Jihan Wu restructured Bitmain’s business strategy after returning

After the return to the company’s helm, co-founder Jihan Wu decided to revisit Bitmain’s business strategy as the market share declined.

New Bitmain’s business strategy in next year

At a customer event hosted by Bitmain on Saturday in Chengdu, China, Jihan Wu presented new approaches to restore Bitmain’s weak market dominance.

First, he earnestly recommends mining companies stick with Bitmain products. Of course, Bitmain will be responsible for the risks associated with cash flow, Bitcoin price fluctuations, and electricity costs. The reason Wu is so confident is probably that he believes the Bitcoin price will rise next year when Bitcoin halving takes place.


Jihan Wu, CEO and Bitmain’s only chairman

He then announced that Bitmain would replace the previous sales strategy. Individually, customers must pay the full prepayment for mining equipment due to future shipments, with a descending payment structure. For example, customers who pre-order 100 to 999 miners can get a 50% discount, while larger investors who buy more than 5,000 units can pay a minimum of 20% upfront.

Next, Bitmain is targeting those who own the mining farm with energy but do not have enough equipment to run at full capacity. They will form a co-mining agreement for more than a year for Bitcoin mining farms to rent their AntMiner S17 or T17. Bitmain will pay year-round electricity costs at 0.35 yuan ($ 0.05) per kilowatt-hour. And Bitcoin mining farms are responsible for equipment maintenance.

In return, Bitmain will retain 75% of its profit, and farm operators will take the remaining 25%. Notably, if mining revenue is lower than electricity costs, all mined coins will move to Bitmain. Through this strategy, Bitmain will increase its mining capability. Because of that, the company’s mining performance has plummeted over the past two years as Bitmain focused more on selling equipment.

In May 2019, Bitmain’s hash rate dropped to 237 betas per second (PH/s) – down 88% from April – accounting for about 0.5% of the network’s total power. However, the Bitmain hash rate has rebounded over the past six months, to 930 PH/s since December 5, accounting for about one percent of the network’s total hash rate.

Finally, Bitmain is seeking to alleviate the concerns of mining farm investors over Bitcoin price volatility. They offered to offer a put option to those who make product orders in large quantities.

For example, for users who buy 1,000 AntMiner S17 Pro units, worth approximately $ 1.5 million, the company will offer 62 ordering options, worth a total of one percent of the mining order amount. Each set option will allow customers to sell Bitcoin for 35,000 Yuan ($ 5,000) on March 27.

The situation of fierce competition in the cryptocurrency mining market

It is still too early to see if Bitmain’s business strategy will succeed. However, the change is a sign of increased competition in the mining business.

Bitmain’s market share has plummeted in terms of mining equipment and mining pool’s hash rate. And for that reason, Wu chose to return to managing the company and topple co-founder Micree Zhan to hold the position of chairman.

Meanwhile, the competition between major Chinese mining manufacturers is still racing non-stop ahead of halving bitcoin next year with Shenzhen-based manufacturer WhatsMiner, MicroBT, launching the series. Its top M30 mining machine.

Also, on Saturday, MicroBT released a new product line. They boast a hashing power of 88 hashes per second with energy consumption as low as 38 joules per terahash.

Canaan, the world’s second-largest mining producer, recently completed an initial public offering on NASDAQ stock exchange, raising $ 90 million in new capital.

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