Mining Survival Apocalypse: Mining Revenue Exceeds ETH Ten Times, But It’s a Disaster for Novice Users

ChainDD (WeChat ID: ChainDD) exclusively reported that after experiencing ups and downs, where should the mining industry go now? On January 17, at the [Dede Pub] event specially held by ChainDD, CoBo co-founder Shen Hai, Bitmain sales representative Dai Pengcheng, Mining Association leader Yu, Biyin mining pool co-founder Zhu Yu, Honeycomb mining machine co-founder Rong Bing and ChainDD content partner Li Feifan had a wonderful discussion on the theme of "Mining Survival Status and Wintering Rules".

host:

Li Feifan, Content Partner of ChainDD

Panelists:

Shen Yu, Co-founder of CoBo

Dai Pengcheng, Bitmain Sales Representative

Captain Yu, head of the Mining Association

Zhu Yu, Co-founder of Biyin Mining Pool

Rong Bing, co-founder of Honeycomb Miner

The following is a transcript of the conversation compiled by the Liande App:

Li Feifan: The past year has been a turbulent year for the blockchain industry. What is your biggest gain in the past year?

CoBo co-founder Shen Qi (second from left)

Shenyu: In fact, we have gained a better understanding of the nature of mining in the past year. In the past, we believed that mining was a typical economic activity, essentially a form of arbitrage. In the past year, we have done a lot of reflection, and the further conclusion is that mining itself is a medium-term bullish option: by holding mining machines and using electricity to obtain low-cost digital currencies in the medium term.

With the dramatic changes in cryptocurrency prices over the past year, medium-term call options will certainly suffer a relatively large impact, so financial instruments with supporting costs are needed to shield the corresponding risks.

Dai Pengcheng (first from left), sales representative of Bitmain

Dai Pengcheng : From the customer's perspective, after experiencing the craziness of the digital currency market at the end of 2017 and the low point in the second half of 2018, investment in the mining industry, including the purchase of mining machines and the construction of mining farms, has become more and more rational.

In the past, customers would invest a large amount of money directly in purchasing futures and spot mining machines. However, with the sharp decline in profits, they have become more and more cautious in building mining farms, especially in finding electricity resources. They are also more inclined to pursue cost-effectiveness when purchasing mining machines, and even prefer second-hand mining machines.

During my visits to clients, I noticed that mining farms were cautious about selling currencies in a bear market and hoped to wait for the market to recover.

For Bitmain, we believe that this market downturn will continue until 2020, during which time Bitmain will cut some of its external investment budgets. After some layoffs, Bitmain is truly a healthy and rational company that can operate more smoothly.

Li Feifan: Does Captain Yu agree with the judgment that the low tide will continue until 2020?

Captain Yu : I am more pessimistic than him. I think it will last for about three years, until 2021. The amount of funds that entered the market in 2017 was too large, and it will take a long time to fully digest it. Therefore, it will take a long time to fully restore investors' confidence.

I think that from the beginning of 2018 to now, a large amount of funds have no knowledge of Bitcoin. In fact, Bitcoin is a very good safe-haven asset. When the global financial crisis occurs, everyone should have more confidence to hold it. The funds attracted at the end of 2017 were irrational. When the economic crisis occurred, the funds in the cryptocurrency circle were the easiest to cash out, so it led to the outflow of funds from the cryptocurrency circle.

Li Feifan: What is your biggest gain in the past year?

Captain Yu : We have gained a lot. I think the most profound impact is that we have learned a lot from many high-level players in traditional finance. After they entered the mining industry, many ways of playing opened our eyes. Mining is only a part of the mining industry. We can participate in this market in multiple dimensions.

Zhu Yu : I think the most valuable gain is that some of my cognitions have been verified, such as the cognition of POW and decentralization. When the market was rising rapidly, there was an excess of funds in the mining industry. Throughout 2017, mining machines and electricity were in short supply, so the total market value of POW currencies decreased. This is because the money had nowhere to go, so POS currencies ushered in their own small climax. Now that the tide has receded, we can see who is swimming naked, so this once again verifies my cognition of POW.

Rong Bing : From my personal perspective, I am constantly growing and coming into contact with more and more people and companies.

In this trading market with relatively asymmetric information, the biggest gain of our company is that there are one or more people who trust you in this world every day.

The third benefit is that with the advent of the bear market, we brought in several relevant talents and began to refine and cultivate our internal strength.

Li Feifan: Have you ever encountered such a point in 2018, when you finished doing something and now think back, you thought that if you had done it a different way, the result might have been better?

Shenyu : According to our statistics, the top 50 miners in China have suffered at least $1,200 in losses this year. Mining, as a typical economic activity, has many pitfalls. Whether it is power supply to the mine, ore, or upstream mining machines, there are actually very high risks.

As a highly volatile industry, miners have a very high risk cost. At present, there is a lack of necessary financial tools to shield risk exposure, which also puts many miners in a very passive state. In fact, we have also seen that some compliant exchanges abroad are also launching some derivative transactions. It is possible that at a certain stage in the future, a series of tools will be provided to shield such risks.

Dai Pengcheng : In the first half of 2018, we had a relatively large market share, and the project was pushed forward relatively quickly, and we also invested a lot of money in production and delivery. The market fell in the second half of the year, which had a great impact on our sales and profits in the second half of the year. If there is such an opportunity again, we may carry out more refined management on the entire budget.

Li Feifan: What do you think of Grin, a virtual currency project that has been very popular in the mining circle recently?

Shenyu: This currency is very suitable for the taste of Bitcoin fundamentalism and is full of geek style. The release of its white paper quoted the name of Harry Potter Voldemort, and the algorithm is Harry Potter's spell. Its currency characteristics focus on anonymity, and it is highly scalable, but it is still in a very early stage.

Then in terms of applicability, it is basically catastrophic for novice users. But from the perspective of its economic model, it is a particularly large inflation model. In fact, before 3 a.m. today, there was not a single coin in circulation on the entire network. We can look back at the last bear market, and a similar story happened. In December 2016, Zcash was once hyped to 33,000 bitcoins because its early issuance was extremely low. However, due to its large daily increase, it led to a very high inflation rate.

But grin is indeed like a fire in a bear market. When there are not many hot spots, such a currency suddenly appears. For miners, graphics card mining machines are currently in a very passive stage, because the reduction of Ethereum production and the rapid decline in prices have caused many graphics cards to become "slag". The 400-yuan RX470 graphics card rumored in 2017 has become a reality. Taobao does sell RX470 and GTX1060 at such a price, so it has become a very hot spot in the mining circle, and many miners are mining this coin.

At present, Grin's mining income is ten times that of Ethereum, so many N-card miners have turned to Grin. At present, the algorithm and logic itself still have certain potential, but for investors at this stage, because it is a currency with a high inflation rate, its economic design may not be particularly ideal. All our own N-cards have been turned to Grin.

Zhu Yu : Before Grin appeared, many people believed that there should be a coin to rescue graphics card miners and give them higher returns. But we will not enter Grin. Because graphics card coins are not our forte, it is not suitable for this kind of graphics card project for the time being. We are better at ASIC mining machine projects. On the other hand, Grin's daily output is not high, resulting in high risks, so we will not do it.

Captain Yu : Grin’s copywriting has been encouraging players to speculate, which seems very short-sighted. On the other hand, there are many novice institutions trying to enter Grin, but due to its technical difficulty, we do not recommend institutions to enter the project.

Rong Bing : We have been able to clearly feel the influence of grin on market sentiment recently. The GPU miners we host have basically informed us to switch over. But for us, we will not get involved in grin without understanding it.

Dai Pengcheng : The stability and security of this currency are questionable. It is very difficult to guarantee the same returns as Ethereum in the future. Bitmain will not consider this high-risk currency.

Li Feifan: Recently, some miners have started to purchase mining machines. What does this mean? Will it continue?

Dai Pengcheng : The current market is mainly affected by four factors: the price of the currency, the difficulty, the electricity cost, and the price of the mining machine. These four factors are the most important factors affecting the entire mining industry. When the price of the currency and the difficulty cannot be controlled, miners may make some changes based on the electricity cost and the price of the mining machine. The price of electricity is relatively transparent in China, so reducing costs requires starting with the price of the mining machine.

Take s9 as an example. Second-hand mining machines are worth 700 to 800 yuan in the market. With relatively low electricity costs, miners can still quickly recover their investment. On the other hand, some mining machines were bought at a high price of 18,000 yuan. Buying second-hand mining machines now can also balance costs, and wait for the bear market to come before selling the mining machines to make up for the current losses.

Captain Yu: The flood season starting in mid-April will cause electricity prices to fall, so many people will try to buy second-hand mining machines to mine during the period of falling electricity prices. We speculate that mining farms will enter the mining season this year, and the total network computing power may exceed 80E. Second-hand mining machines on the market may not be able to fill this gap, and it is inevitable that new mining machines will enter the market.

Li Feifan: The trend of scale and centralization of mines is becoming more and more obvious. What do you think of this trend?

Rong Bing : We do have some arrangements, and as our clients evolve, they used to be mostly wealthy people and people whose homes were being relocated, but now we have encountered many traditional funds entering the market. However, I think they need to take classes and receive training on the relevant knowledge. Only after the transition can we better serve our clients.

Another trend is to expand overseas. We have already started to expand in Iran, which is our focus this year.

Shenyu : Every bear market is a time window for optimizing electricity resources and energy consumption resources.

The bear market in 2015 did reduce the comprehensive electricity cost of mining. In the bear market of 2018, miners will inevitably be forced to look for cheaper electricity. Coupled with the influx of a large amount of traditional capital, this pattern may change. I think that in the future, the form of self-provided power stations may appear.

Dai Pengcheng : Scale and centralization are inevitable trends. Mines in the future will develop in this direction. Individual miners may have a harder time in the future, and their living space may become smaller and smaller.