What will the exchange intend to achieve by “invading” the mining industry Binance Pool?

The mining industry is declining, while exchanges are growing rapidly. With Binance’s announcement of its entry, the three major exchanges have entered the mining pool battlefield. The old mainland mining pools, F2Pool, the emerging Biyin, and the mining pools of the three major exchanges will be a melee in the new year.

On April Fools' Day, April 1, Binance CEO Zhao Changpeng announced that Binance Mining Pool will be launched soon. This is not an April Fools' joke. Zhao Changpeng has warmed up for the mining pool on many occasions. Zhao Changpeng once said that in the future, the mining pools of the top exchanges will be ahead of other mining pools.

What is Binance Mining Pool going to look like?

First of all, Binance Mining Pool is a strategic service for Binance's return to China. Binance started its return to China strategy in 2019. Although there were occasional twists and turns along the way, its recent high-profile public welfare, recruitment of beautiful customer service staff, signing of a contract with Shanghai Lingang Group, etc., continue to attract attention. Miners are mainly Chinese, and providing one-stop services such as mining pools can attract more Chinese users.

It can be expected that Binance Pool will focus on POS and some mining coins that it supports and invests in in the early stage. In addition, it is unlikely that Binance will issue mining pool coins alone. In an interview with the media, Zhao Changpeng said that exchanges are more outstanding in POS mining pools than POW mining pools. It is still unnecessary for exchange mining pools to issue coins. It is best for an ecosystem to share one coin.

In addition, Binance hopes to provide miners with one-stop services ranging from coin storage and financial management, coin-to-coin trading, OTC trading to mortgage lending. Currently, Binance Finance, Binance's exchange token BNB and mining pool, which Binance is focusing on promoting, are expected to form a strong synergy model.

Competition in the Bitcoin and other POW mining pool markets is very fierce. From the monopoly of mainland mining pools in 2017 to the subsequent rise of CoinIn and F2Pool’s return to the top, the technical routes of each other have become homogenized, and it is more of a test of the BD capabilities of large miners.

Binance's first effort in POS does not mean that it will lag behind in POW. At present, mining pool technology is homogenized. If Binance can provide substantial fee reductions and concessions to large miners in terms of BD, it will quickly occupy the market share. Binance, which has deep pockets, has just planned to acquire CMC for $400 million. If it invests heavily in mining pools, it will not be difficult to quickly seize market share.

In the current market, traditional POW mining pools F2Pool, Biyin, BTC.com, and Antpool rank in the top four, OKPool ranks in the fifth, and HuobiPool ranks in the seventh. In the POS field, HuobiPool claims to have the largest market share. If Binance is the first to invest in the POS field, it will compete fiercely with Huobi.

Regarding the problems that may be encountered in the early stage of operation, BTC.com Mu Huan said that in the early stage of mining pool operation, whether it is PPS, PPS+ or FPPS mode, it needs to bear huge luck value risks. In addition, the mining pool may suffer from some external DDoS attacks.

BTC.com mining pool can reconstruct and optimize the mining system, settlement system, etc. of the cryptocurrency mining pool according to customer needs and provide them to partners, providing all-round support including technology, operations and products, and operating a new mining pool without the need for developers.

Another disadvantage for Binance Pool to expand its market is that Binance's market share and users in China are relatively small compared to OK and Huobi. Miners are more familiar with trading and investing on these two exchanges, and Binance will incur more costs if it hopes to migrate them.

At present, former Bitmain mining pool staff have announced that they will join Binance mining pool; in addition, Binance is also likely to adopt mature outsourced solutions rather than developing them on its own. Binance’s relative weakness in the Chinese market and mining circles also requires it to borrow external resources to accumulate.

In the past, the mining circle has been relatively unpopular and professional. Now that the three major exchanges have entered the market, it also shows that in the world of cryptocurrency based on decentralization, the monopoly power of large exchanges is constantly increasing.