A leaked Bitmain pre-IPO report has revealed that not all is sunshine and roses at the world's biggest Bitcoin mining company.

Chinese speaking Bitcoin community, have fun with this: https://t.co/jZO047TH42

— Shinobi, CEO of Bitcoin (@brian_trollz) August 13, 2018

The documents were translated by BitMEX, or Bitcoin Mercantile Exchange. This is a Bitcoin/dollar mercantile exchange based in the Seychelles which claims to process around $5 billion worth of trades daily. It also has a research arm, which was responsible for the analysis. Says the report: "We have reason to believe the authenticity of these documents, which forms the basis for this report."

What is Bitmain?

Bitmain is a Hong Kong-based company that designs, constructs and sells cryptocurrency mining devices. It also owns and operates mining farms, and operates mining pools. Currently privately-owned, it is expected to apply for public listing on the Hong Kong Stock Exchange very soon with a valuation of approximately $14 billion.

According to the leaked document, Bitmain claims net assets of $2.6 billion.

ASIC sales

The research shows that between 2017 and the first quarter of 2018, Bitmain's mining device sales fell from 2.5 million to 1.9 million, which equals a $500 million drop in revenue. This is despite Bitmain's  Payments  Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times. One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times. Read this Term to its microchip supplier, Taiwan Semiconductor Manufacturing Co., reaching a peak of $866 million in 2017.

Of the aforementioned net assets, $1.2 billion is "inventory", or in other words, cryptocurrency mining devices waiting for sale. According to BitMEX, this means that Bitmain has a glut.

In the wallet

The documents show that the value of the company's cryptocurrency holdings dropped from $1.7 billion to $823 million between March 2018 and late August.

Partly responsible for this is the company's shift in focus from Bitcoin to Bitcoin Cash, as Finance Magnates reported on earlier this month. The document shows that the company used 67 percent of its 2017 cash flow to purchase the latter, and now holds $558.7 million worth of the stuff, as compared to $153 million in Bitcoin proper.

At the beginning of August, it held approximately 5 percent of all the Bitcoin Cash in circulation. That figure is now 6 percent.

BitMEX calculates that the drop in value of Bitcoin Cash over that period has caused Bitmain to lose $299.2 million.

Whistle while you work

Bitmain owns the world's two biggest mining pools (BTC.com and Antpool) and is part owner of the third (ViaBTC). Combined, they are responsible for approximately 48 percent of all mined bitcoins. This sector of its business remains steady.

Its own mining farms accounted for 18.4% of its revenue in 2016, but only 3.3% in Q1 2018. It should be noted that this drop is proportionate - in absolute terms, Bitmain's mining revenue increased considerably in 2017, but its revenue from other areas increased far more.

However, cryptocurrency mining as an industry is losing profitability, as we discussed in a recent report. Bitcoin is nowhere near its 2017 value, and may never achieve that level again. Mining rewards are also only ever going to get smaller. When you take into account the fact that newer  Cryptocurrencies  Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities. By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities. Read this Term are taking active steps against mining becoming too centralised, mining may not be a profitable enterprise in the long term.