Chinese privately held firm Bitmain, a company that creates Bitcoin mining hardware, earned as much as $4 billion last year based on information from Bernstein Research – a brokerage and sell-side research firm. According to Bernstein, Bitmain earned the same profits as chipmaker Nvidia. The difference lies in the time it took for each company to earn profits. Berstein declares that Bitmain’s success was seen in as little as four years but it took more than two decades for Nvidia to achieve the same success Bitmain did.
Bitmain produces special hardware responsible for cryptographic function that helps secure cryptocurrencies. One of the reasons for the company’s skyrocketing profits is its hardware price adjustments which coincided with the rise of Bitcoin’s value. The company built asics – chips specially used for mining cryptocurrency. According to Bernstein’s records, Bitmain covers almost 80 percent of the market for cryptocurrency mining hardware.
Bitmain directly benefited from Bitcoin’s rise in value specifically when the digital currency’s price peaked to $20,000 in December. Information from the site Blockchain.info reveals that mining pools (an affiliation of server operators who distribute mining rewards to ensure everyone in the pool receive steadier returns) of BTC.com and Antpool contain more than 40 percent of the computing energy on the server networks that secure the blockchain or the distributed transaction ledger of Bitcoin. The server operators are usually rewarded in digital currency. However, the entire proceeds are not collected by Bitmain. Fees collected by Bitmain – in the form of digital currencies – come from server operators who are members of the pool.
Despite the profits earned by Bitmain, its continuous financial dominance is not 100 percent guaranteed. Bitcoin’s volatile nature and the Chinese government’s efforts to restrict cryptocurrency trading makes Bitmain’s future success unsure. Still, its “massive cash position”, as similarly indicated by the Bernstein report, ensure that Bitmain is appropriately cushioned from a financial fall. Plus, Bitmain is diversifying as it currently creating chips to be used in artificial intelligence. Bitmain was founded in 2013 in Beijing by Jihan Wu and Micree Zhan.