A Chinese crypto mining company, Canaan Creative decided to go public by filing for an initial public offering (IPO) with the U.S. Securities and Exchange Commission (SEC). The company aiming to get listed on Nasdaq will be raising about $400 million in the IPO although a $200 million IPO draft was submitted to SEC back in June by the company.
Canaan is one of the top 3 mining companies located in China which is all set to become the first Chinese mining company to be publicly traded in the United States (U.S). As per the SEC, Canaan had a remarkable business last year as the company generated $394 million in revenue. While the net income in 2018 was around $8.3 million, the company couldn’t perform well in 2019 as it experienced an income loss of $45.8 million.
Previously, Canaan filed an IPO at a Hong Kong listing but couldn’t find any luck. According to a Hong Kong newspaper, regulators didn’t find cryptocurrency-related IPOs mature and that’s why Canaan wasn’t able to file IPO in its own country, China.
Besides Canaan, another mining giant, Bitmain, is also looking to file an IPO in the U.S. Canaan’s biggest rival, Bitmain was also unsuccessful in getting listed on the Hock Kong Stock Exchange so, after the expiration of its application in March, the company turned to the U.S and filed for an IPO request with the SEC on June 2019.
Cryptocurrency mining, especially bitcoin mining, is highly concentrated in China. According to an estimate, more than 50% of bitcoin mining activity takes place in China alone. Bitcoin mining, an essential process needed to produce new bitcoins, provides security and enables decentralization in bitcoin.
During mining, miners all over the world try to validate transactions made on the bitcoin blockchain and the ones who are successful in doing so also get rewarded for their efforts. As miners themselves validate the transaction made on the bitcoin network, the need for a supervisory authority vanishes completely. Moreover, as any miner is capable of validating the transaction, bitcoin exhibits true decentralized traits.
The price of bitcoin affects the mining activity to a great extent because bitcoin mining is an energy-intensive process where miners have to bear electricity and computational cost. As miners are awarded bitcoin after validating transactions and adding a new block the bitcoin blockchain, the mining business only turns profitable when the price of bitcoin exceeds the cost encountered during mining.
At the moment, 12.5 bitcoins are awarded to miners whereas following the next year bitcoin halving, a phenomenon occurring every 4 years, the award of miners will be halved to 6.25 bitcoins. Let’s see how the mining businesses are affected by halving in the long run.