trial and error. From this perspective, China is still relatively strong in the field of mining machines. Blockstream may be able to build mining machines, but it is difficult to be competitive. It will be abandoned halfway or unable to mass produce and used for its own mining.

In comparison, the biggest competitor of the three major mining machine manufacturers may come from China in the future. As Ethereum will completely switch to POS next year, after the huge cake disappears, all mining chip talents and companies will flock to the field of BTC mining machine chip design. This may be the reason why the chairman of Bitmain "threatened" the resigned employees with "death threats" and made an example of them. Welcome to read Wu's selected reports: Huobi exclusive reports, Binance exclusive reports, Bitmain series, supervision and card freezing series, Filecoin series, currency circle chaos, mining field supervision dynamics, etc.

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