Bitmain continues to squash rivals as competing founder arrested

Crypto mining giant Bitmain has amassed the majority of the market share when it comes to fabricating Bitcoin mining rigs.

As competition steps up in the space and the mining reward is halved next year, the company remains intolerant to rivals.

Bitmain rival company founder arrested

According to Bloomberg, Yang Zuoxing, ex-Bitmain employee and the majority shareholder of Bitmain rival MicroBT, was detained by police at the end of October in Shenzhen.

With a PhD in mechatronics from Beijing’s prestigious Tsinghua University, Yang went on to become a Chinese chip designer before joining Bitmain. He was one of the key technology masterminds responsible for the company’s success as the largest producer of Bitcoin mining rigs.

He had previously told Bloomberg News that he was responsible for helping Bitmain to design its range of highly sought-after ASIC mining machines.

However, he decided to leave the company in 2016 after his request for a stake in the business was refused by co-founders Wu Jihan and Micree Zhan.

The Bitmain ex-employee who left to form rival company MicroBT isn’t the first to be detained by police after setting up crypto mining operations.

Details of the arrest

According to sources familiar with the subject (who asked not to be identified by Bloomberg), Yang was arrested following a legal dispute with his former employer.

This is not what the official statement from prosecutors in Naschan district on December 12 proclaimed. In it, they say that Yang was arrested on suspicion of embezzlement, not over a discrepancy with Bitmain. Legal procedures remain ongoing.

The statement makes no mention of either Yang’s company MicroBT or Bitmain. It also removes the second of three Chinese characters from Yang’s name, perhaps in an attempt to shield his identity.

The intensifying crypto mining wars

In an increasingly competitive landscape and with the Bitcoin block reward set to reduce in May 2020, cryptocurrency mining is becoming even tougher. Bitmain is pulling out all the stops to halt its rivals in their tracks.

While far less known than Bitmain in the mining space, MicroBT has become a substantial contender. Its mining equipment range Whatsminer has gradually eroded Bitmain’s market share.

Crypto mining businesses have it tough on many fronts. Not only is there a constant question mark over supply and demand, but companies must also compete for limited chip supplies mainly from Samsung Electronics and Taiwan Semiconductor Manufacturing Co.

Yang’s arrest comes at a time when competition in the space couldn’t be more intense. In fact, MicroBT’s flagship Whatsminer 20 series are the best-selling Bitcoin mining rigs of 2019 so far.

In the absence of their leader, many company executives are unable to make key decisions – including on how to price their equipment.

Representatives of both companies unsurprisingly declined to comment.

Bitmain’s history of legal battles with previous employees

As previously mentioned, Yang’s arrest is not the first time Bitmain has locked horns with prominent ex-employees. Last year, the company fought (and lost) a court ruling against MicroBT over allegations of infringed patents.

In early 2019, Bitmain also filed lawsuits against another three former Bitmain employees. They had left to start Poolin, a rival mining pool, and Bitmain sued them for alleged violation of a non-compete agreement.

Finally, Bitmain chief Wu Jihan recently conspired to remove co-founder Micree Zhan from the company as it scrambles to create new sales initiatives to attract more customers.

Featured image from Bloomberg