Decrypting the mysterious 500.com: Is Tsinghua Unigroup behind the projected 2,500 bitcoins mined this year, manufacturing mining machines?

Wu said author | Colin Wu

Editor of this issue | Colin Wu

Currently, US-listed crypto mining companies are mainly divided into three categories: the first category is traditional Chinese mining machine manufacturers Canaan and Ebang (transformed into an exchange, with reduced mining machine business), followed by Shenma and Bitmain. Canaan’s market value once exceeded US$3 billion; the second category is the two major US mining giants Mara and Riot, which bought most of the new high-computing power mining machines this year, with a market value of more than US$4 billion at one point; the third category is Chinese companies that have entered the mining business: BTBT, The9 and 500.com.

BTBT started the earliest, but due to the complex background of the company's predecessor, it was challenged by short-selling institutions after a sharp rise and fall, and triggered a class action lawsuit; Jiucheng cooperated with the former Canaan Hangzhou team, and in addition to Bitcoin mining machines, it is also gradually filling in Ethereum, GRIN and even Filecoin, which is very radical and active.

In comparison, 500.com, as a leading company that was formerly engaged in Internet lottery, seems to be relatively low-key and even a little mysterious, but its layout, style and backing are larger and more stable. Reference: Analysis: Why did Wu Jihan sell the BTC.com mining pool? Who is the buyer 500.com?

Tsinghua Unigroup is the largest shareholder of 500.com, holding about 32.59% of the shares, and Sequoia Capital holds 8% (Bitmain's main external investor is also Sequoia Capital). The chairman of 500.com is also a senior executive of Tsinghua Unigroup. Unigroup is one of the largest chip manufacturers in China, and the controlling shareholders include Zhao Weiguo and Tsinghua University's enterprise. However, Unigroup's business is not satisfied with the main channel, which has also caused a lot of criticism. It seems to cover everything from real estate to lottery, and there are serious debt problems.

Unlike the above companies, 500.com's affiliated companies were mainly engaged in building mining farms two years ago, and have begun to develop horizontally since this year, including adding mining machine assets and acquiring Wu Jihan's BTC.com mining pool. Tsinghua Unigroup's chip background has also led to speculation about whether it will develop mining machines in the future.

Regarding 500.com’s business logic, operating conditions, and the reasons for acquiring BTC.com, the relevant person in charge accepted an interview with Wu Blockchain. The content is summarized as follows:

1. What is the business logic of 500.com?

500's current business logic is to start with mining farms and then inject equipment computing power, and has been paving the way for two years. At present, 500 has a high-quality mining farm with a load of 435 megawatts, and is fully committed to adding bitcoin mining machines of corresponding size. The company expects to achieve a power load of 200 megawatts for its own bitcoin mining machines and a computing power of more than 4000P in May 2022.

At present, the 500 system has its own high-quality hydropower mine with a capacity of 435 megawatts. The monthly electricity consumption in the peak season reaches 300 million kWh/month, which can accommodate 130,000 to 200,000 mining machines. Its electricity consumption is equivalent to the daily production electricity consumption of residents in a medium-developed eastern city with a population of one million. If measured by computing power, the upper limit of the computing power is about 15E (all placed in s19pro), and the daily output of bitcoins can reach more than 100. According to the actual equipment computing power statistics of 500's mines in September 2020, based on the total network computing power of 131E at that time, the Bitcoin equipment computing power carried by the three 500 mines accounted for 6.27% of the total network computing power.

2. What is the revenue status of 500.com?

As the largest hydropower mine in China with the most complete qualifications and the highest construction standards, 500's mine project can also generate stable business income. According to the income of 0.05 yuan/kWh in the peak season, it is estimated that the business profit that can be achieved in 2021 will exceed 90 million yuan. More importantly, this part of the income is very stable compared to the mining income of mining machines, and can effectively supplement the income of Bitcoin mining.

500.com CEO Yang Xianfeng said that BTC mining machines with a computing power of 2000P will be gradually deployed at the end of the first quarter of 2021, and a considerable number of Ethereum mining machines will be deployed at the end of the second quarter. According to the equipment purchase order recently announced by 500, 500's self-sustaining Bitcoin computing power will reach 2000P in 2021. If all of this part of the equipment is in place as scheduled, 500 can obtain more than 2,500 Bitcoins through equipment calculations within the year. After deducting costs such as electricity, it is expected to achieve a pre-tax profit of 500-700 million yuan. The profit of the mining project is not included in the income calculation, and the amortization of the mining equipment cost is not calculated.

3. Why did you acquire BTC.com?

Three reasons: (1) Mining pool business is an important part of the mining business logic. If 500 can integrate the leading mining pool such as BTC.COM into the system, it can make 500's blockchain business architecture more complete, the platform attributes will be further strengthened, and it will be more conducive to the improvement of its "closed-loop mining" business concept.

It will further strengthen the business platform attributes of 500.COM, making 500.COM a "closed-loop mining" business platform that integrates benchmark mining farms, top mining pools, proprietary computing power, and managed computing power.

(2) BTC.COM itself has good brand benefits and very high-quality customer resources. Once incorporated into the 500 business system, it can conduct cross-integration marketing with 500's existing mining business to enhance competitiveness and increase customer stickiness.

(3) The BTC.COM domain name itself has extremely high brand value and is well-known in the industry. It can serve as a portal and image base for 500 to conduct all-round industry expansion.