Singapore government skips bitcoin, invests in Bitmain
Bitmain owns the majority of bitcoin's hash power. Now its fundraising brings new centralisation problems.
Bitmain is the central heart of both bitcoin and Bitcoin Cash. The company manufactures the popular Antminer series of bitcoin mining rigs, runs the largest bitcoin mining pools and is also the world's largest bitcoin mining entity in its own right.
Recently it has tightened its grasp on the crypto space with a series of investments intended to help it become an extraordinarily profitable central bank for cryptocurrency, and suggestions of branching out into AI and other areas where its technology can be easily applied.
On 11 June it revealed plans to go public, and is expecting to go public with a market capitalisation of $30 to $40 billion before the end of the year.
In the lead up it's gone through a pair of private fundraising rounds, with the most recent including a considerable investment from the Singapore government through its GIC investment firm.
Getting hard to ignore
Bitcoin has been highly centralised under a small handful of developers for years now, and as its hash rate has grown and squeezed out individual miners, a new locus of power has emerged in the mining firms.
These days Bitmain controls more than 51% of bitcoin's hash rate, and for all practical purposes, it's the company that owns the bitcoin network.
Bitmain's secretive nature has so far made this inconvenient truth quite easy to ignore, but its public fundraising rounds and heavy investment from government-owned investment firms might consistently push it back to the foreground as time goes by.
This is because the main argument for ignoring bitcoin's centralisation is that it's fine because it's controlled by for-profit entities, whose financial interests lie in promoting bitcoin and keeping the network running. It might not be a very good argument, but it doesn't have to be.
However, a government's motivations can be more policy and politics-driven than strictly financial. This might complicate the issue, bringing in motivations beyond the simple financial incentives which have been propping up the bitcoin network so far.
And with Bitmain going public, the fundraising also highlights the potential problems of centralisation of Bitmain shareholder power. This type of centralisation might be much less obvious than the centralisation of a blockchain's hashing power.
It's going to be increasingly hard to ignore bitcoin's centralisation going forward, especially if bitcoin's new majority shareholders start flexing their network power.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, XRB
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