Nishant Sharma: Bitmain – Rising to Mining Dominance (#314)

Transcript

[Music] hi welcome to epicenter my name is Sebastien Ogier today our interview is with Nishant Sharma Nishant is head of community relations at bit main this interview was done by sunny in person at the e.t.c summit in Vancouver in early October just before DEFCON in this conversation they discussed a number of things there's the history of bit main and some background on the founder Jehan woo he was the first person to translate the

Bitcoin white paper into Chinese many years ago however as they discussed Jihan was ousted as CEO in late 2018 early 2019 after a failed IPO now since this interview was recorded in early October there's no discussion of the recent drama at big main which some people have qualified as a civil war within the company so in late October just a few weeks ago Jehan Wu regained control of the company in what appears to be some sort of coup these events are still unfolding but if you're interested in learning more you should follow Dovie Wong on Twitter she is a founding partner at primitive crypto and she's been reporting on and translating a lot

of the documents that are coming out of bit main I'll add her Twitter handle to the show notes but what did they talk about is how bit main has grown into to become a superior player in the ASIC manufacturing space and how they balance this part of the business with other business models mining pools of course bit main operates two of the main Bitcoin mining pools and pool and BTC comm and they also talked about bit Maine's role in some of the great debates of the last few years like the scaling debate the Bitcoin cash split prog POW etc I really enjoyed listening to this interview we've never had an

ASIC manufacturer on the podcast before and it's a topic that we rarely get the cover so it was interesting to get a glimpse into that business some of the challenges they face and of course looking at the future although the future is now somewhat uncertain with this drama happening within the company anyway sunny did a great job on this one and hats off to him for pulling this off before we go to the interview I'd like to tell you about the sponsors which make this show possible goal is the oldest and most enduring form of money it's a hedge against the financial system it's a hedge against the volatility in crypto and if you're holding crypto and you want to buy gold there's no better place

to do that than vault or comm vault Row is the leading hedging solution for the crypto community they've been around since 2014 and you can start trading gold as little as one milligram now imagine that the apocalypse is coming right major climate catastrophe financial markets go to zero civil unrest people in the streets no more infrastructure no more electricity nothing well I suspect that in this scenario people would go back to gold people would go back to sound money and if you bought gold with voltar oh well it's your gold so you can have it delivered to you now you might not get it delivered after the apocalypse because society has collapsed but you know you get on a horse you go to

Switzerland you get that gold back and you've emerged victorious from the apocalypse you're rolling in the dough man doesn't that sound good that sounds good to me and that's why I'm buying gold with altera to hedge my bets against the upcoming apocalypse if that sounds good to you go to vault or comm and start trading today and once you create your account you can click on the little yellow support button at the bottom of the website and let them know you heard about them on epicenter and I also want to mention now this is not investment advice I'm just letting you know the Volturi is currently raising funds so if you go to blog vault or comm there's an article there that explains their current funding round on bank to the future it's open to the public I

believe they've raised over a million dollars right now and there's about 10 days left on the funding round so if you're interested in learning more about that go to the blog and check it out we'd like to thank vulturo for those support of epicenter we're also brought to you by cosmos the Internet of blockchains now in preparation for the upcoming inter blockchain communications protocol IBC they are announcing the second ever adversarial testing at Challenge game of zones now this is a competition that will create an educational opportunity for people to learn about the nuances in the IBC protocol because an interoperable blockchain has never been done before the halassi learned before we launched this you know in production the competition will start in December

or January the dates are still being finalized but the interchain foundation is providing 100,000 atoms in a price pool for winning teams and so there will be multiple prizes attached to multiple challenges so if you have an interesting project that can leverage IBC you should definitely go to cosmos Network / geo Z and there you can get involved by joining the riot chat where you can chat with members of the Kosmos team and other projects that are you know potentially taking part and gamers owns it's gonna be really cool we're looking forward to seeing what comes out of this you should also check out the cosmos blog because as I'm recording this just

a few minutes ago they've just released the recap article for the SF blockchain week defy hackathon there are all the winners announced lots of pictures and videos definitely check it out if you weren't there and there's even a picture of me doing a weird d5 VR thing we'd like to thank cosmos for those support of epicenter and with that we go to Sony's interview with Nishant Sharma so we're here today live actually first time I'm ever doing an episode live and so we're here today at the etherium classic summit and we're out here in the lobby recording there's a bunch of new events coming up next couple of weeks and so we tried to do something different and do

some live recordings at these events see who can grab from the crowd and put on a good episode and so we'll see how it goes and given that it's a live event and I'm the only host this time it's also my first time solo as a host so I'm here today with Nashawn Sharma he's the head of Community Relations at bit mean one of the well not one of the I'd say the largest ASIC manufacturing company and it also operates a number of mining pools so intron welcome to the show could you please introduce yourself thanks for having me I'm a fan of epicenter I've been hearing a lot of good things about it and always a pleasure to meet you at different conferences sunny so thanks for having

me so talking about myself I joined the cryptocurrency space in early 2014 by joining an ASIC maker based out of Shenzhen and then when the 2015 bear market happened we realized we couldn't keep up and we had to pull the plug and then I joined the company that was doing everything right everything we wanted to do right bit mean was doing it right so I joined between then 2016 beginning of 2016 which ASIC company was that before you joined bit mean it was called bit crane BITC are any like a crane that does my thing yeah how I came across that one was so I was working in Guangzhou for in the led industry in China and the company was not very interesting like the company's product

wasn't that good and yeah the OU led industry in China was just overloaded it was over supplied and it was surely not the best company to work for at that time so I was looking for other things to do and then I met this time on his American guy who had secured the chips from hash fests liquidation he was trying to make a sick - based out of Shenzhen using those chips and that sounded like very cool exciting idea and the person seemed like someone I can bet my career on and so I did that I joined him and it was a great ride until the bear market of 2015 happen cool and so what would you say is your sort of role

at bit main so you know I met you first time last year at in December we were at this weird event it was sort of like it wasn't officially a Bitcoin cash event but it was essentially a Bitcoin cash event and so I met you and a bunch of the Bitcoin cash team that led to our two-part episode tamari but then I've seen you again multiple events at three events at the Z cash conference they had a theorem classic event and then we're both going to Def Con next week so dark tomorrow right and so what would you say is sort of your job when what what does it mean to be a community relations manager for a mining company so that's a good question because

bitman is very unique not just because of its size but because also its role that it plays in all the proof of all cryptocurrencies that it makes products for it impacts the scripto currency community is an integral part of the ecosystem so what we do matters a lot do these cryptocurrency ecosystems so we want to act more responsibly and that's why a major part of my job is to maintain dialogue with these cryptocurrency communities so it's more with the sort of communities like rather than with the miners themselves so that there are other people who handle maybe I don't miner overly yes there will be the sales team of the and miner brand so they would deal with that and so that's why you see me at events like the EDC summit now or at the Z cash conference or the etherium conference or other

events where there are multiple communities coming together yes that's a major part of my job the second part a smaller part is a PR strategy for between the holding company so I don't do PR for the ad minor brand or for the BDC dot-com brand or and pool they have their own PR and marketing teams I only do strategic behalf of the holding company and if there's any guidance needed for these brands I give them that's the second part much you can give a brief summary so the listeners have an idea what are some of the main major brands that bit mean it has so between is a is the best example of vertical integration in the crypto ecosystem some pitman makes the chips it makes the machines it operates builds and operates mining farms for

others as a service it also builds and operates mining farms where it has its own stake as well which way'd its mining for itself which is smaller part of the business then it also operates mining pools that these mining farms would connect to and it also has a collaboration with the cloud mining service now it's called bit near bi TDE or and of course another major business of between is the AI business where we making chips for AI we're very are making chips like deep use like Google CPUs we also call them TP use this one is called so phone s o ph o n your listeners can go to so found out AI to check it out or even place orders we have four generations of new chips

already released in AI since 2016 so that's going strong yeah these are major businesses or between it probably doesn't cover everything between does which has a lot of things that Whitman does in this space we also invest in a lot of startups and open-source projects in this space to grow this space yeah these are the major things we do cool and so you know I I actually asked you earlier if we could get the new CEO of with me what was his name again hi Cho Wong hi chai WAN uh and but you know you've mentioned to me that he tends to be more of a sort of reserved guy doesn't prefer to make a large public appearances which is I guess you could say quite a bit of a departure from the previous CEO Jihan cos you know

he was very well known very active in the community is this like was this a decision that was made from you know as a purposeful shift from the past or is this a general like a cultural difference between Chinese companies in America and while Jihan maybe was an exception to answer your question it was it is the latter there's a cultural difference in companies in the West and companies in China because of the social political nature of China so the companies are less out there and they have a lesson need then companies in the West to be out there yeah that's the major reason and talking about the difference in back then and now the difference is mainly because of jihun he is a well known person in the crypto sphere even before Bittman was a thing

because he translated the Bitcoin white paper to Chinese he was the first person in the world to do that oh wow didn't know that yeah because he saw the value of it he saw the value Bitcoin before anyone in China or anyone who speaks Chinese only saw the value and then he started a bit mean much later and because he was driven by this cause and then the great scaring debate of Bitcoin happened he had a strong opinion on intense why he was out there even when he was CEO of pittman because he really cares about Bitcoin and the road it's taking he really wanted but going to grow the way it's he he believes was the best way and many others believe to and that is what he saw him more out there and when the

great scanning the bid was bhai over by Bitcoin cash poking off from Bitcoin there was no need and you didn't see jihad out there after that like he was before and then changing the getting a new CEO was just a normal evolution of the company which is the same in the West or anywhere when the company grows sauce so big the CEO is often tend to assign the role to someone who they think is a better person should be at the wheel and that's what happened with the new change and the new CEO like I mentioned companies in China do not have this need or prefer not to be out there so much so he's not so out there yet and so you come and take his place I I can't because there's so much happening at

between that I don't know about it's such a big company so I can't maybe I know only the tip of the iceberg okay the CEO would know everything so he would be surely much better represented ever bit me and I can never be yeah because I you know I've heard people refer to you as G Hans right-hand man and so I figured maybe that's why I agree to the interview so oh I think that's that's missing guiding to say that because there many people that are helping Jihan and it's not just me I'm just one of them but I guess I'm more out there in the cryptocurrency community is outside China so that's why you may have heard of that from some people in the cryptocurrency space outside China so could you tell me a little bit about the history of bit mean

and so yeah when was it created and what was was it always a mining ASIC company or was that something they pivoted into who's the founders so that's a good question I will tell you what I know which won't be every detail but I will go into as many days as I can here so Jian was always into researching about currencies how the role they play in the evolution of mankind and the world today and then he read about Bitcoin despite the language gap in the cultural gap he knew it was a game changer and it will change the world we live in and so he bet everything he could but even borrowed money from his friends and family to buy more bitcoins and even when the price plummeted the first time from like nearly forty to

fifty dollars to two dollars he only borrowed more money and maxed out his credit card to buy more bitcoins and then he was just counting the days it would take him to do a job which is like the one he was doing at that time to pay off all that money if Bitcoin didn't work out and then yeah it worked out eventually and he also started a small mining operation somewhere in China I don't know the details of that but wasn't as big as he would imagine it to be now and then in that paid off well and then he invested in the fried cat startup through the global Bitcoin Stock Exchange back then which was mentioned and introduced on Bitcoin dr. orgy back in the day and that paid off very well then he researched on Asics because Asics was how a fried cat was giving

such good returns to its investors to his investors and then he he somehow stumbled across Mike Reider co-founder who had previously approached the VC firm that jihad was working for to raise funds for another startup that mike lee wanted to do so now jihun when he has this idea stumbles across my cree again explains to my curry about his ideas on a sec making for bitcoin mining and my curry after thinking more about it and researching bitcoin a bit i think mike reset it was two hours he thought he took to understand bitcoin and research it he said yes and that's how they found it between was that a Freudian slip is maybe actually I don't know what you say so they started with ASIC manufacturing

from my get go the gun manufacturing fabulous design the design some between is a fabulous design ASIC design company we don't manufacture it myname manufacture by TSM synth I want our factory we outsource it to just like most fabulous chip companies that you heard of like Nvidia or AMD or a RM or Intel or Apple or Intel sorry makes their own chips they are the exception but everyone else outsources them to a factory like TSM see this is the best in the world at the moment to make chips but so then the goal was always a sick design not yawning pool because I know there's an up couple of ASIC manufacturers who or designers who started running miner mining and then they decided oh you know to get the edge we need to start building our own stuff seems like bit me came from the other direction

really yeah I mean I think every other example that I know of today followed bit means lead they saw what Whitman did and then did the same bit mean is the best in example of vertical integration in the cryptocurrency ecosystem so a bit man makes the chips maybe makes the miners sells them on its website so it has a really detailed website to is that its operating then it operates builds and maintains mining farms of the largest scale they have the most experience and also operates mining pools that these mining farms would connect to later and it also has Bitcoin wallet under the brand off but BTC calm it also has been easy calm blockchain analysis and Explorer and other analytic services for the blockchain

so yeah it's very well a vertically integrated into the space and when bit means example was out there others did the same cool shell jump into talking a little bit about the mining hardware so currently you know bit mean obviously is the largest manufacturer or seller of ASIC hardware do you know roughly what percent of you know I've heard numbers like as high as up to like 70% of the ASIC market you have any more you know precise numbers of like roughly how many let's say I guess it's hard to say because of different coins let's say Bitcoin as an example of well how do you guys I'm an estimate of how what percentage of the ASIC market it's unknowable because you don't know who

which machine mind the coin or because it's mine how about by ASIC sales though I think we've never done this kind of for comprehensive analysis and it's also hard because we can't be sure which customer who bought tons of machines from us maybe three years ago is still mining with those machines we don't know so it's really a noble even if we did such an analysis it would be way off the correct answer but it's a widely accepted fact and something that Frost and Sullivan are reported in their report that we have about seventy percent of the market even a tray at the conference at the a theorem classic summit you know you were on our mining panel this great panel

and there seems to be like a sense of resentment in many different communities often against bit Maine where that it's a little bit maybe too big and to me it's a little bit of villainizing your success in a way so yeah why do you think that like there is this general sense of resentment towards bit mean as a company the kind of scene that sometimes has a bit of a boogeyman in the space that's a good question so of course I've given it a lot of thought in my role as PR for bit Maine and first I used to think it was because of our involvement in the great scaling debate that all this started well it did start because of that it increased this

political hatred against between at that time when we were in the great scaling debate but it's stayed that way not because of that only stayed that way because we have become so competitive and big and this reminds people in the cryptocurrency communities who join this cryptocurrency communities to escape the establishment outside this space of the establishment so that is a reason that we that is inescapable when you are competitive and successful or as successful as you can be and that is something that we couldn't have avoided even if we were not involved in the great scaling debate and that is something that I was reminded of again

today when there was this panel today in the EDC summit about governance or community and someone asked who would be the biggest threat to et Cie and the answer promptly came from one of the panelists was the person with the maximum of money yeah cryptocurrency communities by nature of their trust lessness by nature of the suspicion of the establishment have this inherent suspicion against any competitive or established player do you think that there's the mining heart space is inherently centralizing is there a sort of fundamental incompatibility between competitive capitalism which the mining

space is and decentralization thanks for asking that question I don't think it's the case I think what is often described as centralization in this context is actually just competition and competition will obviously do one player emerging competitive than the others if it's fail competition and so the more fear the competition is the more you will see a successful player emerge and that successful player will be the victim of this hatred of so-called centralization are you familiar with the economist Joseph Schumpeter no he also is a you know well-known political economist you know his entire theory of competition is basically he thinks that

in a competitive marketplace you will have these monopolies and oligopolies but competition really comes through innovation and the term he's most famous he coined was this term called creative just creative destruction where you kind of at any given moment there is no basic manufacturer like that maybe you know there's one it's the manufacturer that's the largest which is you guys but competition had one moment there might not be look like this amount of competition but over time if you look in the scale maybe who is that largest ASIC manufacturer at any given my time keeps changing yeah that's true so before event I joined the space Batman was one of the underdogs the

biggest players are the most hailed players were butterfly laughs pond Elise K and C minor these were the big names and then they were some others that surely were scams they were the big names and Bittman was just one of the underdogs and of course a fright cat that's the one that makes the best miners and there was no reason to doubt they won't they ship their products they had the best product at that time and they was of course I will on the first ASIC manufacturer in the world with the biggest head start women came from nowhere with not enough resources to compete with these well-funded companies many of these were well-funded companies so how did he do it by just being the best by taking so I was working for a

competitor of Whitman at that time and all of our customers would come back and tell us everything we are trying to do was doing the best in that so they would tell me that hey your product shipped later then bit means product but I so ordered the bit means product at the same time when it reached me before your said hey your machine couldn't work seven days even after I got it my Mittman product has been working for one month and no problems everytime everything what happened wrong in any other manufacturer turns out Pitman was doing right and these were not very innovative things these were not very um groundbreaking things they were doing right they were just simple things like supply chain management efficient light chain management a machine that is reliable machine that performs as advertised so what do you say it was

more of a operational project or wasn't more of a technical like in the beginning it was operational because the first ship that the s1 the first machine from between wasn't even using a totally in-house design the chip was designed by outsourcing it to other ship engineers from Russia and some US and some out sourced designs it's only after cs3 I believe that bit main made its own in-house completely in-house design of chips so it wasn't purely technical in the beginning it was operational and then it became technical with when they had more funds and when they saw the returns being promising I said and so you guys started working on you know the

first famous miner was s1 and that came out in a 2015 I think it wasn't the most competitive when s2 wasn't the most competitive even as three hours in the most competitive and s5 turned out to be the most committed there's that like your iPhone product where it's like oh yeah we in change and it wasn't just because I mean we could have had competition maybe I don't know but it came out when the 2015 bear market happened so this was make a break for us at that time so expand all the other ASIC manufacturers were going out of business yes so we would have gone out of business too if we did not release a very competitive product which we managed to that kept bit Maine alive through the bear market of 2015 not

thriving just alive and after that yeah when the bear market turned around and bit Maine was already prepared for it when did you guys start working on Asics for other change as well we started doing that much after I joined between which was in 2016 I cannot remember which was the first altcoin minor we released but maybe it was the light coined minor yeah I'm not sure no but I think it was like coined minor in the end near the end of 2016 somewhere in 2016 so that's when we ventured into other coins and we never turn around we've been making cryptocurrency miners since then how many different hashing algorithms do you guys make - four on the top of my head maybe five I mean because it's a tough

question because we are not making them right now maybe we made like coal miners back in the day we made earth meth hash miners two years ago for you you're not selling them now and yeah I don't know if we are going to make them again in the future because that's part of our confidential are indeed you know house maybe we can walk through a little bit about what the lifecycle of a chip is because you know I'm actually not come familiar with this and so it's so it's not like there's a constant production of like you know most manufacturing that you know you have a conscience shipment of okay we have like a couple hundred Asics coming off the assembly line every day so well you seem to be describing is it's like okay a batch production and then sale process or one thing I am

aware of in the mining world is just often sometimes sale and then batch production could you walk through a little bit about what is the strategy team admit me and decided okay you know what we want to go build a six for Z cash what comes next what's the timeline so the timeline is changing depending on the difficulty of the algorithm or the difficulty of the particular ASIC I believe it used to be the whole product lifecycle when I joined the space used to be three months the whole cycle that time these chips were like 40 nanometer even bigger processes than 40 nanometer because in three months the difficulty of Bitcoin was rising like crazy it was just skyrocketing so after three months a miner becomes obsolete in

general computing they have this Moore's Law of like doubling every two years you guys have like a equivalent in the mining world it's a smooth launch steroids there's no word for it but if it is there a UH you know okay the these chips become deprecated in how long there's no such law it just depends on the competition so if another player comes up with a better chip that will keep pushing the difficulty even higher yeah and make the difficulty increased even steeper than it was before so it depends a lot on the competition so when I joined there was a lot of competition like I mentioned this was oh I didn't mention now this was like when everyone was thinking Bitcoin mining was analogy to the California Gold Rush this

everyone thought make the shovels and you will make more money than the gold diggers and so everyone was making a six when I draw in the space there was so many companies around the world making a six and that was pushing the difficulty even more steeper and if you release a new ASIC minor which is most efficient to mine Bitcoin in the world now maybe next week someone else releases one and then you have a problem at your hands and the only solution is to release a better one than your previous one before any other competitor does there was no other way around it and so in the beginning the life cycle was like three months then it became six months then one year and then when we released the s9 which was one that everyone she had changer yeah yeah the ad minor sign

based on the 16 nanometer process that was breaking like this threshold or in the industry or technical threshold that everyone was stuck with and the s9 stayed for the longest time in betweens history or in the history of Bitcoin no one regeneration of - stayed this long I was looking at the website today and I think you guys are still selling this yes they are still being sold people are still buying them or buying even secondhand s-line miners now so as times survived or was profitable even foreign masses of course there are people who can get almost free electricity for them even an s7 is still profitable but for the masses or generally speaking s9 was profitable for about three years that is a big change compared to the three months like life

cycle that I entered the industry with so yeah let's jump back into the timeline Sol ok back to the story of Aussie cash a sec so well here we decided to make the ASIC do we start designing first or do we start like you know or do we try to gauge try to get pre-orders how do how does that work we start designing the chip well we before you even deciding to design the chip we will see what what the community's beliefs or sentiment is about these things we don't want to do something that seems like we are fighting the community or doing something against a road map we don't want to disrupt what their plans are so first we make sure that the community doesn't have any you know hard feelings against such plans that we may have

because we don't want to make any investment off over time and money on something that the community wouldn't like right it's counterproductive when there are some cases though like pretty well publicized about like you know sometimes the community wasn't quite fully aware or accepting than the one I know is I'm good friends with David from SIA and so you know you know I know from the Shia community there was quite a bit of drama last year yes so the community relations part we have although we have increased this since the last two years before that it wasn't so effective and we didn't do it for every community because we have limited resources at our end right now it's just me doing it and we are looking at expanding the team so I have more help so I can keep my ears on the ground in many communities not

just one at a time usually it's hard to keep up with so much happening overnight all the time in different time zones for one person so see I wasn't something we were following at that time and also SIA algorithm was purposely an ASIC friendly algorithm because the founder envisioned making money by selling Asics for his own coin so that makes it easy for anyone to make a 6-4 so kind of assumed that they were gonna be welcoming a base X yes that's what you were to zoom but it seems like he was very surprised that the biggest ASIC mining manufacturer is a minor maker in the space was making Asics or announced they will make Asics for a coin that is a sec friendly yeah

that doesn't make sense to me one of the common critiques against many ASIC manufacturing companies is this idea of hidden mining and so could you like maybe describe a little bit about what hidden mining is so hidden mining or secret mining as it's popularly called is a practice of an ASIC maker using next-generation products see directly to mine a cryptocurrency and not releasing it to the market or the public and our policy on secret mining is no tolerance we have a zero tolerance policy published on our blog it's part of our transparency initiatives what does it mean to have a zero tolerance like is it like there are situations where like employees of bit Maine or some basic major actors we're mining

into that means we will never do it and we will never endorse someone who does it that's what it means would you also say has been Maine ever secret mined before never because Whitman's always been working at a very large scale and it's a major income generator or source of income is selling the machines which is less riskier than mining it mining with the machines yourself what about scenarios for example in like Manero there were cases where Manero was concerned that there were Asics and they kind of announced that they're gonna hard work to fix it and then the hash rate dropped by like eighty percent and this is right around the same time about two months before it

mayn't announced their I think it was 2x m3s or if I what the exact number was x3 I guess yeah yeah so what would be your response to those allegations I believe no one in the community raised allegations against Pittman it was quite clear for everyone in the community that wasn't Whitman doing it so I heard during this conference EDC summit two people speculating on other ASIC manufacturers having done it I'm sure it could be some of the ASIC manufacturers who who could have done it probably a smaller one because one that is big of the size of it mean it doesn't make sense because there are thousands of people who will find out add between and the word will get out so there's no reason for us to do that compared to making money by selling the Machine

instantly so yeah we are just disincentive eyes to do that but it could have been a smaller player and also there are players who like David that you mentioned of see a coin they advertise their business model as being secret mining as a service that's their business model so assuming they even have one single customer secret mining is happening if we assume that companies like David's even has one customer one thing I never quite understood is why is secret mining so frowned upon well okay I understand that if you saw if you promise to sell customers and your mining on stuff that they paid for yes I guess my question is why does bit Maine cell a6 instead of mining using them as I mentioned man talk to the

major source of income for between is selling the machines and more importantly selling a mining experience do the users of the machine because we just don't want to sell the machine once we want to keep the customers coming back for more and to do that we have to sell a good mining experience to the customer not just a machine which is the reason between succeeded during the time and everyone was making Asics you know the back in the day now if we start competing unfairly with new generation Asics with our customers it will jeopardize their mining experience and our cash cow know why even sell in the first place I agree like you know if you're selling some and you're competing assuming between is a smaller company looking and doesn't want to stay in the

business for more than one or two years and just wants to make quick money we would have to be smaller for sure I think it actually needs a larger company in a way where instead of selling you guys have the largest ASIC manufacturing and now instead of selling it to a bunch of miners around the world wouldn't it be better to use your economies of scale become find the largest warehouse in the world you can with and you know get a great partnership with an electricity company and just run the largest mining firm why sell your Asics instead of using them yourself as the simplest answer is to distribute risk if you do it ourselves we are betting on the price going up we are betting on others not

doing the same we are betting on the difficulty staying stable so we are betting on a lot of things and imagining that kind of investment it's just crazy risky to do that that makes sense but you know if you turn a hedge one day make sense to maybe sell off a portion not vast majority right so that's what we kind of do but we keep a very small portion of the farm ourself and we sell the vast majority of the mining farm that's our mining for business it just seems very odd to me the words like and it's just what like all basic manufacturing some other basic manufacture may may find it profitable do mine themselves especially if their miners are not competitive enough to

sell in the market against pit mines miners then it would make sense for them to do it in secret with some very friendly electricity cost or some other cost-cutting measures to keep it profitable in some time because I've you know I've thought about buying an ASIC before just for fun just to try it out and then I was like thinking about it like why is this company selling this to me like it seems that if its profitable to mime using this they should be using it themselves clearly if it's not I'm the schmuck for buying this when it might not actually ok so it's more about you know risk management sort of so what percentage of Asics does bit mean that are manufactured does bit mean use itself like not in order to sell ever

but just almost negligible negligible so mining for ourselves is the smallest part of the business we do it just to keep our feet wet so we know what the customers go through but and because it's also a part of a business where we build mining farms for others how can we be doing that if we don't build mining farms for ourselves or if we've never built many mining farm so we build the mining farm we maybe if we have a share in the mining farm that we built we would not have more than 10 to maybe 13 percent in one mining farm that's the part we will own the rest will be given to other investors who can mine any coin they want in that share of the mining farm or maybe not even mine in a cryptocurrency maybe they can be using it for big data AI applications whatever

they want to do with the part of the data center ok so you guys don't run a large mining farm but what you guys do do is run some of the largest mining pools and so how did that start so the the two biggest one in Bitcoin are ant pool and BTC com1 question first off right off the bat why have two pools instead of merging into one pool that's a good question because naturally you wouldn't think of having two pools instead of one so for answering your first part of the question which is why we did the pool at all so it's the founders vision the founders vision that we started making a six when people did not think is he making a six would be that profitable

they started doing that long ago and then it was part of the vision to have us vertically integrated into this space so not just making the chips or the machines all the mining farms but also the mining pools that the mining farms connect to so it's part of the vertical integration vision that they had and now why do we have two pools it's because we want to keep Bitcoin as decentralized as we can we realize that having a lot of hash power in one pool causes problems if the pool has some vulnerability or some problem so these pools are one of the the second pool that came later Mediacom started as open source pool totally open source the world's first totally open source large-scale pool that was the vision of the founders to

have an open source pool and an pool is not an open source pool so that's one big difference and there need to be an open source pool which is a closed source pool means all the code is out there anyone can just copy the code and make and after an pool was founded many other pools that came after it are using the tools and competitive advantages that bbc.com have they're using those because they could copy it from the code of btizzy.com pool the reason for separation is as a security mechanism to avoid software vulnerabilities and poor software yes and to in decentralized the mining space more so the teams are totally different the engineers are totally different they're CEOs and a friend of bbc.com an and pool they are

located in separate places Singapore Beijing they have yeah they're totally different how answerable or influenceable are they by the pit main holding company their job is to make profit and that's what they're doing and so between holding company will not tell them to do something else as long as they are making profit these two pools are now I think the second and third largest mining portion is changing all the time sometimes they are first and second yes and when they first entered yeah with pool in quarantine recently Sweden was founded by a former bbc.com employee three former media.com employees who started the bbc.com mining pool with the open source code so

yeah they have that experience from it means Benicia calm cool and so if you take these two are together do you know roughly what the hash rate of BTC calm and and pull together are it's always changing but I guess it's about thirty five to forty percent maybe even lesser yeah now maybe less than 32 to 40 percent in between that I know there's there's also always these a conspiracy theories about the Pittman's relationship as well with via BTC where you know it is a separate company and independent but there's heavy investment from bit main and stuff and so if you add that into you know a level of influence that bit mean has like do you

think now we're over fifty percent no still not ascribe really sees one of the smaller pools okay and also we published a blog post about it long ago about our association with why BTC so we invested in YB DC but we have almost no decision-making power there so the decision-making power of the founder that is hypo yang is about 10 or 20 times more than any of the investors so yeah we have almost no influence in that way no legally binding influence but of course if hypo yang wants to follow bit pain or do what bit main is doing or go with the ideology abutment that's up to him and that's up to anyway any other pool in the world for them to do it or not but yeah we

don't have any legal influence or any binding influence over why you think it is that the bit main operated mining pools are so popular so I think the simple answer is very simple how did Britt main become so big it didn't have a head start it was an underdog it didn't even have the resources to make Asics if the design had to be outsourced in the beginning it's because they just found everything that the customer cares for and made it the best possible and that is what the mining pools did to so when I join the space the biggest mining pool was G hashed on IO and they had 50% of the hash rate of Bitcoin and no one thought anyone could ever replace those pools but then a few years later Whitman has the world's biggest pool

called - and much later then Whitman starts another pool with a differently different team totally open source which also becomes the world's biggest pool repeat beating it means Oh another biggest pool and pool I think the reason for these fluctuations is because of the competitive advantages these pools offer and these competitive advantages are very concrete for example you would go to the biggest mining farm owners and you would ask them what they need most from the pool and depending on what he says you can provide many of those things maybe he wants a dedicated customer support okay you provide him that maybe he wants a better rate on what he's mining on your pool you can provide him that if he's really big you

can provide him a special rate you can yeah these kind of things it's just collecting feedback from the customer giving what the customer wants it's as simple as that but not everyone manages to do it but between manage to pull it off not once but twice so jumping back to the asic manufacturing side who would you say is nowadays your largest competitor when it comes to ASIC manufacture you don't know who the biggest competitor is but it keeps changing I believe the some there are some good machines in the market machines from a bang my scenes from bitfury from Canon the beijing-based - the company the first company that's the first company to make Asics ASIC miners still making a sick miners in a silicon yeah these are

the ones making Asics for Bitcoin one of the concerns about Asics is that the they're very sticky and like if you have a large market share there's nothing there's probably some sort of you know as in all hardware stuff there's economies of scale and if I had lay up and start ASIC company it'll be very difficult for me to get the access to the fabs and the connections and stuff that MIT Maine has do you think these concerns are founded I do not think so because again coming from my personal experience I joined the space when Britt main was an underdog you know they they the only thing that made them as big as

they are now or we are now is being competitive and knowing whatever you can best it's unfair competition there was no unfair competition there was no Bitcoin goddess Satoshi helping bit me and pulling some strength changing bitcoins code to favor bit means mining machines or something there was no manipulation it was a spy or competition and that is how a between became as established as it is now and similarly another player could come in and do the same even now today mining Bitcoin was that profitable and stays as profitable I see bigger players from outside the bit crypto space entering this space yeah if you ask what happens when are you guys prepared for let's say an in Intel or Nvidia it's a there's really more established than between in

chip design and chip manufacturing even when it comes to until they even make their own chips so they're surely more established but I don't know what for how do you think the mining space as a whole would change if one of these manufacturers comes in I think then people would finally see bit pain as the Messiah as the savior because right now a lot of the hatred that between gets is for being quite big and making more profit than other ASIC manufacturers and once there's a bigger company making much more profit than between people would see hope that between challenges that company and becomes takes a big part of the profit share of that company

has has er been any hints or like rumors of one of these big players entering so they were no they there is no any concrete news or any concrete rumors but just talking about rumors there was rumors about Samsung making chips to mine tiptoe and they were headlines like Samsung's going into this space and gonna take bit main head-on and stuff like that and they were so baseless these news because Samsung is a fab they do not make chips or machines it was just a fab order by one of the other companies that make Asics and some companies just ordered Samsung to make chips for cryptocurrency mining for for themselves or not for Samsung but for

whichever company what it was so as we mentioned earlier you know it mean got quite a bit of notoriety a little bit because of its large role in the great scaling debates which eventually you know led to bit Maine being a large part of the initial Christian of Bitcoin cash so could you tell me a little bit about why you know like we mentioned like whoo I go from a neutral arms dealer to someone with a heavy stake and like political opinion when it comes as I mentioned today in my talk to that Whitman has always it hurt to its founding values and the founders a bit vain they bet on bitcoins economics bitcoins technology bitcoins power to change the world at a time and

no one thought much of Bitcoin or hadn't even heard about Bitcoin that's when the founders of Britt main bet on Bitcoin and that is something that bit main sticks to all the time so during the great skilling debate between continue to stick to the power of Bitcoin to change the world which at that time the founders believed it was bitcoins ability to be an efficient medium of exchange more importantly than just a store of value so that's why there was an interesting quote today that Charles Hoskinson gave during his and speech which I kind of really liked where he described miners as sort of mercenaries where they're not people who and it's

explaining why he likes perforce takeover proof of work and he said that miners are these like sort of mercenaries who are just you know showing up and doing their job and mining for the profit and then they don't have a stake in the project and from what it seems like what you're describing it seems that the goal of bit maintenance should not be a mercenary and you you guys do want to be active participants in the governance and ecosystem around the coins that you are participating in yes and no so there are coins like Bitcoin which are truly decentralized which has no founding association no foundation deciding what happens to the protocol and the same with Bitcoin cash and they are also the

coins that our founders started between with in their hearts so these are very important to bit main but when it comes to protocol changes on other coins we are still learning we are not in a position yet to know what is best for those coins but as we learn we hope to contribute more actively and do what is best for the long-term growth of those ecosystems but from this time we are just listening and learning from the communities themselves do you think it is the role of the mining pool operators to be these active participants in governance and this is sort of what 2017 was about it was like at least the Bitcoin or frame it I was just like battle for control between the miners

and the users and from my perspective it seems clear that the developers and the users won that battle would you say that a fair assessment of the results of the last two years it's hard to say yes because if I do it is misleading I'll tell you why so you're talking about segue to X versus us F I think that's probably the most famous example yeah us f1 because it was the case where you create a nuclear bomb and you say I will blow this bomb and everyone on planet earth if you don't do what I say and then you get what you wanted because most of the world wants the best

interest of the earth or people on the earth and that is what USF was it was very risky for Bitcoin it could hurt the risk of reorg the wipeouts because it wasn't with any replay protection and Peter Eisen published a paper or report or it was a BU IP he published which explained that the chances of a reorg wipeout if USF was done were as high as 11 percent with just 70% of the hashed rate it really quickly want to wipe out it means wipe out is where our second fork can replay transactions on the original chain and wipe out the transaction history which is where the value of Bitcoin comes from so if that's ever

wiped out Bitcoin will have zero value or it will just plummet yeah people ask me all the time and people probably hear that question to everyone in the crypto space here is that question from people outside the space we is what gives Witkin value it is the ledger and it is the fact that everyone in the world knows that this Bitcoin that I gave to you is given to you by me and it's yours now if there's no ledger Bitcoin has no value that is how grave this threat of us at was so if you think that the people who were creating noise with us f hats one yeah they did but they won because the victory was given to them by the people who care really cared about Bitcoin more than the people who are wearing these USF hats and talking on social media recently block

stream announced their new mining pool and you know I have some mixed feelings about that but one thing I was super excited to see was in their mining pool they're using a better hash protocol which gives a lot of power back to individual miners and away from the pool operator so your mining with a pool so you can get the rewards sharing they don't control your governance participation would this be something that it mean would be interested in looking into with its pools so at between like I mentioned before in the example of how bit Maine became from underdog chip maker to the biggest chip maker in the space or from no mining pools to having one biggest large-scale mining pool and then having two largest

mining pools it's because it listens to the customers and give what the customers want and right now the most of the mining farm owners they do not want to choose themselves they don't want to decide and read every day and follow what's happening in the scaling debates of Bitcoin or what's happening on the Bitcoin protocol level debates and vote on things they don't want to do that they want to outsource that to the mining pool and let the mining pool give it its profit or they give the miner his profit and that is what would give them a good mining experience and that's very important for Bittman to do so if the day comes when all mining pool owners are most of our customers are asking for a better hash kind of algorithm sure why not are there cases where maybe miners

might want to just delegate to you guys what coins to even mined so for example let you guys figure out whether to mine Bitcoin or Bitcoin cash and like you do shuffle voting mining power across change like that that's already the case in a way because every miner and every mining pool offers its miners or users the option to automatically switch between whichever is more profitable and most users choose that so that users don't need to think even the mining pool doesn't need to manually decide it's just automatic given the level of voting power that you know it main does have orbit main own mining

pools have how does that manage balancing that with governance decisions that may affect it means primary business so the class you know the historical example is the case about covert ASIC boost but even today when in etherium we have this debate around you know prog Powell versus keeping eat hash and you guys have the d9 miners are ready so for one could you tell us a little bit of the history of you know for people who aren't familiar about the ASIC boost so a Sigma was an optimization technique for mining Bitcoin so three years ago the envisioning basic moves to be an open patent in the future we started adding chips support on our chips for ASIC

boost and then two years ago some known malicious actors in the Bitcoin community raised allegations that against Pitman saying Batman is secretly using ASIC boosts to compete with between zone customers which is which who are the biggest income generators for between and it made it seems like some kind of an attack on Bitcoin although we had never used it on the main net we had tested on the test and resolved and later it turns out that the same people who were raising these allegations against Pitman were hailing another miner maker called dragon mint miner as the Bittman killer and that one was also using ASIC boost to get some kind of a competitive edge over betweens miner of that time majority of the community wants to implement prog Pao at

what point does bit mean let's say it has the majority hash power which it does not right now in aetherium a coalition of miners who they all have Asics and they don't want to switch a prog pal when do the miners give in to the community when it hurts there in this case it wouldn't be for between two decide this would be for these miners that you mentioned there's bit may not run out of mining pool on aetherium we have on air pool so you do have to make part of registration right in this case we wouldn't because we will let the users of the mining pool decide and the users will most likely in such a case if there are many considerable number of users who are mining aetherium with a six they will probably fork it off they

will probably keep the original chain and let it helium for coffee there with proof prop POW and that's what's happened with so many other coins with SIA coin then the founder of Co kind decided to monopolize Asics by activating some kind of backdoor that he had put in his own cryptocurrency and they it see a classic was found see a classic continues the original algorithm which is open to any ASIC manufacturer while see a coin can only be mined by Asics manufacturer by the founder of see a coin so when it comes to this decision making for example let's say bit main is signaling to stay on eat hash anti-prom power now enough of the community or of your miners want to switch to promote

prog now right do you think it's the responsibility of the mining pool operator to change their signaling or is the onus on the miners to vote with their feet by pointing to a different mining pole I think the ideal result or what would actually happen if it was a bit mind control mining pool is the mining pool would offer services to both the proc power people and to also the attached people but for this they did offer the way to signal both I'm talking about for the governance process of how miners are signaling the miners would signal then not the pool itself by moving with their feet yeah they would give them some kind of options maybe like a survey true for all their users

because the pool users there's no defined ways for them to vote the users of pool so the pool may send out a survey for everyone to fill up that would be a way to go forward let's move on and a little bit about you know what's the more current events of McMahon over the last year or so you know you guys had a pretty publicly attempted I P oh could you talk a little bit about that so we redisclosure the information of our IPO in a blog post in the beginning of this year where we summed over last year and talked about the IPO as well so we had applied for the IPO in Hong Kong as you know because the application is public and it

wasn't accepted by the regulators in Hong Kong exchange so we plan to go IPO in the future at an appropriate time you know one of the things I've also heard though is that part of the hesitation you know it was maybe a little bit of bad timing with the IPO and let the Bitcoin market had just crashed and how much do you think that was a impact on the IPO process it's hard for me to say because I don't know what goes on in the regulator's brains or and I shouldn't even speculate on what the regulator's think or may have thought but if I was a decision maker for Hong Kong exchange I would certainly see it as a negative point and not a positive point in the application if the

prices were too low because an exchange always does care about its revenue as well so if they can see a new listing that can bring a lot of revenue for the exchange and they might make some trade offs and so this shift towards this AI and machine learning aspect of the company would you say that this is sort of in response to hedging against the crypto market as a whole we're like you know Pitman doesn't want to put all its eggs in one basket of saying oh we're completely dependent on the status of the crypto space well it wasn't the case and it's not a shift because we started making chips for AI in 2016 and we've released for generations since then so

we've been making chips even through the bull market of Bitcoin there's no shift of focus it's just another business of between and it's not about hedging our risk on the crypto market it is about taking our success and expertise and experience to more areas that benefit the world than just cryptocurrencies at the beginning of this year or maybe it was end of last year Jihan stepped down as CEO was this sort of in response to the performance of the company last year it wasn't reactionary measure or a response to whatever happened because of the crypto currency markets it was a natural evolution of the company where the founders and the

board decided to give the wheel to someone who is proven to be very competent someone who really cares about the company and can do the job very well his Jihan still actively involved with the company or has he moved on to sure he is he and Micra both are still actively involved with what are their roles right now so they are members of the board of bitman now I've also heard that Jehan has been working on some new projects at in Singapore are you able to comment on those that's the news talking about him starting another company and leaving bit pain which is not the case one of the cofounders of it main there was a third co-founder you shunga or John is that's his English name he founded matrix this

OTC trading desk / custodian solution that the media connected to Jihan could you tell you know one last question about like what what do you see is the future of bit main so you know there is this focus on AI and machine learning you are you guys interested in proof of stake at all like a number of the large mining pools f2 pool is pretty active in the snaking space now they have related company called bit fish and spark pool is also running on I'm familiar with a lot of the values on cosmos and so a lot of these large mining pools are running pretty large my validators on cosmos so is this something that mean is looking into we are surely looking into it but we don't have any plans of offering

these services like them right now having said that we continue to have our focus on making the best chips for cryptocurrency mining as well as for AI and we'll yeah that'll remain the focus about pain to make the best chips well the Sean it's been great having you on and learning a lot about bit mean and the history and we during the air on a lot of some of the things that you know I hear about on like Twitter and reddit and stuff and really getting a better understanding of some of the things admit me it was a pleasure thank you for having me thank you for joining us on this week's episode we release new episodes every week you can find and subscribe to the show on iTunes Spotify YouTube SoundCloud or wherever you listen to

podcasts and if you have a Google home or Alexa device you can tell if to listen to the latest episode of the epicenter podcast go to epicenter TV slash subscribe for a full list of places where you can watch and listen while you there be sure to sign up for the newsletter so you get new episodes in your inbox as they're released if you want to interact with us guests or other podcast listeners you can follow us on Twitter and please leave us a review on iTunes it helps people find the show and we're always happy to read them well thanks so much and we look forward to being back next week [Music] [Music]