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Analyst Questions Bitmain's Revenue as Crypto Miner Seeks IPO

Crypto mining giant Bitmain may be losing its advantage in developing miners amid other potential cash-flow issues, according to a new report.

Analysts with research firm Alliance Bernstein said the company’s “cash flow appears to be questionable and the company may be gradually losing technological edge” in a report published Wednesday. The researchers note that Bitmain’s revenue in 2017 fell below estimates after the company stored a large number of its miners’ components, rather than selling to customers, although its revenue still remained “remarkably high” for that year.

Further, even though Bitmain dominated the mining device market with “77 percent unit share in bitcoin and ~85 percent in all cryptocurrencies last year,” declining cryptocurrency prices reduced some of that revenue stream.

The bear market also impacted Bitmain’s holdings. The company holds roughly 5.7 percent of the total supply of bitcoin cash, which Bernstein says was “likely” acquired using its operating cash and bitcoin holdings.

“These BCH holdings, valued at U.S. $890 million as of [Q1 2018], poses another major risk as BCH is illiquid and has depreciated nearly 20 percent since [Q1 2018],” the report notes.

The company’s problems also extend to its own crypto mining projects. The report states that, last year, Bitmain’s advantage in mining rigs ensured it could fund projects with customer deposits, and saw roughly $1.3 billion in cash flow. However, as the price dropped early this year, customer deposits also slumped, and Bitmain was “forced to draw from its operating cash flow” in Q1 2018.

The report argues:

Going forward, the competitiveness of Bitmain’s chips is in question, as Bitmain failed in a 10nm chip [and] possibly other projects too. Rivals now may have caught up in technologies and Bitmain’s inventory (U.S. $1.2B as of [Q1 2018]) may face major a write-down risk.”

The publication comes after two of the firm’s reported pre-IPO round investors – though the claim did not come from Bitmain itself – told CoinDesk that they were not actually involved in the funding effort. Both Tencent Holdings and SoftBank group said they were not investing in the company, with SoftBank adding that it had not invested in the company previously, either.

Bitmain is seeking potentially as much as $18 billion in its IPO later this year. If successful, the company could see a market capitalization as high as $50 billion after the IPO concludes.

Computer chip image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Ripple Chief Technology Officer: Getting Volume On RippleNet is Top Priority

David Schwartz – the current Chief Technology Officer CTO [former Chief Cryptographer] for the startup that provides better solutions for cross-border payments Ripple did an interview with Asheesh Birla – Ripple Senior Vice President of Product. The questions were made by the Ripple [its XRP Token] community and enthusiasts over Twitter.

Ripple – David Schwartz

Keeping in mind that news which are related to the crypto-firm Ripple fly in daily, it is obvious that investors, traders, followers want to know what are the priorities and most important tasks that the team has set in front of them. According to Mr. Schwartz the most important matter to take care of is getting more volume in RippleNet. Accordingly, getting more payment corridors by which the transaction flow will increase and its tech implementation will take place.

“I think having that transaction flow as candidates to be bridged with XRP is tremendously important to the company. Also, xRapid, actually doing the bridging of payments with XRP”

Even that Ripple is known for signing many partnerships during the last years counting hundreds according to its CEO Brad Garlinghouse, David Schwartz thinks there is still need for more which of course will turn out positive.

The next major factor to work on is decentralization as Mr. Schwartz highlighted out, and explained why it does matter when asked.

 I’ve had people tell me “Well, banks don’t care if something is decentralized; they trust each other, don’t they?”. Well, not only they do not trust each other, but imagine if you are trying to build on that ecosystem… if you are trying to compete with a company that’s spent billions of dollars on its liquidity solution, are you going to want to spend billions of dollars? And the other problem is that things that are based on trust don’t really scale… However, if you have a system that doesn’t require trust, you can interoperate with everybody by just firing up your own instance.

He continued adding that with a decentralized system there is no need for anybody to manage it on daily, or a governance body which would intermediate the engine. Which is why a decentralized platform that can govern and run by itself is needed.

The following questions were directed to Senior Vice President of Product, especially about Ripple’s product xRapid. As we all just want to know the best part, a twitterati asket when it is going to be in production. Birla noted:

“Right now, we are really working hard on getting the experience right for xRapid… We’ve seen really positive results with the pilot so far. There’s no set time for production just yet… We hope to have it by this year. I would say that the pilots were really good learning both for us and our customers”

As many do know, the partnership with Western Union had its ups and downs. Birla explained that for WU to see the full potential of xRapid and take advantage of the financial transaction solution, they have to set all their volume under xRapid. That is because they already set costs and optimized liquidity flows. However, according to the senior vice president of product, the team has set under radar startups and firms that are competing with Western Union and hoist them with their tech.

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Regulation for the Win! Bitcoin Volatility Solution

If we roll-back just in the previous weeks and analyse the Bitcoin price development an immediate thoughts of its high volatility will hit – Reached $5,000 for the first time, corrected and lowered back to $3,000 and then trade-stabilized at around $4,000. However, this could be solved with the right Regulation as Bart Chilton – Former US trading commissioner commented in an article on CNBC.

Chilton did act as chair of the US Commodity Futures Trading Commission (CFTC) which is the financial regulatory agency that overlooks the US derivatives markets.

The recent crackdown by China’s officials should be more than a signal needed for traders and investors that the lack of regulations is what hits the weakest points for Bitcoin – the former regulator points out.

Stability is needed – which would be a result of a more regulated space to function as a cryptocurrency as a an act to express another way rather than the anti-government standpoint it has positioned – Chilton comment:

“Rather than waiting for governments to take actions that thwart the development of digital currencies, they should lead efforts to put in place appropriate regulatory oversight for these new and innovative financial technologies.”

However, the original idea of a non-governed cryptocurrency for Bitcoin or other digital currencies would in contrary with this perspective.

Julian Assange commented on a more traditional approach towards the dangers that could come from GOV power and the regulation it could experience

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