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The Ledger: Bitcoin Billionaires, R3’s Woes, and ‘Silicon Valley’ Blockchain Advisors

Sitting down with Jihan Wu, one gets the sense that the crypto-tycoon might be more at home in a college AV club than in the ranks of the world’s youngest, richest businesspeople.

The 32-year-old cofounder and co-CEO of Bitmain, the world’s biggest cryptocurrency mining firm, displays a strikingly reserved and gawky demeanor. At the start of an interview in Manhattan in mid-May, when posed with the opening question “What’s up?”, Wu merely remains silent. After a second prodding, he replies, “Um.”

Several seconds later, the conversation starts. Despite Beijing-based Bitmain being only five years old, the privately-held company brought in $2.5 billion in revenue last year, Wu says, largely through sales of specialized, cryptocurrency-mining, computer chip hardware. It also takes a cut of the funds generated via its market-dominating cryptocurrency mining pools, BTC.com and AntPool. Bitmain’s private market valuation has now ballooned to $12 billion, he says (although Bloomberg estimates it’s closer to $9 billion, with Wu and his cofounder and co-CEO, Micree Zhan, jointly owning about 60% of the business).

Wu is on a mission not only to maintain Bitmain’s throne, but to pad it. He has designs on diversifying the firm’s dominance with an entrée into the booming field of AI; he says the company plans to release an AI chip product as early as later this year.

The cryptocurrency billionaire also addressed some of the controversy and conspiracy theories that have swirled around Bitmain. Below is a partial excerpt of Fortune’s interview lightly edited for brevity and clarity. (Read the rest of the interview here.)

Fortune Ledger: Why did decide to put all of your money into Bitcoin when you heard about it in 2011? What made you take that leap?

Jihan Wu: I very quickly grabbed the idea, apprehended it, and thought it would work. Money is not a binary thing—money, or not. It’s more like a scale from zero to one. Something is more like money than other things. That’s the first thing we need to know.

Do you ever mine cryptocurrency internally before you release a new miner onto the market?

No, we don’t do that. As in, sell a second-handed mining rig? If we sell a second-handed mining rig, we would be transparent that this is second-handed. We don’t do mining first and then make the mining rigs old and then sell them as if they’re new. If it was second-handed, we would tell the customer it’s second-handed.

It’s against our principles inside our company to do such things. This is absolutely bad rumors about us. From day one, we are transparent. We have ways to sell used rigs on the market. We don’t have to pretend that some mining rigs are unused ones.

Not even used—I mean, would you ever, before you release a new miner, have a few months where you have an effective monopoly on that hardware, because it hasn’t been released publicly yet?

No, it never happened. We have a small-scale test. We don’t do that. That is not our strategy.

I ask because there have been reports and rumors.

I read those stories as well. There’s some kind of group of people that controlled the majority of the hash rate of Monero for a long time. I would like to say that to develop such a kind of ASIC [specialized computer chip] is not a kind of secret skill that only Bitmain has. Lots of people can do that. For large companies like Bitmain, and especially myself, I do not even have the time, attention or resources to have such a kind of plan to do this. If we develop hardware, we just release and sell it on the market. Right after we have sample machines working, we start sales to market. We don’t have such kinds of advantages.

Do you speak much with regulators?

Not that much. Just sometimes, in conferences, we meet with some of them. Our business is semiconductor design. Circle [a U.S. cryptocurrency startup privately valued at $3 billion after Bitmain led it’s most recent financing round] has been much more experienced with regulators. That’s why Bitmain is interested in Circle as well. We see in the future that negotiating and working with regulators is quite important. We need to push those heavy regulations back a little bit. But we need to work with them, not just try to get around it.

What do you think the Chinese regulatory regime is going to look like in a few years? What do you predict to happen?

I’d rather not give any comment on the regulatory policies of the Chinese. It’s too sensitive.

(Continued here.)

***

So there you have it. More news below.

Robert Hackett
@rhhackett
robert.hackett@fortune.com

THE LEDGER’S LATEST

Blockchain Firm R3 Is Running Out of Money, Sources Say by Jeff John Roberts

Why Classes on Cryptocurrency, Blockchain, and Bitcoin Are About to Boom at Colleges by Lucinda Shen

Apple Co-Founder Steve Wozniak Wants ‘Pure’ Bitcoin to Become the Global Internet Currency by David Meyer

SEC Appoints New Crypto Chief to Oversee Digital Assets and ICOs by Polina Marinova

Ripple Vet Launches Codius, an Easy-to-Use Smart Contract Tool by Jeff John Roberts

Warren Buffett and Jamie Dimon on Bitcoin: ‘Just Beware’ by Sarah Gray

DECENTRALIZED NEWS

To the moon… John McAfee 2020. Coinbase is buying its way into new financial licenses. Circle aims to get there too. SEC names a new crypto czar—and she likes smart contracts. SEC chair says Bitcoin is not a security. Fidelity is reportedly gearing up for crypto trading. Apple’s Woz wants Bitcoin to win. Schools are getting lots of money to teach blockchain thanks to Ripple. PotCoin and Dennis Rodman ease U.S.-North Korea relations. Warhol for sale on Ethereum. Other art stuff?

.…Rekt: John McAfee 2020. Warren Buffett and Jamie Dimon say beware. Big hedge fund cofounder remains skeptical. Quebec issued a moratorium on energy-guzzling by cryptominers. Bitcoin Cash pumper hijacks armored military vehicle. EOS has bugs. People have questions about stablecoins. Long-dreaded 51% attacks are here. Everest-scaling PR stunt ends in fatality.

BALANCING THE LEDGER

☝Click to view the show.

Blockstack cofounders Muneeb Ali and Ryan Shea dropped by Balancing The Ledger to talk about their pursuit of a new, decentralized Internet, their consulting on the HBO show Silicon Valley, and why people should own their own data.

BUBBLE-O-METER

Cybersecurity firm Carbon Black dug into the criminal world of virtual currency in a new report. It found thieves stole more than $1.1 billion in cryptocurrency over the past six months, with attacks on cryptocurrency exchanges accounting for 27% of all thefts. The criminals’ crypto preferences:

44% of all attacks involved Monero in some form.

11% involved Ethereum.

10% involved Bitcoin.

The remainder involved NEM, Bitcoin Gold, Tether, and other coins.

MEMES AND MUMBLES

Crypto—it’s what’s for breakfast, apparently? IHOP has decided to rename itself “IHOb.” No one is quite sure what the last letter will signify, although there’s a strong case to be made for “breakfast.” That is, unless the brand is pivoting to burgers, burritos, or—god forbid—blockchain, as Axios business editor Dan Primack fears. (Look what you’ve done, Long Island Iced Tea company.)

Still, we think they should have gone with IHODL.

FOMO NO MO’

Don’t miss out: Last year the blockchain-for-finance consortium R3 had plans to raise as much as $200 million in new funding. The round never materialized and, as Fortune’s Jeff John Roberts reports in a new investigation, that lack of a cash injection may spell trouble for the firm. According to former employees of the company, R3 is burning through cash, floundering for a business model, and could run out of capital as early as the beginning of next year. Here’s a snippet from the piece:

Those familiar with R3’s culture and operations repeated a common refrain: The company styled itself as a technology startup but acted like a bank. This dynamic meant that R3 acted more like a member of Wall Street or a plush consulting company rather than a hungry upstart. In retrospect, its early success may represent a decision by banks to get a taste of a new trend—blockchain—rather than any real bet on R3’s business or technology.

“Instead of hiring tech people, they started hiring bankers and guys in suits who don’t know much about technology,” said a former employee.

We hope you enjoyed this edition of The Ledger. Find past editions here, and sign up for other Fortune newsletters here. Question, suggestion, or feedback? Drop us a line.