Shenyu: Who is buying mining machines at 70 yuan per kilogram?

The news of "mining machines being sold by weight" has once again put the miners at the forefront.

"This is true," said Mao Shixing, founder of F2Pool and CEO of Cobo Wallet. Mao Shixing is one of the first players in China to get in touch with Bitcoin. He has a more famous name in the currency circle, "Seven-Colored Angelfish", also known as "God Fish".

Once upon a time, miners were the most mysterious group in the entire cryptocurrency world. They were the guardians of the blockchain world and the first to enjoy the feast of getting rich overnight.

But recently, with several sharp drops in Bitcoin price, there has been more bad news in the mining circle.

BTCC, once ranked among the top three Bitcoin mining pools in the world, announced that it would cease operations; Canaan Creative, which moved to the Hong Kong Stock Exchange, has seen its listing application expire; and Giga Watt, a top American mining farm that once boasted that it would "mine for 50 years," also filed for bankruptcy with the court yesterday.

Where did the 70-pound mining machines go? Can the mining industry continue? What is the real living situation of miners? How can they survive this winter?

Today, 31QU exclusively interviewed Shenyu. In this conversation, he restored the most realistic mining circle to us.

“70 yuan per pound is real”

31QU: Miners are selling mining machines by weight. Is this true?

Shenyu: This is true. There are rumors that it is 70 yuan per kilogram.

31QU: Why does this happen?

Shenyu: Actually, the market is under triple pressure:

The first pressure is that the hydropower in southwest China is facing the coming of the dry season and the end of the flood season, which means that the cost of electricity will rise rapidly;

The second pressure is that the current mining machines are in the process of being replaced. Some S9 mining machines have been mining for three years, which is already a very long-lived generation of mining machines. The replacement issue will also have an impact on the current old generation of mining machines.

The third pressure is that the rapid decline in Bitcoin prices has squeezed out the remaining profit margins. Without taking into account silent costs (hardware, operating expenses, etc.), this mining machine can no longer recover the daily electricity and labor costs.

For example, if my mining machines can only mine 1 bitcoin per day, but the manpower and electricity I spend can buy 1.1 bitcoins, then why should I mine? In this case, as a rational operator, I can only choose to shut down the machines.

31QU: According to the latest statistics from f2pool, S9 actually still has a profit margin of more than 5,000 yuan. Why did you choose to shut down?

Shenyu: S9 mining machines that have been mining for too long will also be eliminated. However, machines like T9 and M3 are already being shut down.

31QU: Are some S9s with a short operating time still in operation?

Shenyu: Yes, because the S9 turned on ASIC BOOST a while ago, which reduced the unit power consumption of the mining machine by 15%. If it hadn’t been turned on, the S9 would have been shut down long ago.

31QU: Will miners think that the price of coins will definitely go back up, and then hold on to the coins without selling them?

Shenyu: This is a purely idealistic idea. If it comes down to each individual, they will judge for themselves how to do this. If the investment far exceeds the return, as a rational judgment, they will definitely choose to shut down and exit.

31QU: Will the miners quit forever and stop mining?

Shenyu: No, because the cost of mining is actually changing dynamically. If 10% of the miners choose to shut down, the mining cost will be reduced, the income of other miners will increase relatively, and the miners who persist will also be better off.

“It was shipped to a place where electricity costs are cheaper.”

31QU: With regard to the photos of “weighing by pound” circulating online this time, where did the obsolete mining machines go? Were they really sold as scrap metal?

Shenyu: Of course, they are not sold to scrap collection stations to recycle copper and iron. Most mining machines are shipped to places where electricity costs are cheaper, such as the Middle East.

31QU: How much is the electricity cost in the Middle East?

Shenyu: The electricity bill is 0.1 cent, but the legal currency there has depreciated, so the cost is a little over 0.3 cents.

Currently, an M3 mining machine can only earn less than 0.3 cents a day. From the perspective of pure investment, it will definitely be a loss if it is mined in China.

But in the Middle East, even after deducting the operation and maintenance costs, the net profit is still 0.2 cents, and the income is actually still very high.

31QU: Why didn’t miners go to the Middle East to mine before? Wouldn’t the profits be higher that way?

Shenyu: Different environments have different advantages and disadvantages. A long time ago, the price of Bitcoin was also very high, and people would earn good profits from mining in China, but if they went abroad to mine, they would face many risks, and they might even risk their lives.

31QU: Are there any other reasons?

Shenyu: There are also economic reasons. If I ship mining machines to the Middle East now, they are sold by the pound, which is very cheap, and I may be able to make a profit in one month; but in the past, mining there would take four or five months to make a profit because the mining machines themselves were very expensive, and we also had to consider the risks brought by political instability.

31QU: Are domestic miners migrating there to mine, or are miners from the Middle East coming here to buy mining machines?

Shenyu: On both sides.

"It's very similar to 2014 now, everyone is entering the joke-telling stage"

31QU: Will the bear market have a big impact on the mining industry?

Shenyu: Yes, every bear market will prompt the industry to optimize its industrial structure.

For example, 15 years ago, we were mining in industrial parks, and the electricity bill was 0.6 cents at that time.

15 years later, we went to the southwest and northwest regions and optimized the electricity charges to 20 to 30 cents.

This time will also bring about a relatively large upgrade to the industry, reducing the cost of mining a little bit, which can actually bring opportunities to the industry.

31QU: Is the current bear market similar to that in 2015?

Shenyu: It is a bit similar to 2014 and 2015. Everyone is starting to tell jokes...

31QU: Are there any similarities between the current situation of miners and the last bear market?

Shenyu: From the overall environment, there are obvious differences between the miners who came in 2017 and those who came in 2015.

Most of the miners who came in 2017 had worked in traditional industries before. The work they did was actually very hard because they had to deal with civil engineering, government resources, electricity, raw materials, etc.

But when they enter the mining industry, they will find that mining Bitcoin is great because they have no receivables, and what they mine is money. They don’t have to ask others to pay back their debts, and the rate of return is also very good.

Therefore, a large number of traditional entrepreneurs will enter this industry and fully tap all available resources. In this case, the crowd may be different.

Some people used to say that they would keep the machines running even if they lost money because of their faith, but now miners are more concerned with profit and are still mainly rational businessmen.

31QU: I have heard that the current mines are built in remote mountainous areas and deep in the mountains and forests. Is that true?

Shenyu: There are also such situations. I have seen a mine built 30 kilometers away from the county town. It takes 6-8 hours to drive 30 kilometers. The road conditions are basically like this, with cliffs on one side and falling rocks on the other. This is a very remote mine in the southwest.

There is no signal within a radius of dozens of kilometers, only one optical fiber. If the Internet is disconnected, everyone can only make satellite calls. This is a typical hydropower situation in the southwest.

In the northwest, Inner Mongolia is relatively okay, but Xinjiang is basically a Gobi Desert.

31QU: In fact, when it comes to mining costs, it is also closely related to the mining machine. Judging from the data, the performance of the 7nm mining machine in all aspects is quite good. What is the response of miners?

Shenyu: Actually, it’s just average in this market environment. Besides, the performance of the mining machine is not as good as advertised.

31QU: When do you think the bull market will come?

Shenyu: The market is unpredictable, we can only go with the flow.