Crypto News: July 31, 2018

Tomorrow, subscriptions to “Off the Chain” email newsletter will increase from $10/month to $30/month. Anyone who subscribes before tomorrow morning, will be grandfathered in at the $10/month price for life. You can sign up here.

——————————————————————————————————————

Bitmain, the largest manufacturer of Bitcoin mining hardware, is printing money.

Yesterday, Fortune reported that the company pulled in $1.1 Billion in profits in Q1 2018. These are impressive numbers for a company that is only 5 years old. Here are a few things to consider:

  • Bitmain just raised ~$400M in June and is now supposedly seeking more capital (I’ve heard up to $1 Billion). This is surprising to many people, given the rumors that Bitmain is preparing for an IPO on the Hong Kong Exchange. Either way, the company is growing very quickly and has the benefit of access to cheap capital — it appears they are taking advantage of it.

  • Bitmain has historically been exclusively focused on cryptocurrency mining. The core business is built around Bitcoin mining, but has expanded to Ethereum, Litecoin, Monero, and others. The company’s executives are fairly open about their desire to transition into the artificial intelligence and machine learning fields.

  • Many people in the crypto industry have concerns around Bitmain’s size, specifically when it comes to their ability to “control” the Bitcoin network. If Bitmain was to provide more than 51% of the network’s hash power, the idea of Bitcoin’s decentralization would be violated. It is unlikely that Bitmain is close to 51% (they report only 4% control) but this is important to watch because it could affect the long-term sustainability of the company’s mining business.

  • Bitmain CEO, Jihan Wu, is an impressive entrepreneur. The scale and speed at which he has built this company can not be overstated. We normally see this type of growth from software companies, not hardware manufacturers. I tend to agree with Ryan Selkis that Jihan would be one of the most admired people in crypto if he had more exposure to the Western media.

Bitmain is one of the most valuable companies in the (crypto) world. The team isn’t focused on crypto mining though. They are obsessed with building a globally dominant artificial intelligence and machine learning business. This would put Bitmain in direct competition with Google and other industry behemoths.

Don’t dismiss the company’s chances. They have significant experience building ASIC machines that outperform anything else on the market. Additionally, Bitmain has the capital necessary to conduct research & development, hire the best talent, and fund large scale production runs. They have even publicly revealed plans to triple the size of their development team in Israel.

If data is the new oil, computing power is the new steel. Just as Andrew Carnegie led the expansion of the steel industry in the 19th century, Jihan Wu is leading the expansion of advanced computing in the 21st century. If Bitmain is successful, it is likely for Jihan Wu to go down as one of the greatest entrepreneurs of our lifetime.

- Pomp
——————————————————————

THE RUNDOWN:

Banking giants sign up for a trial blockchain project: Nine banking giants including Citigroup and Barclays are participating in an app store trial for programs based on the technology. The currently in-trial app store, LedgerConnect, was announced Monday by foreign exchange processing giant CLS and tech titan IBM. It’s expected to launch in the coming months. Read more.

No, McDonald's isn't launching a cryptocurrency: McDonald’s, on Sunday, unveiled the MacCoin—and the business world shuttered. Given the still-fresh memory of Kodak’s announcement it would launch its own cryptocurrency, many feared the restaurant chain was hopping on the bandwagon as well. Although McDonald’s touted the MacCoin as the “first fully food-backed global currency,” it’s actually just a heavier-than-usual coupon for a free burger. Read more.

Novogratz's Galaxy Digital will start trading on a stock exchange this week: It should be a triumphant moment for Mike Novogratz, a former Goldman Sachs Group partner, and a milestone for the industry, yet Novogratz is having second thoughts. He reflects on the "frustrating" demands of Canadian regulators that dragged out Galaxy’s listing for months and trapped his investors as Bitcoin collapsed and crypto fever cooled. Read more.

New extradition request complicates case of Bitcoin fraud suspect Alexander Vinnik: A panel of senior judges in Greece has accepted a new Russian extradition request for bitcoin fraud suspect Alexander Vinnik, further complicating an international legal battle. Vinnik is a Russian former bitcoin operator and was arrested in northern Greece last year on a U.S.-issued international arrest warrant. He denied the allegations of fraud and told the panel of judges that he was committed to fighting U.S. dominance of the global financial system. Read more.

Blockstack's first business app wants to help employees earn more crypto: A new bitcoin wallet startup thinks it could also help decentralize the world of work. Misthos launched its multi-signature wallet Monday on top of Blockstack's decentralized application platform. The wallet is designed for project teams, investment partnerships and other ad hoc ventures to manage the divvying up of income (received as bitcoin) among their individual members. Read more.

——————————————————————————————————————

If you enjoy reading “Off the Chain,” you can click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

——————————————————————————————————————