Miner iteration: mining is no longer a game for ordinary people

A miner explained to the reporter about mining. Because blocks are mined every 10 minutes on average, mining is a "Hunger Game" held every ten minutes. Miners all over the world will participate, and the prize of the game is Bitcoin.

The so-called mining algorithm is a method of guessing numbers. The method is fixed and simple, so there is no room for improvement. There is only one way to win the game, which is to find the hardware that can execute the algorithm the most times per unit of time. Also, 1+1=2, whoever has the most such hardware is the most likely to win the game. So the entire history of Bitcoin mining is the iteration history of mining hardware.

It is said that the era when everyone used ordinary computer CPUs to mine at home was called the creation era. By 2010, someone discovered that AMD’s GPU chips had a specific computing component that could accelerate the key steps of guessing numbers. "GPU miners" assembled by GPUs quickly eliminated ordinary computer miners.

By the end of 2011, FPGA mining machines appeared, the efficiency was greatly improved, and the first mining farm Eligius appeared. But the mining farms were still in their infancy, and miners still mainly refer to the personal computers that mine silently all over the world. Up to now, the mainstream ASIC chip machine is the fourth-generation mining machine. Compared with FPGA, ASIC chip sacrifices flexibility and is built to guess the number of mining, so the efficiency has once again made a qualitative leap.

Some miners have made a quantitative comparison of several types of mining machines. If the mining speed of the CPU is 1, the speed of the GPU is 10. Although the speed of the FPGA mining machine is only 8, it consumes 40 times less power than the GPU, while ASIC mining The mining speed is 2000, and the power consumption is equivalent to GPU. Therefore, as soon as the ASIC chip came out, the other three types of mining machines were quickly driven out of the market.

Judging from the history of mining development, by around 2014, the Bitcoin mining field had no living space for individual miners other than mines and mining pools, and the concentration of the top ten mining pools has been determined. It can be said that a fairly high degree of centralization has been achieved while ensuring the security of the Bitcoin network. 

Jiang Zhuoer, the founder of Litecoin Mining Pool, recalled that at the end of 2013, when he was a computer professional, he encountered the problem of cross-border collection of money when he was in the game business. When looking for a solution, he learned about Bitcoin: "At the end of 2013, it was Bitcoin. At the top of the big bull market of coins, I judged that there was a bubble and decided not to participate in the transaction in a short period, but at that time mining was profitable, so I assembled two graphics card mining machines and mine at home. Gradually accumulate the number of mining machines and Bitcoin, and gradually expand the business."

Jiang Zhuoer pointed out that there is a cost to purchase a mining machine. For example, the current price of the S19 mining machine is 60,000 yuan, but once the mining machine is purchased, it is equivalent to the opportunity to buy bitcoin at a discount in the next 5-10 years. For example, if you use an S19 mining machine to mine, you only need to pay 26 yuan a day to mine 200 yuan worth of bitcoins. The static payback period of most mining machines is 200-300 days. Compared to buying coins, mining is a lower-risk investment method for many people. This has also led to the hot market for mining machines.

Jiang Zhuoer explained that although Bitcoin has experienced a huge market that has risen 100 times from 1,300 yuan to 130,000 yuan in the last cycle, few people have made it 100 times. For most people, the biggest difficulty in buying coins is that they can’t store them. No one can predict where and when the market’s peak will come. Once they fail to escape the top, the bear market Bitcoin will fall by 80-90%. , So most people can’t help but sell if it rises by 30%~50%. There are very few people who can hold the rise of three or five times. Those who can hold the bitcoin rise by 100 times are unmatched in a thousand, and most people even pay. Due to the use of high leverage to speculate coins, losses will occur in cyclical fluctuations.

"But mining does not have this problem. In the bull market, the mining machine is a goose that can lay golden eggs. Most people will not sell a goose that can lay golden eggs, so most miners can keep digging. The entire bull market, unlike buying Bitcoin, can’t help but sell if it rises several times. Buying Bitcoin is an inhumane process, while mining is a humane process. And because of the long duration of mining, For example, the S9 mining machine in the last bull market in 2016 has been digging for 5 years and is still digging. Each has a net income of 20 yuan per day. Therefore, during the entire life cycle of a mining machine, there will be more than one round. The bull market, so it can be said that all the miners who are mining in history are profitable." Jiang Zhuoer said.

But Jiang Zhuoer bluntly said that the current investment threshold for mining is very high, and it will get higher and higher. In the early days, there were family miners. One or two mining machines could mine at home. However, with the rapid development of the entire industry on a large scale, the mining business model has undergone tremendous changes.

It is understood that in the bull market in 2018, the previous generation of the ant mining machine S9, the price exceeded 10,000. At that time, if you wanted to dig bitcoin, at least hundreds of S9s were running day and night. The current mining difficulty is only Will be bigger.

"The current mainstream is to do large-scale mines with tens of thousands or even hundreds of millions of hours. There are tens of thousands of mining machines in the mines. Of course, there is usually not only one miner in a large-scale mine, but many of them are like mine. In this way, miners who buy mining machines on a large scale will provide custodial services. But this is still very unfriendly to retail investors. If you only have a few or dozens of mining machines, you want to put them in the mines. There is a high probability that you will not be ignored. So some platforms will provide hosting services, but this kind of retail player is not the mainstream of the mining industry. A large miner with 100,000 mining machines can support 10,000 small miners with 10 mining machines. Most of the mining machines are held by big miners. And since Bitcoin was sought after by the U.S. capital market, Ninetowns and many other U.S. listed companies have purchased Bitcoin mining machines in the market at all costs, making the mining machines further capitalized. , Controlled by large institutions, it is difficult for retail investors to participate in mining anymore." Jiang Zhuoer said.

Jiang Zhuoer told reporters that Bitcoin's output halving every four years will cause huge fluctuations in Bitcoin's supply and demand, so the Bitcoin market will also show a relatively stable and expected cyclical market. According to the previous round of bull market experience, there were more than two 40% drops in the rising period from 10,000 US dollars to 50,000 US dollars. This time there were only 2 times, and the decline was about 20%, which is relative to the previous bull market. It's very "stable". The reason is that mainstream large institutions and large funds in the United States have begun to enter the market. For example, Tesla bought 1.5 billion U.S. dollars in Bitcoin, Meitu’s Cai Wensheng also bought 40 million U.S. dollars in Bitcoin, and MicroStrategy bought a total of 40 million dollars. For billions of dollars in Bitcoin, the market giant Grayscale Fund has bought a total of 650,000 Bitcoins worth 38 billion U.S. dollars, and tens of billions of dollars in ETH Ethereum, BCH Bitcoin Cash, and other virtual currencies.

These are only open positions, and there may be many that are not open under the water. They allocate Bitcoin according to commodities and medium- and long-term assets. Although these institutions only put out a small position to allocate Bitcoin, because of the huge volume, it is far from the previous player's capital volume in the currency circle. Even if players in the currency circle want to speculate, but large institutions enter the market and hold them for a long time, making currency price fluctuations smaller. This will cause the market to further clear out those small players who chase the rise and fall, and Bitcoin and mining are both decentralized.

In Jiang Zhuoer's view, the future of mining is a kind of large-scale industrial production, just like traditional coal mines. Although there will be small coal kilns in the short term, the future will be the participation of such large-scale integrated players.