This is really interesting.
Leading mining hardware manufacturer and mining company, Bitmain, is back in the headlines for all the wrong reasons.
Bitmain recently secured pre-IPO investments from Tencent and Softbank at a valuation of $15bn, having been valued at $12bn in June following a $400m funding round. Bitmain is expected to list on the Hong Kong Stock Exchange in September at a valuation between $30bn-$40bn.
Investors may now opt to stay away after Samson Mow, CSO at Blockstream, revealed that Bitmain has been misleading investors by only showing Q1 results to pre-IPO investors. The reason? Q2 was a disaster, with Bitmain sitting on $1.24bn in mining inventory while prices have dropped by ~85%. Estimated Q2 losses from inventory alone range between $600m-700m.
To make matters even worse, the Bitmain investor deck reveals that the company sold its Bitcoin for Bitcoin Cash at $900/BCH. For some contenxt, Bitmain has a clear interest in supporting Bitcoin Cash (BCH), which has increased block sizes to 32mb, over Bitcoin (BTC), which has opted to keep block sizes small and instead rely on layer 2 scaling solutions: BCH’s larger block sizes provide more transaction fees to miners, whereas layer 2 solutions, where transactions take place off-chain, cut into Bitmain’s revenue.
BCH has since fallen to $535/BCH, resulting in a further $500m loss over the last 3 months. If BTC developers had not disclosed the BCH vulnerability (see below), it is likely that several billion dollars would have been wiped off their balance sheets.
Bitmain now finds itself in a position where it has cornered the BCH market, with the price supported solely through continued selling of Bitmain’s BTC reserves for BCH. Bitmain cannot exit its sizeable BCH position without crashing the price. Solution? Exit through IPO. This will not end well.
Cuy Sheffield has published a fascinating thesis for Ether (ETH), Ethereum’s native digital asset, as a Store of National Security.In order to fully understand Sheffield’s thesis it is worth reviewing the various competing value capture narratives driving this market: Fat Monies; Protocol Wars; Tokenized Securities, and dApps. Nathaniel Whittemore does a phenomenal job summarizing these narratives here.
BlockFi, the leading crypto asset-to-USD lender, announced that it has raised $52.5m from Mike Novogratz’s Galaxy Digital Ventures to expand operations, marking the first institutional investment in the crypto asset backed loan industry. $50m will be reserved to lend capital on the platform, with the remaining $2.5m acting as an equity investment.BlockFi currently operates in 42 US states — with plans to expand into the remaining 8 in the near future — and is backed by other leading investors including ConsenSys Ventures, Kenetic Capital, and SoFi.
The conversation around EIP-999, the proposal to recover funds stuck in the Parity multi-sig wallet, resurfaced this week after Ryan Zurrer, a partner at the prolific Polychain Capital, published an article laying out a path towards Ether fund recovery. Disappointingly, Ryan did not disclose that Polychain is a large investor in Polkadot, the Parity-led project most affected by the frozen funds.
Plenty of controversy in the last two weeks around the Zcash (ZEC) Founders Reward (FR).
Eric Meltzer, INBlockchain: “If the cheapest anyone got involved with your project is at a $200m valuation, then you simply cannot have a community similar to that of Bitcoin, where there is a mass of HODLers who got in at a very low price and are almost completely unperturbed by subsequent price volatility.”
After what felt like centuries of uncertainty, the U.S. Securities and Exchange Commission (SEC) has issued a statement declaring that the Ethereum network has reached a level of decentralization such that its native digital asset, Ether (ETH), should not be regulated as a security.
Several interesting developments on the EOS front this week as the smart-contract platform attempts to move towards a mainnet launch.
All eyes on EOS this week as the firm behind the software production, Block.
Leading crypto asset exchange Coinbase acquired Paradex, a 0x relayer, this week.
Brian Venturo, CTO of Atlantic Crypto, published an analysis of the economics of Casper FFG, Ethereum’s hybrid Proof of Work/Proof of Stake consensus mechanism.