This Chinese Bitcoin Operation Has Cracked the Code on Crypto Profits

A four-year-old Chinese computer hardware company made about $1 billion more in profits in 2017 than American computer chip company Nvidia, which has been in business for a quarter century.

Bernstein, a finance and investment research company, recently published a report revealing that China’s Bitmain generated anywhere from $3 billion to $4 billion dollars in profits last year alone.

Bitmain was founded in 2013 by Chinese businessmen Jihan Wu and Micree Zhan.

It builds and sells machines using powerful computer chips called Application Specific Integrated Circuit (ASIC) cards, which are used to mine for Bitcoins.

Rather than mining on its own, the company outsources its mining operations, overseeing industrial mining pools of individuals.

Bitcoin mining is time-consuming generates extreme heat, enough to destroy computer hardware and chips.

Bitmain overcame this problem by building and selling AntMiner BTC mining rigs, powered by ASIC computer chips, to their outsourced miners.

The company sidesteps cryptocurrency volatility by relying on the sale of rigs and chips. Bitmain adjusts its operating costs to reflect the value of cryptocurrencies, no matter how often or wildly the valuation whipsawed.

“Some money is left with customers, but so are a lot of risks,” the Bernstein report said.

“The results, in our view, have been remarkable.”

International expansion

Nvidia manufactures computer chips and graphics cards that are used in graphics processing units, which are widely used in video gaming.

Nvidia’s computer products also were used once, early on, by Bitcoin mining hobbyists.

Before Bitcoin became a global mania, the GPU cards that are found in video game units could be stripped and repurposed to mine for cryptocurrencies such as Ethereum.

However, Bitcoin mining involves solving progressively more complex mathematical algorithms, so more specialized computing power is required.

GPU computer cards and chips just cannot offer the same computing power and heat sustaining abilities of ASIC cards. Plus, ASIC cards mine about 50 times faster.

To add to their profits, Bitmain operates several international mining rig operations in countries such as Canada, Israel, Singapore and Switzerland.

The company also mines Ethereum and Monero.

The Bernstein reports speculates that Bitmain controls a 70% to 80% market share of Bitcoin mining rigs and ASIC computer chips.

“In the year 2018, Bitmain will likely lead the cryptocurrency ASIC industry,” said the report.