The whole story of the feud between Bitmain and Biyin mining pool

Recently, there were reports that Bitmain sued its former executives, including CEO Pan Zhibiao, who is now the co-founder of CoinIn Mining Pool; COO Zhu Yu; and CTO Li Tianzhao, claiming that they had violated the non-compete agreement and demanded that Pan Zhibiao pay US$4.3 million (nearly RMB 30 million) in compensation.

1. Focus of controversy: mining pools

Because the whole thing revolves around the "mining pool", before introducing this matter, let us first briefly introduce what the "mining pool" is.

A mining pool is simply a combination of the computing power of miners (a mining pool is not the same as a mining farm. A mining pool is a collection of computing power, while a mining farm is a collection of mining machines). We know that Bitcoin mining is all about computing power. The higher the configuration of your mining machine, the stronger your computing power is, and the greater the probability of mining Bitcoin. However, the power of one person is limited after all. As more and more miners enter the market, the total computing power of mining becomes higher and higher. At this time, the output of a single miner becomes more and more unstable. In order to obtain more stable mining income, miners begin to unite to compete with other miners. Therefore, the concept of Bitcoin mining pools gradually emerged.

The principle of mining pool operation is simply this: we connect our own mining machine to the mining pool, contribute the computing power of our own mining machine to the mining pool, and mine together with other partners in the mining pool to obtain income. Then the income is distributed according to the amount of computing power contributed, similar to distribution according to work, more work, more pay, that is, the greater the computing power you contribute, the higher the mining income you are allocated. In this way, not only the probability of mining Bitcoin increases, but the threshold for Bitcoin mining is also lowered.

2. Parties in dispute: Bitmain and CoinIn Mining Pool

We say that the focus of this dispute is on the "mining pool", so what is the dispute between Bitmain's mining pool and the CoinIn mining pool?

Bitmain currently has three major mining pools: AntPool, BTC.com, and F2Pool, which are marked with red arrows in Figure 1; and Poolin Mining Pool mainly has Poolin, which is marked with green arrows in Figure 1. According to BTC.com official data, in the past year, AntPool, BTC.com, and F2Pool, owned by Bitmain, accounted for 17.8%, 12.9%, and 9.9% of the computing power of the entire network respectively; and Poolin Mining Pool's Poolin's computing power accounted for 7.5% of the entire network.

Figure 1: Statistics of hashrate of major mining pools

The reason why Bitmain had a dispute with Biyin mining pool is that the three co-founders of Biyin: Pan Zhibiao, Zhu Yu and Li Tianzhao, were former executives of Bitcoin Mainland, so we say that this lawsuit is actually a tug-of-war with the "old boss". As mentioned above, Bitmain currently has three major mining pools, namely: AntPool, BTC.com, and F2Pool. One of the mining pools, BTC.com, was originally built and operated by Pan Zhibiao, Zhu Yu and Li Tianzhao.

In other words, Pan Zhibiao, Zhu Yu and Li Tianzhao were the main persons in charge of BTC.com, a mining pool under Bitmain, before leaving Bitmain. After leaving Bitmain, the three founded a new mining pool brand: Biyin Mining Pool. This formed a competitive relationship with the "old owner" Bitmain. According to Bitmain, the three violated the non-compete agreement, causing huge losses to the company, and demanded compensation of 30 million RMB.

Zhu Yu once wrote in an article that in 2015, they focused on the operation of Bitmain's original mining pool Antpool. After that, they took the lead in building BTC.com, but this idea was not initially supported by Bitmain, and the three could only use Pan Zhibiao's own money for development and promotion. In 2017, the three of them resigned from Bitmain.

In 2017, after leaving Bitmain, Pan Zhibiao, Zhu Yu and Li Tianzhao launched the Biyin mining pool, but they did not provide Bitcoin mining services at that time. It was not until July 2018 that Biyin began to provide Bitcoin mining pool services and mined the first Bitcoin block that month. After that, Biyin quickly developed into one of the largest Bitcoin mining pools.

3. The beginning and end of the dispute: each party has its own reason

Before Bitmain sued Biyin Mining Pool, the current co-founders of Biyin Mining Pool, Pan Zhibiao, Zhu Yu and Li Tianzhao, had already sued Bitmain. Therefore, the "Bitmain suing Biyin Mining Pool" that has attracted much attention this time is actually a countersuit by Bitmain.

Some time ago, Pan Zhibiao, Zhu Yu and Li Tianzhao sued Bitmain in order to terminate the non-compete agreement they had signed with Bitmain. What is this non-compete agreement? The non-compete agreement mainly states that when Pan Zhibiao, Zhu Yu and Li Tianzhao left Bitmain in mid-2017, Bitmain had to pay Pan Zhibiao a compensation of US$2,780 per month for 24 consecutive months after his resignation; and Pan Zhibiao could not operate the Bitcoin mining pool during this period.

However, according to Pan Zhibiao's lawyer, Bitmain did not pay the agreed compensation to Pan Zhibiao on time, because the non-competition agreement stated that if Party A (Bitmain) did not pay the compensation within one month after Party B (Pan Zhibiao) left, it meant that Party A had waived its obligations.

However, the media said that Bitmain's non-compete compensation has actually been paid as agreed in the contract, and the arbitration committee has ruled that the three former employees should pay liquidated damages to the company. As a result, Bitmain believes that the CoinIn mining pool founded by Pan Zhibiao, Zhu Yu and Li Tianzhao after leaving the company has formed a direct competition with Bitmain and caused significant losses to the company. It requires Pan Zhibiao to return all the compensation paid and a fine of US$666,000. If the fine is added, the total compensation will exceed RMB 30 million. In addition to the compensation, Bitmain also asked the court to order the executives of the CoinIn mining pool to re-perform the non-compete agreement.

Which party's statement is the exact fact needs evidence. The case is currently being heard by the court and the final decision will be made by the court.