Bitmain prepares 100,000 machines for the flood season, and Zhan Ketuan takes over the mining burden

While the mining army was still migrating eastwards on a large scale to fight in the flood season, a powerful force suddenly emerged.

Recently, Odaily Planet Daily exclusively learned that a mining farm headed by Zhan Ketuan suddenly appeared in Sichuan, attracting the attention of people in the mining circle. People once speculated whether Zhan Ketuan had withdrawn from the dual CEO position of Bitmain and returned to mining.

But according to Odaily Planet Daily, this is most likely a development related to Bitmain’s “joint mining” strategy during last year’s bear market.

It is worth noting that this is a huge deployment. It is reported that Zhan urgently deployed 100,000 mining machines more than two months before the flood season, all mining Bitcoin. If running at full capacity, 100,000 mining machines are equivalent to a computing power of approximately 1.33EH/s, accounting for about 3% of the total computing power of the Bitcoin network, and equivalent to the total computing power of the Huobi mining pool.

For more than half a year, digital currencies have been in a bear market and most companies associated with them are in poor financial condition. Last year, three major mining companies, including Bitmain, Canaan Creative, and Ebang International, applied for IPOs in Hong Kong in order to expand financing channels. However, as of now, the IPO applications of the latter two mining companies have expired, and the outcome of Bitmain is unpredictable.

At the end of last year, Odaily Planet Daily exclusively reported that Zhan Ketuan and Wu Jihan had both resigned as CEOs of Bitmain. Subsequently, as the price of Bitcoin continued to fall, Bitmain was confirmed to have closed down mining farms on a large scale, disposed of second-hand mining machines, and laid off 50% of its employees.

Bitmain rarely discloses its real operating conditions, latest progress, etc., so it is difficult for the outside world to truly understand the real situation of Bitmain. But at this year's annual meeting, a live photo showed that Zhan Ketuan had covered his face and cried, and Wu Jihan held Zhan's shoulders to comfort him. Perhaps, this picture can somewhat reflect the complex and sad situation faced by the two and the entire Bitmain behind them.

On March 4, Odaily Planet Daily verified with Bitmain about the rumor in the mining circle that “Zhan Ketuan was mining in Sichuan”, and the other party responded: “It is a normal business cooperation between companies. Please refer to the industrial and commercial information. It is not a personal behavior.”

Preparing for the flood season

"Boss Zhan has come out to run a mining farm in Sichuan, with a load of 160,000 and 100,000 machines." Recently, Zhao Yiming (pseudonym), a person in the mining circle, revealed that Boss Zhan refers to Zhan Ketuan of Bitmain.

In the past two months, Bitmain has been reported to have closed down its mining farms, sold off its mining machines, and laid off employees on a large scale. However, on the other hand, there are constant new moves.

Industrial and commercial data show that on November 22, 2018, a company named Hainan Continental Ark Data Technology Co., Ltd. (hereinafter referred to as "Continental Ark") was registered in Hainan with a registered capital of 30 million yuan, and Wang Ming held 100% of the shares. Two months later, Fujian Chuangke Technology Co., Ltd. (hereinafter referred to as "Fujian Chuangke") joined and acquired 40% of the shares. Fujian Chuangke is a company that Bitmain holds 100% of, and the legal representative of both is Zhan Ketuan.

Joining Fujian Chuangke is Zhan Ketuan, who became a senior executive of the company on January 29 this year.

It is reported that the company behind the mine built by Zhan in Sichuan that Zhao Yiming referred to is Continental Ark.

According to a previous report by Odaily Planet Daily, when BCH forked in mid-November, a mining worker met Bitmain staff responsible for finding electricity at a power plant in Sichuan, but the matter ended up being unresolved because "they (Bitmain) were not familiar with how to get electricity."

Zhao Yiming said that Bitmain previously had high electricity costs in its domestic mining farms, but they have finally found a way to get cheap electricity in Sichuan. The mining farm is located in Sichuan and uses hydropower. It is expected to start operation in May.

May is the flood season in Sichuan, and the electricity cost can be less than 20 cents. In recent years, after the Spring Festival, a large number of mines chasing low electricity prices will move to Sichuan.

Odaily Planet Daily also learned that the mine in charge of the above-mentioned Zhan Ketuan will run Antminer S11 and 15 models (S15 and T15), "both of which are Bitmain's own mining machines."

Or “Joint Mining”

In December last year, Odaily Planet Daily exclusively reported that Bitmain was carrying out a "joint mining" business, in which the partner company provided electricity and mining farms, and Bitmain provided mining machines.

This is Bitmain’s way of digesting its mining machine inventory and recovering funds to “overwinter”.

A person familiar with the matter revealed: "Companies that cooperate with it also need to advance the electricity bill to reduce Bitmain's capital investment."

However, regarding the "joint mining" model launched by Bitmain, mine owner Lu Yuan (pseudonym) once revealed that the progress was not smooth.

"Under this model, Bitmain only provides machines and does not pay deposits, so few mining owners are willing to cooperate so far," said Lu Yuan.

The mining industry is unwilling to cooperate with Bitmain, but some people outside the industry are willing to do so. Before the Spring Festival, an industry insider revealed that a boss from the real estate industry had cooperated with Bitmain in mining.

It is worth noting that Continental Ark is likely cooperating with Bitmain in the "joint mining" model. On March 4, Odaily Planet Daily asked Bitmain for confirmation on this matter, and its official response was: "Ordinary commercial cooperation between companies, please refer to the industrial and commercial display, it is not a personal behavior."

In addition, Wang Ming, the largest shareholder of Mainland Ark, is also unknown to the mining circle and is most likely an outsider.

The "giant ship" turns to create cash flow

At present, Bitmain is facing the most serious difficulties since its establishment.

According to public data, on January 28, Bitmain's AntPool and BTC.com accounted for 25% of Bitcoin's computing power, while previously this figure was far more than 50%.

Last December, Bitmain was rumored to have laid off more than 50% of its employees, nearly 1,700 people, and fired all BCH employees.

According to local media reports in Texas in December, Bitmain has suspended its mining business in Texas. Just five months ago, Bitmain announced that it would create 400 jobs and invest 500 million US dollars in the city.

At the end of last year, news showed that Bitmain would cut all mining operations, "leaving at most 10 people to do some asset-light operations." Now it seems that Bitmain's mining business has not stopped, but has just switched to a "joint mining" method that requires less capital investment.

Lu Yuan revealed to Odaily Planet Daily that Bitmain has been working on cash flow. As early as the end of December last year, an insider said that Bitmain was working on a cloud computing platform called BitDeer, which would package the use of mining machines, electricity, and maintenance costs and sell them to users in exchange for cash flow.

Regarding the adjustment of Bitmain's mining business, Lu Yuan said: "Their mining farm was previously managed by Wu Jihan's people. Bitmain was not professional in running the mining farm before, and it employed a bunch of idle people. It was difficult to find cheap electricity, and the operation and maintenance were not good. Now they have separated the mining farm from Bitmain and it is managed by Zhan Ketuan."

By laying off employees, joint mining, selling cloud computing power, and divesting mining business, Bitmain is trying to make its original heavy asset model as light as possible to create a steady stream of cash flow, while also focusing on its core business and planning to launch the Antminer S17 in the near future.

There is no doubt that the mining giant Bitmain has struggled to continue sailing in the bear market.

IPO expiration

After the new year, Odaily Planet Daily obtained a photo of Bitmain’s annual meeting.

Under the bright lights, Zhan Ketuan became emotional and wiped his tears with a tissue in his right hand, while Wu Jihan supported him by his side.

In the photo, Wu Jihan has a beard and looks much more haggard than in his previous public images.

Wu Jihan’s Twitter account had been very active before, but it seemed to have disappeared since December 18 last year, and he only retweeted a tweet from Bitmain introducing the BM1397 chip on February 18.

Lu Yuan saw Zhan Ketuan appear at the Beijing International Airport on February 26, flying from Beijing to Shenzhen, alone.

Bitmain is slowly divesting itself, laying off the BCH team, reducing mining farms, and spinning off non-core AI businesses. Even the two founders are moving away.

On December 28 last year, Odaily Planet Daily exclusively reported that Wu Jihan and Zhan Ketuan would both step down as CEOs of Bitmain, and their successors would be a person named Wang. Later, it was revealed that the person named Wang was Wang Haichao, the former product director of Bitmain. Zhao Yiming said that Wu Jihan and Zhan Ketuan were not responsible for the specific affairs of Bitmain at present, and they only existed as shareholders.

“Both Zhanketuan and Wu Jihan understood that dual CEOs were not good for Bitmain, so they let go,” Zhao Yiming said.

"Joint CEOs are prone to problems. Historically, few joint CEOs have had good results. A horse has two heads, so how can it go?" Jiang Zhuoer, CEO of Litecoin Mining Pool, told Odaily Planet Daily: "If I were Wu Jihan and Zhan Ketuan, or their shareholders and investors, I would think that they should split up and each be responsible for a part of the business they are good at. Then the two of them can cooperate with each other, and the result will definitely be better than being tied together and restricted."

On March 1, All Weather Technology reported that Wu Jihan may be in charge of a company called "Matrix" in the future, with Ge Yuesheng, former senior investment director of Bitmain, as CEO.

Zhao Yiming revealed that when Wu Jihan was preparing for the new company, he contacted the employees who were laid off from BCH, but the progress was not smooth. "Many people were dissatisfied with the last layoffs. Many of the more than 40 BCH employees chose not to go back."

In less than a month, Bitmain's IPO application in Hong Kong will reach the deadline. Obviously, at the critical juncture of whether to go public or not, Bitmain has a lot of information that is inconvenient to disclose publicly, but key operational actions such as business transformation and personnel adjustments have not stopped.

Even so, a pre-IPO investor of Bitmain once revealed to Lu Yuan that he no longer had hope for Bitmain's IPO. "Besides, isn't listing in a bear market just selling assets at a low price?"