Mining machinery manufacturer Yibang International wants to set up a trading platform to open up the "mining circle" industry chain

Original title: "Yibang International intends to establish an exchange, strengthen the positioning of" mining circle "water seller"

Source: Hong Kong Stock Exchange, Tiger Securities

In recent years, there has been growing interest in blockchain. As of December 31, 2019, there were 5,035 cryptocurrencies in circulation with a total market capitalization of approximately $193.4 billion, up 48.5% from approximately $130.2 billion as of December 31, 2018. The largest cryptocurrency, Bitcoin, represented about 68.2% of the market value of all cryptocurrencies as of December 31, 2019, or about $131.9 billion.

Mining, as one of the most basic forms of the digital currency industry, has always been in demand. Bitcoin mining, in particular, is the focus of "mining circle". If there are "miners" who dig mines, there are "water sellers" - makers of mining machines.

Ebang is one of four major Bitcoin miners, all Chinese, that dominate the global market. The mining giant filed its prospectus with the Securities and Exchange Commission on April 24 and expects to complete its IPO under the symbol "EBON" in June.

Company profile

Ebon reported total revenue of $319 million and $109 million in 2018 and 2019, with net losses of $11.81 million and $41.07 million, respectively.

Ebang's main business is the production and sales of Bitcoin mining machines, and the design capability of ASIC chips for mining machines is its core competitiveness.

Yibang is one of the earliest mining machine manufacturers in the industry to use 10-nm ASIC chips for commercial use. At present, Yibang will soon launch 8-nm and 7nm chip mining machines, and 5-nm ASIC chips are also under development.

Of course, mining is not limited to Bitcoin. Ebon international also plans to apply its own technology to non-bitcoin areas, such as Litecoin and Menlo COINS.

In addition to the manufacture and sale of mining machinery, Yibang also has mining machinery hosting services. In 2019, Ebon's escrowed revenue was US $15.728 million, up 104.5% year on year, accounting for 14.4% of total revenue, compared with 2.4% in 2018.

Most of the mining machines managed by Ebon international come from the mining machines sold by itself. A closed loop is formed between the sales of mining machines and the trusteeship of mining machines, which will bring "miners" a certain degree of convenience and expand their business scope at the same time. As we all know, the sales of mining machines are related to the situation of Bitcoin. When bitcoin surged, the demand for mining machines was strong. On the contrary, the sales of mining machinery are relatively low. The mining machine trusteeship business is relatively stable. The expansion of the mining machine trusteeship business by Eppon International also reduces the volatility of the company's performance to a certain extent.

In addition, eppon International also mentioned the establishment of a digital currency trading platform in its prospectus. From mining mechanism manufacturing, to mining machine trusteeship, and then to digital currency trading platform, Ebang international tightly around the role of "water seller" to expand upstream and downstream business. At the same time, the establishment of a digital currency trading platform can also deal with the fluctuations of the industry and policies, and the revenue generated by the trading platform business in the future can also smooth the fluctuations of performance.

Industry status

The industry chain of digital currency "mining circle" is mainly divided into three parts: the upstream mining mechanism, the middle mining and the downstream digital currency trading. Yibang international is in the upstream mining mechanism, after the establishment of the future trading platform, Yibang international will also enter the downstream business.

The core of ore mechanism manufacturing is THE IC design of ASIC chip. The demand and price of ore machine are affected by the price fluctuation of digital currency. Take Bitcoin as an example. When the price of bitcoin rises, more and more "miners" are attracted to mining activities, so the demand for mining machines increases and the price of mining machines also rises.

On the contrary, when the price of Bitcoin falls, the attraction of mining decreases, the number of miners participating in mining decreases, and the demand for mining machines also decreases. Therefore, the price of mining machines is strongly correlated with the price fluctuation of Bitcoin.

Source: Ebon International Prospectus

According to Frost Sullivan's report, global bitcoin mining machine sales grew at a CAGR of 61.3% from 2015 to 2019, surged from about $200 million in 2015 to about $1.4 billion in 2019, and are expected to grow further at a CAGR of 24.8% in the next five years to $4.3 billion in 2024.

Source: Ebon International Prospectus

Therefore, the demand for mining machinery to maintain long-term growth, while short-term fluctuations.

review

In 2016, bitcoin production halved. In 2017, bitcoin saw a surge. There's a lot of talk about bitcoin on the street, and blockchain technology is being tried out in different areas. Mining, as the bottom of digital currency, has naturally entered a period of vigorous development. For a time, the demand for mining machines surged, and Huaqiangbei in Shenzhen also changed from a computer city into a mining machine city, thus giving birth to four mining machine manufacturers, of which Ebang International is one giant.

Although bitcoin has since fallen back, demand for mining machines has stalled. However, Yibang international will continue to deepen the "mining circle" related business, code mining machine custody business, the future will enter the digital currency trading platform business. These business expansions can expand a company's circle of capabilities while smoothing out the cyclical swings in the price of digital currencies.

Put the vision into a longer range, the application of block chain is more and more extensive, mining machinery long-term demand logic unchanged. 2020 is another year in which bitcoin production has halved, and the price of bitcoin has risen more than 30% this year to $9,000. Will mining demand explode again? We'll see.

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