~Bailey Reutzel & Pete Rizzo
"Free! We're free!"
Jihan Wu may not have created the "BCH Talk" WeChat thread, but he was among the first to celebrate the formal creation of the blockchain for which the channel was named, making his feelings known on August 1 to the more than 500-member channel.
But then again, those in the messenger chat were already well aware of how Wu, the co-founder of Bitmain, one of the world's largest providers of bitcoin mining hardware, software and related services, felt about bitcoin cash.
In the days before the cryptocurrency had formally forked from bitcoin, creating a $5 billion network from a few changes to its code, Wu was a not infrequent participant in the chatroom.
Designed to serve as a forum about the new effort to boost bitcoin's block size (the rule in the code that effectively puts a constraint on the volume of transactions), Wu had already weighed in by posting everything from news articles to technical tools to advice on when users should sell their bitcoin in exchange for bitcoin cash.
"Don't fall into the trap. Don't pay too much. Don't give Core too much money," he wrote.
In this way, the comments give nod to the central controversy surrounding Wu – his outspoken antagonism of bitcoin's developer team, and the influence he wields that effectively puts him in a rare position to wage such a public conflict.
Indeed for much of the internet, Wu emerged as the arch-nemesis of the developers working on the Bitcoin Core software for his views on the cryptocurrency's technical roadmap, ones that would not only lead to outsized scrutiny on his business practices, but grow to ensnare all projects and efforts affiliated with Bitmain's brand.
At points, it was hard to tell fact from fiction, or which was more instructive.
Take ASICBoost, a theory that aimed to link Wu's public stance against the group's preferred scaling path, Segregated Witness, to technologies designed to boost Bitmain products. Or AntBleed, a supposed piece of code that would enable the company to control all its miners, making them run software that would block the update.
As the fight progressed, worsening over the course of 2017, public debate turned to vitriol, with Wu often relegated to shouting obscenities at perceived enemies on Twitter, Reddit or wherever else there was dialogue.
It's telling that a sentence so inarticulate could say so much about the state of debate.
Two sides to the story
But those reading the above might be left with the obvious question, how could the co-CEO of one of the largest companies in one of the hottest global technology sectors be driven to public profanity? And to not only supporting, but helping popularize a competing software?
Wu, who declined to be interviewed for this piece, appears to want to say little on the subject, keeping dialogue short and apologetic in a mainstream press push this summer.
Yet, industry representatives who have worked with Wu suggest a nuanced explanation for his public perception, one deeply interwoven with the history of cryptocurrency itself.
In a way, they contend that he seems to epitomize two of the technology's underlying sociological conflicts.
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As a native of China, Wu's public persona has been impacted by bitcoin's east-west culture clash, one that has pitted Western bitcoin developers brought up in a democracy, against bitcoin's miners, often business people, hailing from one of the world's few powerful communist regimes.
Like other founders and entrepreneurs, Wu, who has an economics degree from Peking University, is also predisposed to a fail-fast mentality, one at odds with developers who favor a security-minded approach.
The latter disconnect is one that has played out in high-profile meetings between the groups, whether in New York, Hong Kong or across message boards, but is by no means unique to Wu. Neither is Wu's involvement in scaling, which traces back to these early efforts by bitcoin businesses to lift its perceived capacity constraints, most notably the 1 MB limit on block space that can be added to the blockchain at intervals.
Originally viewed as a short-term way to prevent spam, its removal would nonetheless require all software users to upgrade and enact the change. Such a path was opposed by developers, who view bitcoin as a kind of opt-in sovereign money and have felt the change could disenfranchise users, and supported by businesses, who saw the limitation as a bottleneck on new users and funding.
Wu, however, wasn't always so adamant about a larger block size.
Though he may have been most synonymous with an agreement forged this year in New York, he was also a signatory of the Hong Kong agreement, a controversial 2016 meeting, the failure of which was, those involved say, the root of the bad blood between the groups.
Yet, those who attended the meeting describe Wu as someone willing to stake out a middle ground, at least early on.
But as the Hong Kong Agreement broke down, SegWit testing went on for much of the year, straining relations between the two groups, and distrust began to mount.
"Wu became more and more radical after what happened to the Hong Kong agreement. His position was if the devs weren’t holding their side of the agreement, I don't need to run SegWit," said Guy Corem, whose former firm Spondoolies-Tech was considered an early contender for Bitmain's crown.
The survivor
By the time business leaders assembled in New York this year, Wu wasn't just another seat at the table. Not only was Bitmain one of the few companies left selling mining hardware, but it owned three mining pools: BTC.com, ConnectBTC and AntPool, its largest flagship offering.
Essentially, Wu's firm had enough hardware to block any software change.
And the explanation for this was simple. While mining had become big business, there were few big businesses doing it.
From bitcoin's release in 2009 until early 2013 when it eclipsed $100, bitcoin was just a plaything, a toy for the ultra nerdy. But as it continued its rise, people started researching – nobodies had just made hundreds of thousands of dollars interacting with bitcoin, and others wanted in.
And once they found out that they could get in, just by putting some computing power toward verifying transactions, or "mining," it was all over – the race was on.
A slew of companies started up, selling graphics processing units (GPUs) to mine bitcoin, and as the price continued up, even more specialized hardware, ASICs, were created. Before you knew it, individual hobby mining was nothing but a cost suck. But not all the companies selling shovels, so to speak, were successful.
Butterfly Labs, an early U.S. market leader, was shuttered by U.S. regulators. KnCMiner succumbed to a combination of lawsuits, poor performance, and eventually, bankruptcy.
And these were just two of the more public meltdowns. The founders of China-based ASICminer actually disappeared without a trace in one of bitcoin's true unsolved mysteries.
Bitmain, however, didn't.
Instead, it became the largest bitcoin-specific hardware manufacturer in the world by not over-innovating on product and choosing to perfect their delivery model. For example, Bitmain's competitors now cite an innovation credited to Wu called "franchise mining" as a game-changer.
Effectively, Bitmain would guarantee that it would buy back miners if customers put up a certain amount of funds at purchase.
"It made mining much less risky for the miner," Corem says.
As described by investor Roger Ver, such acumen has made Wu's firm one of the "most successful" ever to base its business model on bitcoin. Ver goes so far as to claim Bitmain is the "largest bitcoin company in terms of revenue, employee headcount, customers around the world."
The company did not respond to requests for comment on the matter.
Even long-time critics acknowledge the success, with Samson Mow, the former chief operating offering of BTCC, a bitcoin mining and exchange service that's been criticized publicly by Wu, pinning the success on the strength of the company's strategy.
"They had a more efficient miner than the other guys. Others over-engineered and made their miners too expensive, whereas Bitmain made it functional and efficient," Mow says, adding:
"A slightly different direction killed one company and kingmade another."
Corem agrees, pushing back against claims that any trickery led to Bitmain's success over his former firm.
"Bitmain won over us. It was fair and square, nothing malicious. Nothing about patents; they were simply a better business," he says.
Information asymmetry
But if Wu is a villain, it's his handling of his influence on scaling where that transformation really started.
Often overlooked, however, is why it was necessary for miners like Bitmain to approve bitcoin software at all. Originally designed on the premise that all users would run the software on their own computers, developers argue the emergence of mining pools, like Bitmain's AntPool, was never envisioned. As all the miners mining together, they also vote together, essentially selecting en masse the software they'd run.
Direct democracy in what changes would be made to bitcoin's software, so to speak, had been replaced by collective representation, meaning miners now had power over decision-making.
Adding to those fears was that it remained unclear just how deferential mining pools were to the wishes of their users, or whether they could use their power to force an agenda.
On the ground evidence to accusations, though, appears inconclusive.
Mining pools like ViaBTC and BTC.Top, for instance, are often alleged to be "controlled by Bitmain," though it seems in practice they've made decisions that put their business model over any ideology (ViaBTC still enables pool operators to mine bitcoin or bitcoin cash, along with a slew of other protocols, as does BTC.top).
But critics, like Mow, take issue with Bitmain's practices and its relationship with customers of these pools, who have few options other than do business with them.
"You can say he’s a good business guy, but ... at BTCC he would threaten miners in our pool. He would say that he wouldn’t sell to people if they didn't leave our pool. If it’s a good ecosystem and we’re all friendly, we should be able to support software without fear of reprisal," Mow says.
And it's perhaps on this topic that Bitmain has faced the most damning criticism – that Wu doesn't quite understand the balance that needs to be struck between furthering an open-source ecosystem and promoting his own private companies.
Case in point for some is that Bitmain now accepts bitcoin cash exclusively for new miners, a mandate that has come under fire by some, like Mow, who deem the move against the free market ideology Wu is said to support.
Interestingly, it's something that Wu seems to have acknowledged, tweeting earlier this year that "open-source culture" is not only unfamiliar to him, but unpopular domestically in China.
Business today
But if Wu is the king of mining today, he might also have reason to worry about his crown.
While Bitmain is one of only two companies globally that develop, build and deploy mining chips (Georgia-based Bitfury being the only other present in three verticals), the same circumstances that created the company's dominant position could quickly change, those familiar with the mining business say.
Mow, for instance, argues that bitcoin's rising price is good for consumers, who are now making more than they were a few years ago. With this economic freedom, he argues buyers may be able to more freely make decisions based on ideology.
"Miner efficiency is going to be a bit less of a focus because of the price. It’s not about having the cheapest miner and the cheapest price," he says.
Coupled with that, the capital expansion bitcoin's price rise has caused has enabled new competitors to spring up, coming to market with millions in investment and alternatives that promise a more open-source ideology.
Others aren't convinced about competitors, though.
Jiang Zhuoer, founder of BTC.Top, for one, isn't phased by such boasts, arguing that even the $30 million raised by one new entrant, Haolong, is "too little" given the costs of researching, developing and prototyping miners. "In the chip industry, $30 million is not enough," he says.
Haipo Yang, founder and CEO of ViaBTC, remarks similarly in statements that seem to nod to Bitmain's success: "You know, building a miner and building a mining company are different. Selling is a very complex thing."
Still, more hobbyist entrants aren't the only competition. If announcements by Japan's GMO Internet are any indication, large public companies may soon come for a slice of the mining pie.
Then there's always the chance that one supply chain issue, or maybe even a chokehold at a foundry (Bitmain uses the Taiwan Semiconductor Manufacturing Company, also used by graphics cards and computer chip makers like Nvidia), could cause a blow to the company bottom line.
#Misunderstood
So, where some see a villain, others see an impassioned capitalist, much like Ver or Barry Silbert – Westerners who have funded no shortage of companies and offered no shortage of opinions on how bitcoin should develop.
Far from someone trying to corrupt bitcoin, they see Wu as simply a powerful supporter whose controversial opinions have been warped by misconceptions.
"He's misunderstood, especially on social media," says Yifu Guo, the creator of the first bitcoin ASIC.
According to Guo, Wu might not understand Twitter, at least to the degree other users do.
"Nobody in China does this Twitter thing. It's not a part of the culture," he says. "But the West does that, 'I troll you all day, every day,' and he can't handle that. He gets triggered."
Other defenders often cite the nature of free-market economics, the freedom and the frustration of permissionless innovation like the kind bitcoin provides, as a reason Wu is misunderstood.
"Jihan has been demonized by people who just make up bullshit," according to an industry analyst who wanted to remain anonymous. "If Satoshi was allowed to create bitcoin, why can't Jihan? If he didn't need permission than why does Jihan?"
It's not an unfair criticism of Bitmain's detractors.
But for all the permissionless innovation bitcoin was built upon, the space has become more black or white, more right or wrong than many could have predicted. And whether you're a hero or a villain depends from which side people are judging you from.
To bitcoin cash supporters who believe in a bigger block size, Wu is very much a hero, someone willing to stick up for what he saw as inequities and hypocrisies, and even better, put his money on the line.
With the advent of bitcoin cash, it seems the debate will only continue, this time with real-world results. So it's likely the conspiracy theories will continue also, and that the mistrust of one of bitcoin's most powerful people will go on.
According to Ver, that's merely the nature of the human condition.
"Why do people love to conspire about things like the flat earth or bigfoot or stuff like that?" he tells CoinDesk, adding:
"It's more likely the earth is flat than Jihan is trying to destroy bitcoin. He poured his life and soul into this for years."