Time: 22:00 June 15th
WeChat Group: Top Ten Questions Base
Guests: Jihan Wu, Co-founder of BITMAIN, graduated from Peking University with a double-degree in Economics and Psychology. In 2011, he joined the Bitcoin community and co-founded Babite (8btc.com), an important media outlet in the Chinese Bitcoin community. He founded BITMAIN in 2013 where he currently serves as the company’s director and co-CEO and heads marketing, sales, strategic investments.
Wang: I’d like to introduce today’s guest Jihan Wu, co-founder of BITMAIN, and a rather mysterious figure. He graduated from Peking University in 2009 with a double degree in economics and psychology. Prior to starting a business, he worked as an investment analyst and investment manager for a private equity fund. In 2011, he learned about Bitcoin for the first time and co-founded Babite, a Chinese Bitcoin community, together with Jia Chang. In the same year, he was the first to translate Satoshi Nakamoto’s white paper Bitcoin: A Peer-to-Peer Electronic Cash System into Chinese. He founded BITMAIN in 2013 as its director and co-CEO.
A few days ago, I met Jihan at a dinner party for the first time. Because both of us come from Chongqing, we became familiar with each other very quickly. He didn’t talk very much, but left an impression as a gentle, humble and calm man. I find it hard to connect the portrayals of him as a “mining bully” “terrorist”, “villain” and other terms like these by the media of Jihan.
What I believe is that under his calmness, a tremendous excitement must be pulsing inside. Having witnessed the development of the Bitcoin industry from the beginning, he holds extraordinary powers in that new world, like a captain sailing BITMAIN to the “New World” of opportunity created by the blockchain. Where will we go in this new age? I hope tonight’s “Wang Feng’s Top Ten Questions” can give you some inspiration and insights into that future, which is the purpose of this session. Now, let’s begin our talk.
Wang: According to Bloomberg, Sequoia Capital and Singapore, government funds invested $400 million in the pre-IPO of BITMAIN, which is said to currently be worth $12 billion. If the information is true, we can expect to see the largest blockchain IPO in the traditional capital market shortly. With the arrival of artificial intelligence chips at BITMAIN, Bloomberg is putting IC manufacturers such as MTK and Nvidia as your competition. But, I have a question. I think your company is targeting its own era, not a particular manufacturer. Nvidia, a GPU chip manufacturer, has caught up with the trend of artificial intelligence. Although its market value has been in a horizontal price movement for 13 years and was not been looked favorably upon by the industry and investors, since the beginning of 2016 Nvidia has increased 10 times, reaching a record high of $160 billion in market value. Another example is Qualcomm, a mobile device chip producing giant, which had a market cap of a billion of dollar in 2014. Qualcomm has caught up with the pandemic boom of Apple, Samsung, Huawei, Xiaomi, etc. Now its market cap has fallen to $800, but it is still one of the biggest beneficiaries of the Mobile Internet Era. Earlier, we had Intel catching up with the trend of personal computing. In short, these companies all become leaders in their industry, backed by a massive incremental market move.
My question is this, with BITMAIN as a mining machine producing giant and with significant power in the blockchain, when will it reach the peak of its market cap? Bitcoin had its highest market cap to date of $320 billion and is now only worth $110 billion. Have you ever thought that your company might one day surpass Bitcoin in value? Looking forward to your answers.
Wu: Market capitalization is something of a fantasy. A concept called liquidity illusion indicates that there exists an illusion when investors want to get the money by selling their shares or assets that have a high market value. But it is difficult for them to really sell at that high price. If investors are determined to sell at the same time, the price must come down.
Buffett often says, before buying a stock, you should think well whether you’re still willing to buy it, supposing that the stock market will be closed for 10 years beginning tomorrow. When running a business, it is harmful to watch the market cap on a day to day basis, because risk preferences and the sentiment of individual investors, macroeconomic fluctuations and other factors will all affect the market cap. Besides, the cyclical fluctuation of the industry as a whole will also bring great changes to the market cap. It is better for enterprises to focus on their core competitiveness. Ignoring the secondary market value is crucial to the development of a business. Among those companies you’ve just mentioned, one founder is bold enough to disregard the disapproval of naysayers and place big bets on unproven markets. His competitor, who listens to professional money managers and analysts, cannot take risks like him and then they suffer a lot 🙂
Wang: Expectations are the basis of innovation, just like the Internet.
Wang: In February, Cobra, the administrator of Bitcoin.org, released their effort to modify the consensus mechanism PoW and introduced the PoW+PoS hybrid mechanism. It has been said that this action was a response to BITMAIN’s monopoly on hashing power. Cobra also tweeted last Friday that Jihan Wu and Haipo Yang, CEO of ViaBTC, could easily launch a 51% attack on Bitcoin, crushing the $130 billion network completely.
Here we should explain the idea of a “51% attack”. Its underlying principle lies in the distributed accounting mechanism adopted by digital currency. Take Bitcoin for example: a 51% attack means to recalculate blocks that have were confirmed earlier and then fork them so as to gain control of them and their Bitcoin after mastering 51% of the computing power of the entire Bitcoin network. You then responded on twitter saying: “Please read Satoshi Nakamoto’s analysis on the 51% attack before modifying the original white paper. It’s not going to be the end of Bitcoin.” If I may say so, I guess 99% of Bitcoin holders have not read the original white paper as carefully as you have. Can you explain your response on Twitter with more details?
Wu: The following words are cited from Satoshi Nakamoto’s paper. “We consider the scenario of an attacker trying to generate an alternate chain faster than the honest chain. Even if this is accomplished, it does not throw the system open to arbitrary changes, such as creating value out of thin air or taking money that never belonged to the attacker. Nodes are not going to accept an invalid transaction as payment, and honest nodes will never accept a block containing them. An attacker can only try to change one of his own transactions to take back money he recently spent.”
The important things are to note are: #1 Even if the attack is accomplished successfully, the whole system is not totally subject to the arbitrary will of the attacker. #2 An attacker can only try to change one of his own transactions to take back money he recently spent. In his white paper, Mr. Nakamoto argues that a 51% attack could only affect part of the system and those users who received payments from the attackers.
Cobra has lots of different opinions with Bitcoin Core. He unilaterally changed the Bitcoin.org website to recommend an alternative implementation of Bitcoin software called Bitcoin Knots. https://www.yours.org/content/the-Bitcoin-conspiracy-Lukejr-and-cobra-Bitcoins-b344bf498005
Cobra is one of the few zealots out there, and I have the misfortune, or fortune, to become one of those major Bitcoin companies opposed by him.
Wang: On the other hand, BTG (Bitcoin Gold), one of Bitcoin’s fork coins, became an unfortunate victim of a “51% attack.” The attacker successfully implemented “double payments” and sent himself over 380,000 BTG. LoL, crazy! We simply calculated that if all those funds are stolen, the attacker would receive more than $18 million from exchanges. Moreover, according to some foreign media reports, many digital currencies such as Monacoin, Zencash, Verge, and Litecoin Cash, have already suffered a “51% attack” and suffered millions of dollars in losses.
As a leader at BITMAIN controlling almost half of the Bitcoin network, how can you convince us that the original Bitcoin network, created by Satoshi and designed for the better future of humanity, will not be so tarnished? In your opinion, will frequent occurrences of “51% attacks” shake the future of the entire digital currency industry?
Jihan Wu: First of all, there is no entity that owns such a large portion of computing power. Many of our customers operate and maintain their own mining machines, but they also point their computing power to the mining pool we operate. This kind of computing power can be changed at any time. If we did something evil, our customers would respond immediately and switch their computing power to other mining pools. In this sense, a large portion of computing power is held in our custody.
There is no way to create value out of thin air with a 51% attack. In other words, there is no way to issue tokens out of thin air.
Speaking of BTG network attacks, there are still many doubts. If the attacker controlled the private keys of 380,000 BTG, then who holds all that BTG?
According to general tactics, the attacker would send those BTG to an exchange and sell them immediately, changing them into other coins and withdrawing. But such a large withdrawal of BTG could not be completed all at once, since cryptocurrency exchanges are not stupid enough to allow $18 million to be withdrawn at one time. Can any account that withdraws such a large amount of money run away easily with strict Know Your Customer rules? Meanwhile, in theory, such a large amount of sales would cause a huge drop in the BTG price, but we didn’t see that happen. So, did the attacker actually implement a double payment attack on the exchange?
How should we explain these doubts? I think I’d better not continue the analysis.
If hackers launch 51% attacks, they may significantly reduce values of their mining equipment.
An important feature of currencies such as BTG that have been attacked by controlling 51% of compute power is the use of universal mining devices like GPUs. The related computing power is said to come from the nicehash, a website dedicated to cloud computing. Those who rent computing power do not need to invest in hardware and could mine cryptocurrency at any time.
After assaulting one currency, the attacker could mine other currencies, because the computing device is universal, while attacking currencies based on ASICs requires attackers to pay a much greater price.
Do you believe the Bitcoin network will never be attacked? In simple words, don’t believe it. Suppose that any blockchain practitioner told you that his blockchain would never be attacked and it is absolutely safe… you’d just hear it as a joke and wouldn’t take it seriously. My signature for Weibo is: Bitcoin Cash (BCH) is an independent, decentralized accounting unit. No individual or institution gives any promise or guarantee for its value.
Satoshi has given a detailed analysis of a 51% attack in his white paper, and described the possible consequences of their loss. His scientific and honest attitude is what we should study.
So, why do people still think the Bitcoin network is secure? It is not that it cannot be assaulted by a 51% attack, but that the loss would be limited. There are many technical ways for the community to restore the entire system. Simply put: blockchain is extremely immune to attacks.
So what if a cryptocurrency network is attacked by controlling 51% computing power?
There are many possible choices. One is to wait passively for network recovery. Because attackers’ simply launching a 51% attack will not gain any direct benefits, they must be linked to specific short-selling, fake charges, etc. Specifically, they are likely to double-pay. Continuous attacks cost a lot, so once implemented successfully they’ll stop attacking. The other possibility is that the community can issue patches and checkpoints in the blockchain, so that the community can agree on the point that the attacker’s blockchain would be invalidated;
Therefore, we have a lot of methods to cope with a 51% attack, which would not lead to the end of blockchain world.
Wang: With the increasing popularization of investments in Bitcoin, Bitcoin network congestion becomes serious, making scalability a problem. In February 2016, you and a group of representatives from Bitcoin Core, mainly from the United States, reached an agreement in Hong Kong and advocated to double blockchain scalability while achieving segregated witness. However, it was postponed afterwards. In May 2017, Barry Silbert, founder of DCG, held a meeting in New York during which 58 companies from 22 countries, reached a consensus on the Segwit2X scalability program, and expanded blocks from 1M to 2M. The scalability problem has been solved and forking was also successfully avoided.
On July 17, 2017, ViaBTC funded by BITMAIN announced the forking of Bitcoin, and named the newly created currency Bitcoin Cash (BCH). It was reported that this action made people who had signed the New York consensus very angry. In May of this year, BCH completed a second upgrade, expanding scalability to 32M through hard fork, supporting 100+TPS, and greatly increasing the bearing capacity and transaction speed. What are the points of disagreement on Bitcoin scalability? Some people say that BCH is the true value of Bitcoin. What would you say?
Speaking of the New York Agreement, a temporary compromise has finally been abandoned by both the enlarged blocks and smaller blocks. In April 2017, Bitcoin Core refused the Hong Kong Consensus, causing Bitcoin’s scalability issue to reach an impasse. Barry Silbert, founder of Digital Currency Group (DCG), has invested heavily in Bitcoin and he believes he must stand up to break the deadlock. Barry Silbert privately told me that although DCG has invested in many types of digital currency, BTC has occupied the most important position. He hopes Bitcoin scales smoothly. Barry is also a part of the Consensus Conference in New York.
Throughout April, Barry worked extremely hard to start one-on-one discussions with the industry’s major companies and developer representatives. He did his best to serve as a mediator to soften the attitudes of the various parties. Adam Back, CEO of Blockstream, promised to go to New York for face-to-face negotiations with Barry in May. But, before he set off, Adam was forcefully stopped by another important partner within Blockstream. This is what Adam told Micree in Hong Kong personally. Instead, Blockstream sent Yongquan Miao who has a lower position in Blockstream to attend the talks.
Due to the boycott of some important Bitcoin eco-enterprises, Miao was rejected by Barry. These entrepreneurs threatened to not attend if Miao participated in the talks. Why are people protesting Miao’s attendance at the meeting? This is mainly because Mr. Miao Yongquan frequently conducts unending personal attacks on community members on Twitter.
In particular, I did not participate in the Samson protests. The protesters say that on the one hand, developers of Blockstream and the entire smaller block-oriented camp were excluded by major companies in the industry; on the other hand, they also refused to communicate. Adam temporarily decided not to attend the meeting, but instead sent Miao with his bad reputation, which is often cited as a good evidence for the latter.
The talks took place in New York on May 21, 2017. It was a Sunday and the sunshine in the morning was very good. Barry held a party on the roof of a hotel and only invited the main representatives of the community to attend. Because of the strong sunlight, many participants wore sunglasses. After the party, my neck was sunburned.
The focus of our discussion is whether SegWit activation should be tied to hard fork scalability, allowing two versions to proceed simultaneously. Barry intended to represent Adam, who had not been present, and stood in Adam’s position. He hoped that everyone could agree to activate SegWit first, putting scalability aside for awhile, tackling it in the future.
However, most companies present wanted to bind SegWit activation and hard fork scalability together. For example, Bitpay, Blockchain.info and others all pointed out that Bitcoin scalability had become an urgent need. If they couldn’t be done together, users would have to face high fees and might eventually turn to alternative cryptocurrencies, such as Ethereum. Other companies said that if they couldn’t reach an effective agreement, they would leave immediately. They noted that Bitcoin Core had already refused to implement the Hong Kong Consensus. Why should they make another Hong Kong Consensus in New York?
Representatives of Bitfury participated in the talks. Bitfury has always supported smaller block oriented camp. To my surprise, Bitfury’s representative threw his support behind binding SegWit and hard fork scalability. The representative believed that if a number of companies came to a consensus together, a few ultra-minimalists could not do anything. Bitcoin scalability would certainly succeed.
Barry wanted people present to accept Adam’s proposal, that is, to activate SegWit first and then discuss other things later. At that time, representatives of three other important companies threatened to leave immediately. Although most of the others present did not have as strong a position, they all disagreed with Adam’s proposal. In the end, the on-site representatives formed a consensus on the implementation of the SegWit+2M program, which was later known as SegWit2X. There is actually a very interesting technical detail here, and I hope to share with you.
Bitcoin has more than one voting position when it is taking votes. SegWit’s activation voting was position 1, while the voting position of the SegWit2X program was 4, so as to distinguish it from SegWit.
Why did they choose position 4 and not position 2 or 3? Supposing that an unannounced community plan came out, position 2 and 3 would be available at that time. Choosing position 4 was meant to avoid a conflict. Barry drafted the relevant content after talks and confirmed it with on-site representatives. Then, Barry began to collect more supportive signatures, in the hopes of announcing the news at the upcoming Consensus Conference. Naturally, before the agreement was announced, some of the major community developers and entrepreneurs already knew the contents of the agreement.
On Monday, Barry was still collecting supportive signatures only among enterprises. Then that night something unexpected happened. A developer from Bitcoin Core named James proposed a competing program numbered BIP91 before the agreement was announced. BIP91 also decided to vote at position 4. As the New York Consensus has not been announced, it seemed that the unexpected collision had no reasoning behind it. Of course, it just seems to be that way.
Now, both SegWit2X and BIP91 would use position 4 for voting. Let’s not worry about what BIP91 is all about. If BIP91 and SegWit2X both used position 4, it would not be clear which one the voters had chosen. Furthermore, a voter could arbitrarily interpret his vote after.
What is BIP91? In fact, it is relatively simple. It begins with voting at position 4, and then turns to position 1 when voting at position 4 reaches 80% of agreed votes. BIP91 allows the stalemate to be broken, because SegWit needs 95% of agreed votes to be activated but never reaches it. As for blockchain scalability? It doesn’t exist at all. The first half of BIP91 is SegWit activation, which is exactly the same as SegWit2X. The only difference between them is whether or not to do scalability after SegWit is activated. BIP91 has no intention to fix scalability, while SegWit2X contains it. At that time, two domestic mining pools making use of this collision, claiming that they supported the New York Consensus and later declaring that they actually supported BIP91. BIP91’s intentional rush to position 4, shows almost certainly that they would immediately abandon the New York Consensus when SegWit was activated. The New York Consensus was seemingly doomed. At the same time, some activists from Bitcoin Core had begun to strongly advocate the so-called UASF (user activated soft fork), but UASF did not receive official support from Bitcoin Core. The smaller block oriented camp released two Apps at the same time for UASF and Core clients specifically. Although UASF did not receive support from Bitcoin Core, almost all of the Blockstream camps supported UASF on social media.
These supporters are mainly senior developers, who understand that the UASF is a very dangerous solution. During that time, the entire Bitcoin network would be forked into two currencies, one is the UASF and the other is a normal Bitcoin. If the price of the UASF becomes higher during subsequent transactions, the computing power will be drawn to the UASF chain. As the UASF chain becomes longer, it will eventually cover the original Bitcoin chain. The UASF is actually a kind of 51% attack that is planned by market means. Since most exchanges and traders are not aware of its dangers, a lot of transaction data could become controversial and confusing if the UASF was implemented. If the entire Bitcoin chain had a long and deep rollback, many exchanges and traders would lose money. At this time, measures had to be taken to ensure that at least one chain of transactions would not be rolled back. Therefore, together with experts from the large block camp, BITMAIN pointed out another proposal, called BUIP055, to look into a UAHF (user activated hard fork). The UAHF was defensive at the beginning, to ensure that there would be a backup of the entire Bitcoin transaction history that would not be completely erased if the UASF were activated. After the UAHF was implemented, soon some members from the large block camp would plan to turn the UAHF into an aggressive competitor to Bitcoin. As long as the UAHF and specific technical means were implemented, a brand new blockchain carrying large blocks would be born and would be independent of Bitcoin. As a result, having foreseen the prospect that the New York Consensus would be betrayed by untrusting groups advocating smaller blocks, BitcoinCash driven by the UAHF technology was born. No attention was paid to BCH for a long time, because the entire community advocating large blocks had been actively promoting the New York Consensus. Roger Ver said that he would firmly support the New York Consensus. If the New York Consensus could not be achieved, he and the entire Bitcoin.com group would immediately support BCH. This time, those who had signed the New York Consensus were indeed upset. For example, the manager of a mining pool said they did not understand why BCH still needed to be independent after showing their support for the New York Consensus. In fact, he had forgotten that he had privately said to everyone that he only supported BIP91, not the New York Consensus. The reason why he said he supported the New York Consensus was to activate SegWit but not to implement expansion of the blocks. What made him angry was that his plan to restrict the Bitcoin blockchain forever to 1MB had failed.
“BCH is the real Bitcoin.” I personally disagree with this statement, but I am very sympathetic and understanding. Because the enlarged block camp includes many early evangelists who have paid a lot of dues promoting Bitcoin. What exactly does the word “Bitcoin” mean? For those early supporters, the word “Bitcoin” represented a payment network that was fast, cheap and free of middlemen and that could be used as electronic cash, Nakamoto’s originally planned scalability roadmap, etc. Considering that BCH has more of the properties mentioned above, some people would say BCH is the real Bitcoin, where I do not agree.
BCH came out of the BTC community. They share a common history. Since August 1, 2017, they have lived separately. It is like Americans calling their country the United States after the United States obtained independence from Britain, but there are not any Americans who say that the United States is the real Britain. Canada was organized by part of those Americans who fled to the north because of political differences. Similarly, there are no Canadians claiming that Canada is the real United States.
Here, I wish the BTC community and the BCH community could be friendly with each other and build a solid future along their respective technology roadmaps. It will be the success of this great invention no matter who win in the end. Some of the important early contributors in the BTC community also modified their own statements. For example, Gavin said that BCH was the one he had worked on since 2010.
Wang: Your answers have set a new record in “Top Ten Question” history. The character of people born in Chongqing will come out at crucial times. When BCH was criticized for being centralized, you yelled at your “enemies” on platforms like Twitter and Reddit, “Fuck your mother if you want fuck!” LOL, could you not control yourself? After all, you control the largest amount of computing power in the Bitcoin network. Tonight, the moonlight is bright and clear, although hidden in clouds.
Wu: I just felt that I should swear back when someone swore at me on Twitter. Afterwards, I realized that it was me who suffered the greatest losses from that and I decided not to do it again. My swear words are widely circulated. Someone has even printed them on T-shirts. Anyway, I will not do that anymore.
It really cannot be called “power”, because we possess very little hash power by ourselves. Lots of the power is simply placed in the custody of our mining pool. We would be condemned and boycotted if we did something evil. We all hope that efforts will be made to safeguard the security of mining pools.
Wang: Yes, I see. Shortly before, someone fired at you, claiming that the mastermind behind the Bitcoin fork is Jihan Wu. They asked, “why did you unilaterally destroy the New York Consensus to fork out BCH?” There is also a rumor on the Internet that I am not sure about. It is said that you got a “false Satoshi” (an Australian businessman named Craig Steven Wright, who claimed to be Satoshi Nakamoto in 2016 but without any evidence) to lobby for BCH. Would you like to give your official response to that claim here?
Wu: CSW did not support BCH in the beginning. He strongly supported it later. There are countless reports about him. I’m not the one who made him famous. Actually, my opinions are different from his and I refuse to comment on CSW.
The 4th question
Wang: The following question is about your competitor. You’d better prepare carefully. Recently, Japan’s GMO announced that its 7nm miner chip is already taking reservations, and that GMO’s total network computing power will increase 9X. Dragon Mint T1 uses Samsung’s 10nm chip, which is also very powerful. In contrast, BITMAIN’s Antminer S9 uses only 16nm chips. How should BITMAIN meet the challenges of competitors like GMO?
Wu: The blockchain network is open, so it is bound to be full of competitors. Competition makes the network more secure. The more powerful competitors are, the more unstoppable the blockchain will be. I hope everyone can work together to make the blockchain better.
Wang: I have heard many comments about your shrewdness. One of them is that BITMAIN will set a price for mining machines based on their computing power and the not the costs involved. Actually, I think this is understandable. After all, you have economic background knowledge. Your pricing theory is similar to Xiaomi’s pricing method which is based on market supply and demand, constantly adjusting customers’ psychological price to gain market advantage. Both of them naturally have their own reasons. However, according to someone, BITMAIN’s most innovative products will be used for your own mining pools first. One of my intuitions is that your double-degree in Psychology and Economics at Peking University gives you confidence in entering this emerging market like a fish swimming in water? Do you think you are a shrewd businessman?
Wu: I can hardly be said to be self-confident. The true state of things is that I always believe our company still has many things to improve, but I have to control those feelings and try not pass on such emotions to my colleagues. If I were a shrewd businessman, I probably wouldn’t be involved in the dispute on Bitcoin scalability. I might have pretended that I don’t understand anything and devoted all my efforts to other money-making areas. It is true that I myself have too much enthusiasm for the roadmap that Nakamoto established earlier.
The basic principle of a market economy is that the pricing is what the demand side really wants to pay. Therefore, our pricing must be based on market demands, not our costs. Customers don’t care much about your costs. They only care about what gold and silver can be exchanged for.
The 5th Question
Wang: In the past six years, the Bitcoin market has been magnificent, and it has been in its darkest period for a long time. Even investing in Bitcoin is ridiculous and egotistical. I believe no one could have accurately predicted the situation today. In 2012, at the very beginning of the birth of China’s first batch of mining machines, this era reminded me of the era of the great navigation of the Columbus era. With ambitious departures and hardships, it did not know that there was the dream of a new continent that could be reached on the other shore. Or is it safe to return to the port of origin? What is the best day of your experience? When was the darkest time? When did you really have psychological security?
Wu: After the New World was discovered, some people went back and forth to go back and go, and some people settled permanently in the New World. Different people will have different choices. Some early pioneers in the community started trying to“live xx days only on Bitcoin”or“only use Bitcoin to travel around the world”. This is probably the most determined person to settle in the New World. The vast majority of investors in the community are high-spirited and low-stakes, hoping to improve their lives. This is probably the person who returns to the port of origin. For myself, I am interested in the sailing itself, where I’ve settled I will say in the future.
The best year was definitely 2017. The industry was developing beyond imagination. The company also enjoys a huge dividend in industry growth. The company’s most difficult task was in 2014, when the industry was in a big bear market. The company almost went bankrupt.
Psychological security – If you seek psychological security, you will not be a company. The most important thing is that everyone in the company works together.
Wang: BITMAIN is not the first entrant to make mining machines. In fact, the Friedcat started the mining machine era in 2012. At almost the same time, Katherine Chien’s “Pumpkin” Zhang also entered this market. It is said that you first invested in Friedcat miners, and later bought the Pumpkin machine. I noticed that you launched your first generation of miners in November 2013, but in 2014 Bitcoin entered a long-term bear market and did not enter a major uptrend cycle until early 2016. After this stage, when Bitcoin returned to a bull market, BITMAIN occupied the most power on the Bitcoin network in one fell swoop. After crossing the long-term bear market, I believe that you must have had the means to control and maintain a mast that could not be broken by storms. In the process, what important things have you done?
Wu: We have done a lot of work in technology research and development, production organization, and industrial integration. The company also continuously integrates transnational R&D teams in multiple countries.
The 6th Question
Wang: Recently, BITMAIN developed an ASIC miner for Ethereum mining, called the ANTMINER E3，It is 250% more efficient than a traditional GPU miner. This has caused a strong reaction from the Ethereum community, part of them believing that once the machine is wildly released, it may lead to the concentration of Ethereum’s hash rate and threaten its decentralized network. Ethereum’s developer Piper Merriam proposed a hard fork solution EIP958, by changing the algorithm to be resistant to ASIC mining. Vitalik, the founder of Ethereum, also revealed his plan to change their PoW (Proof of Work) consensus to a PoW/PoS (Proof of Stakes) hybrid consensus model in 2018. Do you think Ethereum will eventually liberate itself from PoW consensus?
Wu: Vitalik is a determined idealist, he was a young journalist who wrote press reports for money in the Bitcoin community. He is the kind of person who is willing to settle in the new world and will not return. He was planning to develop his own smart contract in op_return space in Bitcoin, but he sensed the hostility of Bitcoin Core later, and decided to develop it independently. When the BCH community was born, he gave us strong support. Vitalik’s efforts to promote the implementation of PoS have continued for years, and experienced setbacks. The initial plan was to implement PoS at one time, but soon rollback to the PoW+PoS hybrid design. Although Vitalik is very determined to have PoS, he is a person who can be very honest when facing the facts and truth. As I have observed, the entire ETH community is very much the same. They will carefully analyze the specific plan and risks of PoS implementation in the future. According to our own technical research and judgment, a complete PoS system won’t achieve either security or decentration in the short term. We are actively tracking the development of PoS technology.
At present, it seems that to be decentralized, only PoW is verified and secure. The Anti-ASIC algorithm itself is a free choice for any blockchain independent community. I think this is something that any outsider has nothing to argue with and must respect. However, is their choice wise? Is it really thinking about the future of the community? I am skeptical. Anti-ASIC algorithms are not necessarily secure and decentralized. Some of CPU friendly algorithms are almost all hacker-controlled with zombie miners. Hackers have an absolute advantage in these currencies, so is this called decentralized? And we know that hackers have a hard time controlling ASIC mining. The PoW market will fluctuate with the development of the entire industry. But overall, PoW will share in the growth of the entire blockchain industry. The growth is certain, the only question is whether market share can be maintained. BITMAIN is essentially engaged in the blockchain business, and we will not confine ourselves just to mining. Our understanding and technical reserves are actually much more advanced than many ongoing PoS projects. When the time is ripe, BITMAIN will also enter the PoS market.
Wang: Ethereum mining will become less profitable if Ethereum turns into a PoW/PoS hybrid consensus. For instance, after Monero (XMR) miners came out, the Monero community collectively updated its algorithm, resulting in only BITMAIN miners being left on the old Monero currency. Its market capitalization fell from 2.6 billion USD to 84 million USD. Riccardo Spagni, founder of Monero denounced BITMAIN as a “tumor”. We also noticed that, as an example, the 2018 EOS super node campaign and many other new public chains adopting PoS consensus. How do you view the development prospects of the PoW market? What are your expectations for the future size of the PoW mining market?
Wu: Like I said before, PoW will share in the growth of the entire blockchain industry. It is only a question of whether market share can be maintained, but growth is certain.
Wang: I have consulted Mr. Kong Huawei, (director of the Institute of Computing Technology at the Chinese Academy of Sciences, Shanghai) on this issue. He believes that if digital currency activates Anti-ASIC rules in the future, for example Bitcoin would have ProgPOW (Programmable POW), it would take Bitcoin back to the era of 2009 where everyone could mine. What impact would this have on Bitmain’s business strategy, if it goes the direction that Confucius said? According to sources, BITMAIN is selling customized mining machines for more than a dozen cryptocurrencies, and plans to add more, can you confirm this?
Wu: My opinion on anti-ASIC projects has already been discussed above, and let’s not go into details here. BITMAIN has developed a variety of mining machines and will continue to design more miners in the future.
The 7th question
Wang: At the end of 2011, you were an analyst and investment manager at a VC, however, you joined the community with the task of translating Satoshi Nakamoto’s thesis: Bitcoin: A Peer-to-Peer Electronic Cash System. This is also the most widespread version, and you were called a “Bitcoin evangelist”. However, as of today, it has been seven years since the introduction of Bitcoin and digital currency. Many people still have misunderstandings: What is the significance and value of a limited-quantity currency to the public? Is Bitcoin a pyramid game or a pyramid scheme? Can you use plain language to clarify those misunderstandings, and to spread this popular science once more?
Wu’s translation of Satoshi Nakamoto’s Bitcoin whitepaper
Wu: The current understanding of Bitcoin is a far cry from my translation of Satoshi Nakamoto’s whitepaper. As mentioned above, the Bitcoin Cash(BCH) community has become independent, and all my energy and enthusiasm are in BCH. For Bitcoin (BTC), I do not want to comment. I believe that the current misunderstanding of BCH is as large as the misunderstanding of BTC in 2011, and the investment opportunities in it are also as large as those of BTC in 2011. BCH is fully implementing several technologies to prepare to become the Internet’s electronic cash system. BCH has the potential to become P2P E-Cash, or at least one of them.
Here are some simple examples of important technologies and projects, which include: giga blocks, weak blocks, op_codes reactive, UTXO proofs, canonical transaction ordering, sharding, op_return extensions, tokenization, money buttons, etc. BCH has the potential to become electronic cash. The value is huge and does not require any act of faith. BCH will be widely used in the Internet for a variety of scenarios requiring micropayments.
Wang: I heard that you bought Bitcoin at Taobao and Mt.Gox at first. How did you know about Bitcoin at the time? Who lead you to the Bitcoin world? How much Bitcoin do you currently hold? Many people are very concerned about the issue of the Bitcoin market. How long will this bear market last?
Wu: I was introduced to Bitcoin by a blog. I feel the topic gets too sensitive, so I won’t answer the other questions here.
The 8th question
Wang: You have been working in the mining machine business for many years, unlike those whales who are busy cutting leeks (collecting coins). But I feel that many people are even more critical of you than of those whales. You have even been called a “villain” by Coindesk, which is the largest blockchain media outlet in the United States. Many people in overseas forums also intentionally misspell your name “Jihan” like “Jihad” (terrorist). In your opinion, why do you make so many people angry and resentful?
Wu: These criticisms are mainly due to my insistence of expansion. The actual blockchain community is very flatly designed, no matter who you are, it’s hard to avoid being judged. Meanwhile, the larger the size and influence of the company, the more its founder insists on a certain point, the greater the criticism will be. The community is very much hoping to realize decentralization, an ideal community. However, as a member of the community who was extremely enthusiastic about Nakamoto’s original technology roadmap, it combined with my other identity as the BITMAIN co-founder. This dual identity has caused great concern for some people who strongly hope that Bitcoin will be free from authoritative control.
Especially when I insist that smaller blocks are ridiculous. I think it’s good to deal with it all as my natural heart. Many people who bash me on the internet are actually very gentle when face to face.
If you want to know how bad it is, I think Vitalik has been treated even worse than me. People at Blockstream keep saying that Vitalik is going to be investigated by the SEC and going to be imprisoned, saying that ETH is a very bad at technology with lots of vulnerabilities. With ETH’s DAO security breach, the community used hackers, spammers and public media relations to crack down on ETH. Some documents created to describe how to attack ETH were quickly and systematically translated into multiple languages.
But Ethereum was still developing and wasn’t stopped by these attacks. Vitalik also showed great tolerance and understanding for the ETC community’s personal attack, he considered it’s the free right of the ETC community.
Wang: I heard that you saw Buffett as an idol, as many young people do. But Mr. Buffett scoffed at Bitcoin and cryptocurrency, and called Bitcoin “rat poison”. Do you still consider Warren Buffett an idol? How do you evaluate Buffett’s criticism of cryptocurrencies?
Wu: Buffett is a wise man and worthy of long-term research and study. But it doesn’t mean Buffett has always been right, just as young Buffett realized his own teacher was not always right. When Buffett was young, he invested in a little-known insurance company he believed would grow rapidly. He excitedly shared his opinions, but was disappointed to find that no one believed him. This kind of situation happened to many people in the past, present, and will in the future, and only the facts in the future can prove if it will be correct or not.
The 9th question
Wang: Referring to BITMAIN, we have to mention your other co-founder, Micree Zhan, who is known as BITMAIN’s “technology brain”. In my opinion, your previous cooperation was golden. Micree Zhan is seven years older than you, he was engaged in the design of integrated circuits after he graduated from the Chinese Academy of Sciences. In 2013, Micree Zhan spent six months developing BITMAIN’s first generation of mining machines, which were far more efficient than its competitor, and became the key to the rise of BITMAIN in future years. It is said that the your fates were attributed to a “roadside sale”? In the company, how do you divide the work with Micree Zhan? There are rumors that the Micree Zhan is the largest shareholder of BITMAIN?
Many people may notice that Micree, who used to hide behind the scenes, has frequently come to the stage and spoken on behalf of BITMAIN, but his title is “BITMAIN co-founder and co-CEO”. According to my observations, the title of co-CEO is basically used in the transitional phase of two companies that are merging, such as Wang Xing and Zhang Tao’s titles after the merger of MeiTu and DaZhongDianPing, and ZhangTao left in the end. One company only needs one person to make a final decision. BITMAIN is a partnership between you and Micree, so what was the purpose of establishing a co-CEO?
BITMAIN’s “technology brain”
Wu: Since the recent blockchain industry has expanded dramatically, many journalists need to write something about it. But they don’t understand us and are concerned with the co-CEO relationship. In fact, this is old news. Micree and I started as co-CEOs, people in the Chinese blockchain industry have always known that. In 2017, during the expansion debate, Blockstream suddenly realized it. They had journalists report the matter and were excited for a long time. Adam felt that there was a chance and met with Micree alone. He hoped to find a breakthrough opportunity for a story but it had no effect. Micree and I are more like a complementary team. It’s like a table tennis doubles game. When the ball is played, whoever is in the best position will hit the ball, so coordination is the key.
The 10th question
Wang: At the 2017 World Artificial Intelligence Conference, BITMAIN announced its special custom chip, Sophon BM1680, deep learning accelerators SC1 and SC1+, as well as the intelligent video analytics server SS1, and formally entered the artificial intelligence industry. “The three-body problem” fans must have recognized that the name “Sophon” comes from the sci-fi novel. According to your estimation, 40% of BITMAIN’s revenue will come from AI chips in the next 5 years. How did you make this decision to enter the field of AI chips? From the development of mining chips to AI chips, what technology stack can be applied and what are the biggest challenges that could be encountered?
Wu: BITMAIN is a high-performance computing chip company. After our success in the blockchain and cryptocurrency field, we view artificial intelligence as a new application sector. We found that traditional chips do not have the ability to meet the computational needs of deep learning, and we needed a new ASIC architecture to build a special processor for it.
Wang: Recently, Intel introduced the latest version of their NNP chip, Nvidia launched Jetson Xavier, Google also introduced a new version of TPU 3.0, IBM launched the “True North”, and even Elon Musk’s Tesla announced the development of its own AI chip. Obviously, the processor R&D competition has become the top competition in the food chain. What are BITMAIN’s competitive advantages compared to these giants? Is there a difference in competitive options?
Wu: In essence, we are not competitive with them. Artificial intelligence is an emerging market, and it is appropriate for these companies to make the market even bigger. The strategies of BITMAIN are not the same as giants like Nvidia. BITMAIN as a new company, will work with them to make the applications better. Google is a very open company, and TPU is a project led by the spirit of open source, which helps us a lot.
Wang: How does BITMAIN consider the application launching in AI scenarios? It is said that BITMAIN has collaborated with Internet giants such as Tencent and Ali in the AI field. Can you disclose more information on these collaborations?
Wu: BITMAIN’s artificial intelligence products can be applied in various fields such as security monitoring, voice processing, image recognition, and robotics. The Internet giant has a large amount of data and has the opportunity to create some great views of the data. It is an important partner and application area for BITMAIN’s artificial intelligence products. Currently, the second generation of AI chips have been tested, and the 3rd and 4th generation products are in research and development. We maintain close cooperation and communication with mainstream Internet companies in the industry, but details cannot be disclosed.
The 11th question
Wang: Since 2015, BITMAIN has established R&D centers in places such as San Francisco, Israel, and the Netherlands. However, in 2018, the company’s overseas blueprint suddenly accelerated, setting up branches in Zug, the “crypto currency valley” of Switzerland; setting up a regional headquarters in Singapore; looking for mining farms in the Quebec region of Canada; setting up an ASIC mining machine service center in Russia and so on. What is BITMAIN’s overall plan for overseas operations? Why did you suddenly force overseas operations this year?
Wu: BITMAIN was a global company from the very beginning. We make arrangements based on the advantages of each country, and we also strive to contribute to local economic development and job creation. In the past, the company had fewer personnel and many offices had only a few employees. In 2017, due to the overall development of the industry, the number of offices increased, and the number of people in each office also grew. In the past, people did not pay attention to us when we opened a new office, but now we get local media reports when we simply start consulting with a local agency. It gives us a feeling of “force”. In fact, we are never relaxing.
Wang: In an interview with Bloomberg TV, you said that the United States is one of BITMAIN’s largest target markets. The company’s Bitcoin mining business will “have a huge expansion plan” in the United States. How do you plan to expand the US market? How is the current progress?
Wu: The U.S. is a vast country, with many talented people and very low energy resource costs. Our current development path in the United States is relatively smooth and we have already overcome many initial difficulties.
The 12th question
Wang: I can feel that BITMAIN has created a huge blueprint with its investments. Since 2017, BITMAIN has invested in a number of blockchain projects such as Yilaiyun, ViaBTC, AICHAIN, Hero Interactive, and Yingying Network. In May this year, another $110 million was invested in Circle Internet Financial, a mobile payment and cryptocurrency trading company. Which sub-fields will be selected?
Wu: We value the blockchain’s ability to serve the real economy. We will focus on those blockchain projects that are helpful to the real economy.
Wang: BITMAIN’s official website wrote: “Although we are not yet giants of artificial intelligence, with neither the fastest expansion nor the best promotion, our commitment to professionalism and understanding of the industry will eventually make us the most dazzling one on the journey.”
Perhaps the new era of great navigation has already begun. Even if there are storms and waves, I hope you persist in your original intention and never give up finding your own new continent ASAP!
Thank you for answers.
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