Industry figures are pointing the finger at Bitmain, accusing them of "playing dirty" to maintain their position as the largest mining operation in the world. We look into how much truth there is to the claims.

Bitmain is probably largest company in Bitcoin, valued at ~$1 billion as of 2017, and is involved in many aspects of the crypto-industry, including mining, manufacturing, and software development. Because of its position as a clear market leader in the design, manufacture, operation, and sale of ASIC mining chips targeting many of the largest cryptocurrencies, many advocates of decentralization are concerned over the centralizing force of Bitmain in the industry.

David Vorick - lead developer of Sia

David Vorick, lead developer of Sia, claims in a recent blog post that Bitmain has barred numerous crypto chip designers from manufacturing their chips in China. In the same post, he also accuses Bitmain of not only intentionally releasing chips to market that they know will not be profitable for buyers, but actually manipulating sales in various ways so as to intentionally bring this about. Vorick says Sia was warned by unattributed third-parties that Bitmain would block any attempt to manufacture chips in China. Subsequently, a deal between Sia and an unnamed Chinese manufacturer fell apart which Vorick blames on Bitmain, despite admitting to having zero evidence for such accusations.

In his post, Vorick acknowledges that Bitmain is an highly advanced and optimized company and that throwing their weight around is just one way they maintain an edge in mining. He also states that, in general, the economics of decentralized mining tends toward centralization as manufacturing and economics of scale naturally lead to a large advantage of a small number of players over their competition. To protect against any hostile takeover of the network by centralized miners/manufacturers, he argues that software developers must thus maintain decentralization at higher level.

Bitmain usually prefers to let their market leading chips speak for themselves, otherwise refraining from the media fray; however, they quickly responded to Vorick's accusations on their blog. They state that, while they appreciate the contribution that Sia has made to the mining industry, cornering the entire chip manufacturing industry in China, to the extent that Vorick claims, is something they are not capable of doing. They also address Vorick's accusations of purposefully selling unprofitable chips by pointing out how they specifically release new chips in a responsible manner, so as not to flood the market.

Jimmy Song on Bitmain's mining dominance

In a post regarding Bitmain's mining dominance, Jimmy Song argues that Bitmain brought a professionalism to manufacturing that simply wasn't there before, and this is why they've driven other companies out of business. He argues that maintaining a positive business reputation is much more important to their continued success than would be engaging in bad behavior that may result in short-term gains but the eventual undermining of their position as a market leader. Also Song believes that mining manufacturing centralization is a short-term problem and that Bitmain is likely to be dethroned in time by the free market.

Conclusion

As there appears to be no supporting evidence of foul-play on the part of Bitmain, at least in regard to undermining rival manufacturers and selling unprofitable chips, it's really Bitmain's word against Sia's David Vorick. However, Bitmain remains openly engaged in other bad behavior such as actively mining empty blocks (along with most other large mining pools), with its CEO, Jihan Wu, justifying such behavior as permissible under the "freedom given by the Bitcoin protocol."

Featured image from Shutterstock

Verified on Po.et

May 21st 2018, 18:59

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@landonmutch — traveling, trailer-dwelling, software developer, writer, geologist, autodidact, traditional hacker, subversive, Bitcoin maximalist, contributor to Lightning Network protocol.

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