Midea, a major Chinese electrical appliance manufacturer with an estimated annual revenue of $22.1 billion, is attempting to revive 21 Inc’s previous vision of integrating bitcoin miners into household appliances.
With over 125,000 employees, Midea remains as one of the largest appliance manufacturers in China. The company has significant reach into the Chinese manufacturing and appliance markets, as it controls the majority of market share in both industries.
Earlier in 2017, through the State Intellectual Property Office (SIPO) of the People’s Republic of China, Midea released a patent on its technology and method of integrating bitcoin miners into existing appliances. Similar to 21 Inc’s previous business model, Midea is currently aiming to implement bitcoin wallet accounts onto conventional electronics and devices, and credit users running bitcoin mining equipment via household appliances in real-time.
The patent of Midea read:
“The method comprises the following steps: controlling network access of the household appliance, and logging in a bitcoin account via the household appliance, wherein the bitcoin account is an account preregistered in a bitcoin [mining] website; driving a controller of the household appliance to [mine] coins in the bitcoin [mining] website, and storing the … bitcoins into a bitcoin wallet corresponding to the bitcoin account.”
In May 2016, 21 Inc became the first bitcoin startup ever to raise $116 million in a single funding round. The only startup that came close to 21 Inc was Coinbase, which raised $100 million in its recent Series D funding round at a $1.6 billion valuation in July 2017. At the time, the hundred million dollar funding round of 21 Inc was taken as a surprise by the Bitcoin community and industry because the startup raised funding without securing an active user base or launching a product.
The market did not have any additional information about 21 Inc apart from the fact that the company was being led by prominent venture capital investor Balaji Srinivasan and raised $116 million in a funding round led by Andreessen Horowitz, a highly respected early-stage technology-focused venture capital firm.
A few weeks after securing its investment, 21 Inc finally released its business model and product. The 21 Inc development team revealed the 21 Inc computer and a profit sharing system that allowed users to integrate bitcoin mining equipment to household appliances and earn profit from mining the digital currency.
However, after failing to appeal to the general consumer base due to its small profit margins and the inefficiency of mining bitcoin with a household appliance, Srinivasan and the 21 Inc development team migrated to an entirely new business model. In an interview, he stated:
“The concept behind the 21 inbox product is that you can now get paid to read email and complete messages and tasks online, and the reason that’s interesting is, right now, there have been two ways that people have obtained digital currency, the first is mining it. The second is buying it. This is a third way to get it, which is earning it. Utility of Bitcoin by earning it, by performing a micro task is that you don’t need to put a piece of hardware there and you don’t need to whip out your credit card.”
21 Inc was not able to deliver its initial business model or the final product of decentralized mining with household appliances, despite the support from leading venture capital firms. It had to wholly alter or overhaul its entire business model from distributed mining to decentralized mailboxs as a result.
It will be challenging for Midea regardless of its connections and reach in the manufacturing and electronics industries given that bitcoin mining is not as profitable for small-scale miners any longer. More to that, miners are required to upgrade their equipment every few months in order keep up with the fast-paced development of new advances in cryptocurrency mining.