Following the listing of Canaan Technology on the US stock market last year, Ebang International became the second mining machine manufacturer to successfully IPO, with the stock code EBON.

In 2017, as Bitcoin approached $20,000 for a time, mining machine manufacturers had a bright future. As representatives of the blockchain industry, Bitmain, Canaan and Ebang International were also included in the "2018 Second Quarter Hurun Greater China Unicorn Index" for the first time in 2018. Among them, Bitmain was valued at 70 billion yuan, Jia Nan Yunzhi is valued at 20 billion yuan, and Yibang International is valued at 10 billion yuan.

The market once had great expectations for their listing, hoping that they could "raise their eyebrows" on behalf of the Bitcoin concept company. However, not only did these companies go public with ups and downs, but their post-listing stories were not optimistic. It was more like the bubble was burst, revealing the true side of the fairy tale to everyone.

According to the prospectus, Ebang International achieved a revenue of US$319 million in 2018 and a gross profit of US$24.4 million. But in 2019, its revenue was only $109.1 million. Not only did it fail to make money, it also faced a net loss of $41.1 million.

Explaining the slump, the company said it had "suffered from a sharp drop in the price of bitcoin," adding that it couldn't guarantee it "will see revenue growth in the future" or "won't experience another big drop."

Such poor performance caused Ebang International to "break" after listing. After the opening of the market, the price has been falling all the way. It once fell 27% in the intraday, and the lowest hit 3.81 US dollars. As of June 29, Eastern Time, the closing price was only 4.5 US dollars.

On the day of Yibang International's listing, the share price of Canaan Technology, the "difficult brother", also closed at US$1.89. According to public information, Canaan Technology’s stock price has fallen for a long time since it landed in the U.S. stock market at the end of November last year. It has fallen by nearly 80% from the issue price of $9. It can be seen from the performance of both stock prices that capital is not optimistic about the prospects of the mining industry.

As Shenyu, the founder of F2Pool, said, "This year, we have basically experienced a complete mining cycle, from the disillusionment period at the beginning of the year to the rapid rise period, and now we have entered a period of confusion. Everyone should be in the Thinking, what does the future hold? What should we do to deal with it?"

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Sluggish bitcoin market

As mentioned earlier, after reaching a high of $20,000 in 2017, Bitcoin started a "falling and falling" mode.

In fact, mining mainly depends on two factors, the currency price and the difficulty of the entire network. The currency price is the root cause, and the difficulty of the entire network is linked to the currency price most of the time.

Therefore, during the global asset crash last year, Bitcoin fell by nearly 80% throughout the year, and the price hovered between $7,000 and $10,000 for a long time, which led to weak demand and prices in the mining machine market. In 2019, the average selling price of mining machines dropped from $737 in 2018 to $304.

From the financial report of Yibang International, it can also be seen that the main business is single, the compliance is questionable, and the profitability is poor, which has become the lingering "curse" on the heads of mining machine companies.

According to the prospectus, Yibang International’s income mainly comes from three parts: sales of Bitcoin mining machines and accessories, mining machine hosting, maintenance services, and telecommunications network fees. Among them, the sales revenue of mining machines and accessories accounted for 82.4% of the total revenue, which is the main source of income.

Yibang International also admitted in the prospectus that fluctuations in bitcoin prices will directly affect the corresponding fluctuations in sales and average selling prices of mining machines, as well as inventory write-downs; and once bitcoin prices continue to drop sharply, it will further weaken the company's profitability.

From the perspective of financial data, Ebang International’s performance this year can be roughly summarized as follows: revenue has shrunk sharply; gross profit and gross profit margin are negative; operating losses have increased.

In 2018, the company sold a total of 415,900 mining machines, and in 2019, the sales of mining machines dropped to 290,000. In 2019, the revenue was US$109.1 million, a decrease of 65.8%, and the net loss in 2019 was US$41.07 million, which expanded significantly year-on-year. Yibang International stated in the prospectus that the company's net loss in 2019 has expanded by 3.5 times.

However, in the first quarter of 2020, the company’s revenue was US$6.4 million, a year-on-year increase of 6.1%, which was mainly due to the increase in the average selling price of mining machines and the increase in sales volume. But the company's gross margin has been declining year-on-year, from 7.6% in 2018 to -28% in 2019.

In terms of products, Ebang International is not very competitive compared with its peers. Its mining machine products Ebit E9 series, Ebit E10 series, and Ebit E12 are all 10nm mining machines, while competitors have launched 7nm mining machines. It is particularly noteworthy that Ebang International's research and development expenses dropped sharply in 2019, from US$43.5 million in 2018 to US$13.4 million in 2019.

And this year's Bitcoin "halving" is a heavy blow to mining machine manufacturers. From the early morning of May 12th, the Bitcoin mining reward for each block created will be reduced from 12.5 to 6.25. "Halving" is a unique issuance mechanism of Bitcoin, which occurs approximately every 4 years.

Since the Bitcoin network can only generate 21 million Bitcoin blocks. Bitcoins are obtained through mining, and miners receive Bitcoins as mining rewards. When the halving event occurs, miners receive a 50% reduction in the amount of bitcoin rewards they receive for completing the same amount of work. The purpose of the halving is to regulate supply and demand, i.e. as the supply decreases, the demand will increase and the value of each bitcoin will generally rise.

Therefore, the first two rounds of halving, which started in 2012 and 2016, both triggered a surge in the price of BTC. The first halving pushed the price of Bitcoin from $11 to $1,100, and the second halving made Bitcoin’s price soar. The price went from $600 to $20,000 in 18 months.

The market has lost interest in it.

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Mining machines are doomed to have no future, will AI be a lifesaver?

In the blockchain industry, the "mining circle" often represents the most upstream of the industry. The essence of "mining" is to use computing power to determine the ownership of data accounting rights.

In the final analysis, the birth of the mining machine is just a link in Satoshi Nakamoto's ingenious design of Bitcoin. The halving of the total revenue caused by the halving of Bitcoin will be the sword of Damocles for the entire mining industry. Unlike the huge upper limit of the exchange, no matter how hard you try in the mining industry, it is impossible to break through this ceiling. Transformation is the only way for all mining machine manufacturers.

For the mining industry, the iteration of chips has always been the core of miners' competition for the market, and chips affect the mining efficiency of mining machines.

Since the essence of AI chip and mining machine business is chip design, and the concept of new infrastructure has been proposed this year, the computing power of AI will increase massively, so the transformation of mining machine manufacturers to AI chips will become a very good choice.

Firstly, the business that provides AI computing power support complies with the regulations; secondly, the scale of this market greatly exceeds that of Bitcoin. ReportLinker, a market research organization, believes that by 2023, the global AI chip market size is expected to be 10.8 billion US dollars, with a compound annual growth rate of 53.6%. Another agency, Allied Market Research, predicts that by 2025, the AI ​​​​chip market size will be 37.8 billion US dollars, with a compound annual growth rate of 40.8%.

Although the two forecasts are different, they both clearly point out one point: in the next few years, the market for the AI ​​chip industry will be huge, and the growth rate will be astonishing, and more participants will be needed. This imagination space is much higher than mining Bitcoin.

The AI ​​chip is also an ASIC chip. The three elements that determine the development of AI are algorithms, computing power, and data. Algorithms and computing power are determined by chips. According to the vision of mining machine manufacturers, the computing power of mining machine chips exceeds that of ordinary chips, and the company's research and development experience in mining machine chips can be extended to AI chips.

In fact, the transition to AI chips has become the "consensus" of mainstream mining machine manufacturers.

Bitmain once stated in the prospectus that the first two uses of the funds raised by the listing are "to improve the research and development capabilities and expand production of our cryptocurrency mining ASIC chips and blockchain applications", "to improve our AIASIC chips and R&D capabilities and scale-up production of AI applications". Canaan also showed in the prospectus that the first two uses of the funds raised in the listing are “ASIC chips for research and development of artificial intelligence algorithms and applications” and “ASIC chips for blockchain algorithms and applications”.

But as the saying goes, "interlacing is like a mountain", the mining machine manufacturers tell the story very well, but the AI ​​practitioners do not buy this story.

According to an interview report by China Business News, since mining requires a large number of repeated logical operations, the mining machine chip only needs to repeat a large number of simple logical operation units, and the design is relatively simple. The AI ​​chip is different. It not only requires massive computing, but also requires a high degree of flexibility and efficient data interaction efficiency to cater to the rapid and changeable algorithm evolution of deep learning and adapt to the "wonderful ideas" of neural networks. . Therefore, there is a big gap between the algorithm of mining chips and AI chips.

Facts also confirm the above point of view.

Not long ago, a short-selling report on Canaan Technology pointed out that it has problems such as low profit margins for mining machines, failure to transform AI chip business, and unreasonable market value.

Bitmain, which has not yet been listed, is now caught in the founder's seizure of power. Ketuan Zhan, one of the co-founders of the company, recently returned to the company and took control of the Shenzhen mining machine delivery factory, prohibiting employees from delivering goods to paying customers normally, causing problems in the operation of Bitmain’s mining machine department.

The transition to AI chips is not that simple. Going downstream to the currency circle and chain circle is another option for mining machine manufacturers. This is also the story that Yibang International brings to you.

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Want to transform? chain ring or better

In the prospectus, Yibang International stated that it "has certain advantages in technology, has completed the design of 8nm ASIC chips and 7nm ASIC chips, and is currently focusing on the development of proprietary 5nm ASIC chips and mining machines for non- Bitcoin cryptocurrencies such as Litecoin and Monero."

At present, the company's main income comes from the blockchain product business. In the future, it plans to invest in research and development in other application fields, and gradually expand its business to the upstream and downstream markets of blockchain technology and the value chain of the cryptocurrency industry, so as to seek new opportunities. business opportunities.

Ebang International plans to start with the mining business of cryptocurrencies and explore the application of blockchain technology to non-cryptocurrency industries, such as financial services and healthcare industries.

However, from the perspective of the development of the currency circle, now that the central bank's digital currency is about to emerge, these non-sovereign "digital currencies" will also pale in comparison.

Since the beginning of this year, the development of digital currencies of central banks in many countries has begun to accelerate. After the Swedish central bank took the lead in testing its central bank digital currency e-krona in February, France, South Korea and more countries began to announce their central bank digital currency test plans or programs.

According to a previous research report released by the Brookings Institution of the United States, many countries have made substantial progress in the research and development of "central bank digital currency" or intend to issue "central bank digital currency", including France, Sweden, Saudi Arabia, Thailand, Turkey, Bahamas, Barbados, Uruguay, etc. A survey of 23 central banks around the world conducted by IBM Corporation of the United States and the "Official Monetary and Financial Institutions Forum", a British think tank, shows that many central banks are considering researching and issuing "central bank digital currency", which can be used by consumers. Available within the next five years.

Unless you "hug" the "thigh" of the central bank, non-bitcoin cryptocurrencies can only be short-lived.

Judging from the development of chain circle applications, it is true that blockchain technology has a relatively broad application scene space, which is a good choice.

According to IT Orange data, the current blockchain industry application projects have expanded to blockchain medical care, blockchain entertainment, blockchain real estate, blockchain social, blockchain games, blockchain energy, and blockchain agriculture. , blockchain Internet of Things, blockchain logistics, blockchain public welfare, blockchain automobile transportation, blockchain law, etc., almost involve all walks of life. In the future, blockchain technology will continue to accelerate its wide application in industrial scenarios and begin to be widely integrated with the real economy, using blockchain technology to reduce costs, improve collaboration efficiency, boost the development of industrial blockchain, and stimulate the growth of the real economy .

Needless to say, how could the giants let go of such a big piece of cake?

Today, well-known companies at home and abroad have begun to deploy blockchain. In China, Alibaba is exploring the use of blockchain technology to create a transparent and traceable cross-border food supply chain; Tencent is exploring the application scenarios of blockchain technology in logistics; Collaboration and trust among participants.

Overseas, Amazon has used blockchain technology for cloud computing business, Microsoft has released a cloud storage solution based on blockchain technology as early as 2018, and IBM has used blockchain to identify and verify the authenticity of diamonds .

But until now, the real phenomenal products of the blockchain have not yet appeared. Ebang International, which has neither giant blessing nor ecological landing, as a late entrant, does not have much initiative.