Crypto billionaire Jihan Wu has lost his power over Bitcoin
Bitcoin mining pool Antpool and its former master Jihan Wu are storied institutions in crypto history.
Once definitively the largest and most powerful collection of Bitcoin miners in the world, Antpool lost its 2017 bid to increase Bitcoin’s block size through Bitcoin Unlimited — and never quite recovered.
Last week, Antpool announced it will block IP addresses from mainland China to comply with Beijing’s nationwide ban on crypto mining.
Antpool barring Chinese Bitcoin miners is tantamount to Budweiser proclaiming that it would stop buying grain from US farmers.
For most of its existence, Antpool was controlled by Bitmain, the major Bitcoin mining rig manufacturer, and its billionaire co-founder Wu, the notorious Chinese crypto entrepreneur.
- Bitmain generated $2.5 billion in 2017 revenue when Wu and his co-founder Micree Zhan owned 60% of its equity.
- In 2018, Bitmain tried to raise $3 billion in a failed Hong Kong IPO bid at a valuation north of $15 billion.
- More recent reports have aspirationally targeted Bitmain’s valuation at $40 billion (about the same as Electronic Arts).
But Bitmain’s grip on Bitcoin has wavered since China issued its most fervent crypto ban to date.
Today, it’s looking more likely that Antpool could be knocked off the top of the Bitcoin mining pool rankings.
Antpool hopes Singapore will do the trick
Now that China threatens Bitcoin miners with “forcible dismantlement,” US-based IP addresses generate one-third of Bitcoin’s hashrate — the country’s highest share since 2015, according to the Cambridge Bitcoin Electricity Consumption Index.
Antpool is moving its Chinese headquarters to Singapore in a bid to retain its number one spot. It’s also implementing a Know-Your-Customer verification system to increase compliance with local regulations.
Antpool will still operate a few Chinese facilities for students studying blockchain, and support China’s efforts to develop blockchain technology.
Remember: giving back to the state is not exactly optional in China, and Forbes estimated Wu’s net worth at $1.8 billion last year.
But while Chinese hashrate fleeing to the US and elsewhere is certainly noteworthy, it formally signals another slice of crypto history: Bitcoin’s small block community has now definitively defeated Wu’s efforts to increase Bitcoin’s block size.
Not just Wu: Armstrong wanted big Bitcoin blocks, too
Wu, and by extension Bitmain and Antpool, were the most powerful backers of “large blocks” during the power struggle between 2015 and 2017 that came to be known as the Blocksize Wars.
Other supporters of large blocks included Roger Ver, Mike Hearn, Coinbase’s Brian Armstrong, Jerry Chan, and even Satoshi Nakamoto successor-turned-Craig Wright backer Gavin Andresen.
Big blockers made the case that more data per block would keep Bitcoin’s transaction fees low. Ver, once known as Bitcoin Jesus, argued that Bitcoin’s top priority was keeping on-chain fees low for peer-to-peer digital cash transfers.
Read more: [Ethereum echoes the Blocksize Wars (why Bitcoin doesn’t need coffee)]
The small blockers were eventually victorious. The global community decided decentralization via small blocks and a small blockchain was more important — protecting the ability to run full nodes on household computers with less than 1TB of storage.
Although Bitcoin’s on-chain transaction fees occasionally spike, small blockers believe that fees will reduce through Lightning, Bitcoin’s increasingly popular “layer 2” solution.
Antpool was Bitcoin Unlimited’s secret weapon
Throughout 2017, Bitcoin client Bitcoin Unlimited (a Bitcoin Core fork with a hardcoded 1MB block size limit) gained support from mining pools like ViaBTC, GBMiners and BTC.TOP.
When Wu’s Antpool added its support in March 2017, the hashrate for Bitcoin Unlimited jumped from 45% to 55% of Bitcoin’s total hashrate.
However, the mining pools supporting Bitcoin Unlimited were accused of false flag attacks against Bitcoin Core (today’s version of Bitcoin) by sneaking Bitcoin Unlimited code into Bitcoin Core blocks.
Bitcoin Unlimited supporters were also said to be plotting to defeat Bitcoin Core by devoting mining power to generating empty blocks and orphaning Core blocks containing transactions.
Wu’s Bitmain even installed a patented “AsicBoost” into its mining rigs, empowering his Bitcoin Unlimited hashpower with up to 20% more power efficiency versus Core hashpower — an apparent bid to entice Bitcoin miners to adopt Unlimited.
(AsicBoost was incompatible with Bitcoin Core’s block-stretching SegWit protocol. Bitmain, of course, denied that Bitcoin Unlimited was the reason that it blocked SegWit on its mining rigs.)
There were also bugs in the Bitcoin Unlimited code that could cause security threats. In March 2017, one of these bugs were exploited to cause most of the Bitcoin Unlimited nodes to crash in an effective denial-of-service attack.
Bitcoin Unlimited never fully recovered from that incident.
After a three-year battle and the victory of the small blockers, many of the Bitcoin Unlimited supporters like Wu moved to supporting Bitcoin Cash (BCH), a fork of Bitcoin.
Wu refused to support Bitcoin Core’s SegWit without larger blocks. However, his support for Bitcoin Unlimited had proven costly to Antpool and Bitmain.
In September 2018, Bitmain filed for an IPO in Hong Kong, just weeks after BitMEX Research reported the company had lost $328 million directly due to Wu’s BCH investment.
Wu’s failed IPO triggered by Bitcoin crash
Bitmain let its IPO application lapse in March 2019. At the time, the company said it would resume its plans to go public at a “more appropriate” time.
A crash in Bitcoin’s price hit Bitmain especially hard in January 2019 due to a drop in mining rig sales. It was forced to downsize, with some reports indicating around half of its workforce was cut.
Reports indicated the company was in the process of restructuring, and founders Jihan Wu and Micree Zhan were preparing to leave.
Wu left Bitmain in January this year after a power struggle with Zhan. Zhan signalled he would work toward an IPO with a possible valuation of $50 billion within the next three to five years.
Bitmain divested from Antpool in May. In response to China’s most recent crypto mining ban, Bitmain also announced it would stop shipping mining rigs to Chinese customers.
And in June, Bitmain halted sales of rigs globally. The company claimed the move was to keep prices in mainland China stable as local miners flooded secondary markets with used ASICs.
Antpool still controls 22.90 EH/s in mining power at press time, more than any other Bitcoin pool, and about 7% more than number two F2Pool, which also operates out of China but says it serves participants worldwide.
As for Wu, he’s now focused on his other crypto company, Matrixport, which he spun out from Bitmain in 2019 (Bitmain and Wu are still major shareholders).
“Crypto neobank” Matrixport provides crypto trading, investing, and leverage services, mostly to wealthy clients.
The Singapore-based firm claimed in April to have over $10 billion in assets under management, and in August it closed a $129 million Series C with a valuation of over $1 billion.
Wu does run another Bitmain spinoff, Bitdeer, which reportedly manages Bitcoin mining operations in the US and Norway.
But at least for now, it seems Wu is more content with a role in crypto fintech than influencing Bitcoin — for which the network is surely glad.
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