Potential redemption from controversial past? Bitmain allegedly raising $50 million in VC funding

In a surprise announcement, VC firms such as Sequoia and IDG are reported to be investing heavily into Bitmain. Bitmain Technologies Ltd  spearheads the largest bitcoin mining pool in the world, Antpool.

According to the Bloomberg report, they are raising as much as $50 million for “AI expansion” and “guidance” from aforementioned VCs. Neither Bitmain nor the VC firms in question have responded to questions on the matter – the source of this announcement from Bloomberg is not clear either. This won’t stop us from speculating on implications of the arrangement though.

Controversial past

First, it’s important to get context. Bitmain and its founder, Jihan Wu are no strangers to controversy.

Back in April there were the AsicBoost allegations which effectively exposed Bitmain for gaining unethical (and illegal if there was any legislative precedent set around the crypto-mining space) advantages over other mining pools. Additionally, the technology used to do so was re-patented in China by Jihan Wu with no credit to the original patent. The nail in the coffin for this debacle was the fact the SegWit protocol upgrade to Bitcoin would render AsicBoost useless – Bitmain’s vehement opposition to Segwit leading up to its activation upon this realization is damning in hindsight.

More recently, Bitmain gave all-but-direct support for the Bitcoin Cash split which occurred on August 1st. Up to present time, it’s clear that the monolithic mining pool have a vested interest in keeping the altcoin alive. To add my own speculation to Jimmy Song’s articulate but brief analysis, there’s a lot of crypto-politics at play here. In short, Bitcoin Cash is more malleable to centralized interests than the legacy Bitcoin – potentially allowing for future scandals like AsicBoost (and worse) to go unnoticed. Bitmain and mining pool subsidiaries dedicate significant mining resources to keep Bitcoin Cash functional, usually incurring huge losses in doing so.

To add to my own charged perspective, here’s the Twiterrati’s take on Bitmain and Jihan Wu:

Famous “crypto troll” WhalePanda’s statements on Jihan Wu and Bitmain are well received on Twitter. The post received so much public reception that it prompted Jihan Wu himself to come out of the woodwork and offer a (low-effort) response.

A new hope?

VC investment was entirely unexpected and brings a new hope.

As part of the investment, the VC firms are offering “guidance on management”. We can only speculate and hope that this is a euphemism for correcting all the shady and unethical behavior that Bitmain has been involved with to date. There could be a realization that it’s possible for the corporation to be incredibly profitable whilst still keeping in line with the mission statement of decentralized and (relatively) immutable Bitcoin.

It’s a stretch to say that any of the VC firms will really know what’s going on behind closed doors, contrary to what hopefuls in the Twitter feed eagerly announce. Especially considering that Bitmain Technologies Ltd’s valuation is already very likely somewhere in the billions – paltry in comparison to the $50 million funding round.  However, mainstream investment is definitely a step in the right direction to pivot Bitmain from it’s current trajectory as a “bad actor” in the crypto space.