Lingting Exclusive丨"The First Blockchain Stock" Canaan Technology is listed, 26 questions to answer everything

Just now, at 22:30 on November 21, mining machine manufacturer Canaan Creative officially landed on the Nasdaq Stock Exchange in the United States, with the stock code "CAN". The initial offering price was US$9 and the opening price was US$12.6. The "first blockchain stock" was finally born.

Canaan Technology was founded in 2013. Its domestic main body, Canaan Creative, is a supercomputing solution provider through high-performance computing proprietary chips. It is the second largest manufacturer of Bitcoin mining machines in the world. The Bitcoin mining machines sold by Canaan account for 22% of the total computing power of all Bitcoin mining machines sold worldwide, and the mining machine revenue accounts for more than 90% of the sales revenue. The net income in 2017 and 2018 was 375.8 million yuan and 122.4 million yuan respectively.

Lingting Blockchain (public account ID: lingtingqkl) is the first business observation column in the blockchain industry, created by China News Award winner and Babbitt editor-in-chief Tang Xialing and her team.

Lingting Blockchain had an exclusive interview with Kong Jianping, co-chairman of Canaan Creative. 26 questions to answer all your questions about Canaan Creative's IPO at one time.

1. Ling Ting: How do you feel now?

Kong Jianping : Maybe because the listing cycle has been extended to several years, I am not as excited as in previous years, but I am still very happy that the mainstream capital market and investors have finally connected with the blockchain industry. I am also very moved to see that everyone is blessing us and this industry.

(Photo) Kong Jianping, Co-Chairman of Canaan Creative

2. Lingting: What are your expectations after the listing?

Kong Jianping: This listing is actually a link, a link between the traditional capital market and new industries, a link between the traditional world and the new economic world, and it may give rise to more chemical reactions. We also look forward to more people having a better and more comprehensive understanding of industries such as blockchain and artificial intelligence.

(Photo) Tang Xialing, editor-in-chief of Babbitt and founder of Lingting Blockchain

3. Ling Ting: Canaan Creative’s revenue model is very simple. What do you think?

Kong Jianping : In 2015, we positioned ourselves as a chip manufacturer, not a mining machine manufacturer. Our revenue comes from chips, mining machines, and AI. In 2016, we began to design, research, and develop the AI chip industry, and in 2018, we started mass production, and this revenue will also grow. As for mining machines, their base is getting bigger and bigger, and the stability of income will become higher and higher. The iteration of mining machines will increase the certainty of income, and the growth will be more clear. In a few years, we expect the blockchain and AI businesses to achieve a 1:1 ratio .

4. Ling Ting: Chips require huge resources and capital investment. What is your competitive advantage?

Kong Jianping : The POW calculation of the digital currency Bitcoin has very high requirements for low power consumption and high performance of the chip, which is much higher than other chips. Nearly 80% of the cost of a mining machine is the chip, so the profit from selling mining machines is essentially the profit generated by the chip .

This makes the mining machine industry very important in two aspects: one is technology accumulation, and the other is process technology. The chips used in mining machines are all the most advanced process nodes, and the investment is very huge. Generally, entrepreneurial teams will not have many opportunities for mass production.

The core of the competition in mining machines is the competition in chips . Therefore, chip design, supply chain and financial strength are all indispensable. The mining machine industry has entered a pattern dominated by several large companies. Bitcoin mining machine companies that are still in the initial financing stage will definitely have no chance.

(Picture) An AI chip developed by Canaan Creative

5. Ling Ting: Why are mining companies so eager to go public?

Kong Jianping : Mining companies mainly focus on chip design and have a higher level of compliance, so it is easier for them to go the IPO route.

When we were planning our company in 2015, the digital currency and blockchain industries were not recognized. Going public would allow the industry to gain greater recognition, attract and reserve more outstanding talent, and at the same time, leverage the power of capital to make better early plans for the entire industry.

6. Ling Ting: Why were the first three attempts to go public so bumpy?

Kong Jianping : For blockchain companies, especially mining machine companies, Canaan has always been at the forefront of the road to listing: from A-shares to Hong Kong stocks, and then to US stocks. We have never been rejected, but have been asked questions one after another. We overestimated the regulators' understanding of this matter, and the timing was not ripe.

Take Hong Kong as an example: We did pre-A1 communication for three months, and after passing the pre-hearing, we formally submitted the prospectus. But after other companies submitted theirs, the regulators started asking more questions. Later, the Hong Kong stock market also collapsed, the price of the currency fell, and we did not continue to promote it.

Canaan only accepts RMB payments for mining machine sales . Therefore, we also lost the market of people who use digital currency to buy mining machines, which is one of the reasons why Canaan lost a piece of market share.

That’s because we have longer-term considerations. If we accept digital currency to buy mining machines, we have to do KYC, which is very difficult to do in practice. The question that follows is: Do you need a license to hold and receive digital currency? After holding a large amount of digital currency, if you go public, do companies that buy your stocks need to be licensed? Therefore, we made it clear that we only accept legal currency to buy mining machines.

(Photo) Kong Jianping is being interviewed by Tang Xialing

7. Ling Ting: So, you started planning for the IPO very early on?

Kong Jianping : In 2015, I made a strategic positioning and put forward two points:

1: Doing business in China must be legal and in compliance with regulations, and there must be no original sin. Otherwise, you may be very successful today or tomorrow, but not necessarily the day after tomorrow.

Two: There are two paths before us, one is to make chips, and the other is to build the entire Bitcoin industry chain. From the perspective of the company's genes, we are more suitable for making chips, because the Pumpkin (Zhang Nangeng) team still has technical genes, and the layout of the entire industry chain cannot be successful in every field, so we decided to make chips. We think this industry will be very large, and it is impossible to be the first in every field. We need to focus on one field to make a breakthrough.

Of course, we will personally invest in some blockchain or digital currency projects, but we will try to keep the company's entity simple and develop around its core business .

8. Ling Ting: What do you think of the competition between Canaan Creative and other companies such as Bitmain and Ebang International?

Kong Jianping : Everyone has made great contributions to this industry. From a specific competitive perspective, because our company does not accept Bitcoin, does not focus on mining, and does not hoard coins, we cannot get a part of the market, and we do not have any profit from the appreciation of coins. In recent years, we have been the second in the market. But after going public, we will have a greater grasp of the supply chain and greater capital investment. Our goal is to strive to be the first in the industry in terms of market share in 2020.

9. Ling Ting: Could the recent problems of Bitmain be an opportunity for Canaan Creative to make a comeback?

Kong Jianping : If we talk about a counterattack, Canaan Creative's counterattack is definitely not due to Bitmain, but our own pace, our accumulation in the chip field, and our governance structure, namely board governance and CEO management, without the result of excessive internal power struggles. We certainly also hope that Bitmain can develop well. A better industry future requires the joint promotion of excellent friendly companies.

Canaan Creative has only one CEO, Zhang Nangeng. But there are two chairmen, him and me. In terms of division of labor, he is more responsible for R&D, and I am more responsible for operations. From the perspective of the entire company structure, he is in charge of everything, unless the company's board of directors needs to make a decision. After the listing, he also has the most voting rights, which can ensure the stable development of the company. My job is to cooperate with him and the company's strategic needs.

I have two basic principles in my participation in company management. First, the board of directors must implement everything they decide to do, even if it is wrong. Second, there is only one CEO, Zhang Nangeng, and everyone is under the CEO's management.

There is no god in business operations. Everyone’s decision may be wrong, but it doesn’t matter. What matters is how to maintain the company in a low-risk and long-term survival state so as to seize opportunities in the ups and downs of the industry.

10. Ling Ting: Corporate governance is the foundation of operational management. Maybe because the industry is still in its early stages, many blockchain teams are not standardized in terms of corporate governance. But your governance structure was clearly established very early on. What do you think of this?

Kong Jianping : Because the industry is too early, no one has experienced this stage yet. In 2015, I proposed some ideas about compliance and listing, and everyone agreed with this strategic direction. So in 2015, we made a very transparent company structure and governance standards, which to a certain extent ensured the steady development of Canaan Creative.

I have been starting a business myself, and my partners are the easiest and most difficult to get along with . It is good because we are friends, but it is difficult because we have too high expectations of each other. But because we are friends, everyone will pretend, and at first they will show their good side to their partners. This is human instinct. The process of starting a business partnership is to tear off the disguised mask step by step . Many people have not experienced this process, so there will be hostility, and employees will also take sides due to differences among the top management.

We should believe that no one is perfect. You should recognize the shortcomings of others . It is easier to get along with others if you know their shortcomings than if you don't know them . For example, if you know that this person is not good at managing details, this is not a shortcoming. You can match him with someone who manages details.

11. Ling Ting: Mining machine manufacturers have gradually formed an oligopoly. Will this run counter to the distributed and decentralized thinking advocated by blockchain?

Kong Jianping : In any industry, a small number of people will eventually control the most resources . In the end, a small number of people will definitely control the most Bitcoin. It may not even be the 80/20 rule, it will become more concentrated.

This is the law of free competition. When a company produces a larger volume of a certain product and has stronger R&D capabilities and financial strength, its costs will naturally be lower and it will be easier for it to go further than others. In the end, the competition comes down to who has lower costs.

Mining machine manufacturers can be regarded as important nodes for the efficient operation of this industry, but they are definitely not the center of this industry.

12. Ling Ting: You were an investor in Canaan Creative at the beginning. What opportunity led you to join the management team?

Kong Jianping : I bought a second-hand Avalon mining machine at a high price in 2013, but I lost money. Then I became an investor in 2015, and then I participated in the company. Pumpkin Zhang talked to many people before he found me. At that time, he didn't think about investing. He just wanted to take some money to make chips and share the profits when the mining machine was made. But I said that this thing must be operated as a company, which is more suitable for long-term development. He listened to this suggestion and moved the company from Beijing to Hangzhou. Then I found Tsinghua Yangtze River Delta Research Institute to participate in the investment, and other shareholders also invested in Canaan Creative at different prices.

13. Ling Ting: During the development of Canaan Creative, were there any benefactors?

Kong Jianping : From the perspective of investors, I think Changsan Institute is our benefactor. It’s not because of the money, but when everyone didn’t understand the industry, they stood up and helped Canaan Creative when we needed it most.

14. Ling Ting: What excites you most during the development of Canaan Creative?

Kong Jianping : It's the industry. In the past, China had no opportunities in the chip field, but in the fields of blockchain, digital currency, AI, edge computing, and more new fields in the future, we have huge opportunities. I am personally optimistic about blockchain, digital currency and AI, and I am excited about the tracks that Canaan Creative is involved in. This has nothing to do with making money or not. It is difficult for a person to encounter a good outlet in his life . It is difficult to identify which track will be the outlet in the early stage, and we have been in this track for a long time. It will be much more difficult for you to enter now.

15. Ling Ting: What is Canaan Creative’s corporate culture like?

Kong Jianping: We don’t have a corporate culture now, but it’s not that we don’t have one. In fact, we don’t want to generalize it. The future of blockchain companies has a lot of room for imagination. We don’t think it’s necessary to frame a concept now. We will continue to iterate for a while. If you think you have a good one, you can introduce it to us for learning.

16. Ling Ting: What is Canaan Creative’s goal?

Kong Jianping : Going public is not a goal. The boundaries of this industry are unpredictable. For example, in 2015, I said we wanted to build a company worth hundreds of billions of dollars. Several founders said, "Old Kong, one billion is enough." Then I bought them a book on the history of Intel. Intel grew from a very small company to a giant, a company with a market value of hundreds of billions of dollars.

17. Ling Ting: So, you determined in 2015 that Canaan Creative could be a 100 billion-level enterprise?

Kong Jianping : I thought at the time that the future development of chips, blockchain, and artificial intelligence might be very huge, and if we stayed on this track, we would definitely have the opportunity to enjoy the dividends of this era and become such a company.

18. Ling Ting: Will you expand into other fields besides mining machines? Will you issue coins? Will you set up an exchange?

Kong Jianping : We do not rule out the possibility of developing businesses other than mining machines. We will discuss any business that is related to our main business and is compliant, and do different things at different stages. We will not issue coins in the short term, nor will we directly engage in exchanges.

I think there are two points. First, the listed entities that violate laws and regulations must not do it, but we must pay attention to it. Because all innovations start from the edge, many regulatory policies, laws and regulations will also change for technology-driven industries that bring greater value to mankind. The blockchain industry has segmented tracks that may not be compliant at the moment, but as long as technology-driven can create a better tomorrow for mankind, it will definitely be integrated into this society.

Second, don’t be too superstitious about short-term changes driven by technology. If Bitcoin is only one dollar now, no one will be motivated. But don’t be too short-sighted about the future of this industry. If it really represents the arrival of a new era, its growth will far exceed the economy of the previous era.

Gold was an anchor in the Industrial Revolution. In the Information Age, gold as a carrier no longer meets the needs of international trade. The US dollar is. In the digital economy, digital currency will be used. Its settlement and circulation will be more efficient and more suitable for the production relations and productivity of this stage. In terms of economic volume, agricultural society was surpassed by industrial society, industrial society was surpassed by information society, and information society will definitely be surpassed by digital society. Once Bitcoin becomes a true digital anchor, its volume will definitely exceed that of gold and even the US dollar. Of course, in the digital age, digital currency must be used for anchoring. Maybe it will not necessarily be Bitcoin in the end, but at present, Bitcoin has the highest probability.

19. Ling Ting: You are firmly optimistic about the blockchain industry. What is the underlying logic?

Kong Jianping : I first came into contact with blockchain and Bitcoin in 2012. At that time, only technical geeks participated. Bitcoin is indeed very convenient for cross-border transfers. I think this is a technology-driven revolution . But at that time, I thought this thing might have a future, but I had no idea how big the future would be.

After 2014, the market started to pick up, and more digital currency ecosystems emerged. I found that Bitcoin can be anchored and traded with all digital assets in the digital world. It has become the anchor of the digital world . From then on, I firmly believed in its future. In the future, more data assets will be put into circulation, more physical assets will be digitized, and more machines will communicate with each other. Its future may not be imagined with the current vision.

20. Ling Ting: There are two types of people in this circle, one is the early practitioners, and the other is the newcomers who came in with a good professional background in the past two years. What do you think of them?

Kong Jianping : Regardless of which category, including myself, most people will eventually become cannon fodder for entrepreneurship, but it will make the soil more fertile. In the iterative process, some people will become new forces or giants in the entire blockchain field. The participation of various groups of people and this process are indispensable.

21. Ling Ting: This year, mainstream institutions have begun to enter the market, including Morgan and Facebook. What do you think of them?

Kong Jianping : They play a more important role in public opinion and connection, that is, to attract more people to pay attention to this field and bring more users into the blockchain ecosystem. At the same time, they will also squeeze out the opportunities and space of startups in some tracks.

22. Ling Ting: There is a voice saying that big companies cannot do blockchain well. What do you think?

Kong Jianping : The more unfavorable the policy is, the more opportunities there are. But the premise is that it is technology-driven, which is called disruptive innovation or marginal innovation. The closer you are to the center of power, the less likely you are to have a big breakthrough, because no one wants to slap themselves in the face. It is difficult for large companies to have disruptive innovation. They do blockchain to serve their original business, not to revolutionize themselves.

Why is there Pinduoduo? Because it is too easy for Tencent and Alibaba to make money. When you make money lying down, you will not think about making money standing up, walking, or running. All disruptive innovations are on the edge. This logic is in line with the laws of nature. It is not easy for a tree to grow under a big tree . Blockchain is on the edge now, and it will become mainstream in the future. You see, mining machines and exchanges are not made by giants. Before the policy was clear, the giants did not dare to do it and were unwilling to take the risk. But now the policy is better. It is not ruled out that in the field of non-coin blockchain, the giants may have advantages over entrepreneurial teams to a certain extent.

23. Ling Ting: From a longer historical perspective, what stage is blockchain technology at now and what is its future for commercial use?

Kong Jianping : Digital currency has entered a relatively clear upward trend, but I don’t see an immediate explosion in blockchain applications.

The explosion of blockchain applications lies in the development of artificial intelligence and data industries. The explosion is even more explosive when it comes to machines, because machines need trust, they can only speak with data, and they must be implemented with code and smart contracts. In the machine age, more smart devices are connected, and human-machine and machine-machine interactions occur. More data will be truly digitized, and the value of blockchain will explode by orders of magnitude.

In the 2G era, you could not have imagined that there would be Toutiao and Meituan. It is a little early to talk about the explosion of the blockchain industry. What will come out now are more digital currencies, including legal digital currencies, such as the DC/EP of the People's Bank of China, cross-sovereign digital currencies, such as Libra, and super-sovereign digital currencies, such as BTC. They are the mainstream in the past two or three years. The application of other industries is valuable and meaningful, but it cannot become a giant at this stage. The future growth space may exceed imagination.

24. Ling Ting: What is the connection and difference between blockchain and the Internet?

Kong Jianping : Blockchain is a value internet. In terms of value exchange, blockchain has achieved better iteration. For example, digital currency can be circulated without intermediaries. It will make the global value circulation very efficient, thus generating more value. When we talk about the Token incentive mechanism, I think blockchain and Token are the carriers and media for the value transfer of all things in the future. Everything cannot be separated from Token. I don’t agree with others talking about a currency-free blockchain. The greatest value of blockchain lies in the credible value exchange. Whether it is a center or not is to make it more credible.

But in the future, for example, there is a machine that cannot realize value exchange without currency, and it can only do other things. So Token is undoubtedly one of the most important things in the future, it is oil or blood.

25. Ling Ting: In October, the Political Bureau of the CPC Central Committee held a collective study on blockchain. What impact will this have on the blockchain industry?