Beijing-based start-up Bitmain now dominates the Bitcoin mining industry. Last year it is estimated the company made as much money as chipmaker Nvidia did, according to estimates from researchers at Wall Street analyst Bernstein.
Based on conservative estimates, the analysts calculate that Bitmain made $3 to $4 billion in operating profit last year. Bernstein’s U.S. semiconductor team estimates Nvidia’s profit was $3 billion during the same period. What’s particularly striking is that Bitmain achieved this in a mere four years, while it took Nvidia 24 years, the Bernstein analysts said in a report published Wednesday, February 21st.
Crypto mining as an industry has gained significant traction as of late thanks to the frenzy seen in crypto markets. The technology behind these chips is also undergoing changes, with a focus on reducing the electrical energy consumption for every coin that is mined. On the sidelines, huge tracts of land are also being bought by different businesses across the globe to host data centers that support the crypto mining activity.
Just a few years ago, Bitcoin-enthusiasts could use normal graphic processing units (GPUs) to process the computations needed to mine the cryptocurrency. But Bitmain helped turn Bitcoin mining into a specialized process: In 2013 it began selling application-specific integrated circuits, or ASIC — GPUs that can mine Bitcoin up to 50 times faster than traditional cards.
Today, the company sells Antminer Bitcoin mining rigs that can cost several hundred to a few thousand dollars each. The company also operates mining pools, where participants collaborate on mining in attempts to cut costs. As a result, Bernstein estimates Bitmain has 70 to 80% of market share in Bitcoin miners and ASICs.
Bitmain has taken strategic steps to stay ahead of the game. The company launched a mining pool subsidiary last April in Israel and is opening mining farms in Canada and Switzerland, and regional headquarters in Singapore, according to the Bernstein report. Bitmain is also expanding its business to other cryptocurrencies like Ethereum and Monero.
The analysts estimate that most of Bitmain’s revenue was generated by selling miners powered by the company’s chips: “The rest was largely generated by mining itself and, to a much lesser extent, by collecting management fees from the mining pools it operates and renting out the mining power of its mining farms through cloud services.” Bernstein also indicated that Bitmain shrewdly adjusts the prices of its miners according to current Bitcoin prices.