Focus

Shihezi, Xinjiang: During the peak period, nearly 500,000 mining machines roared here. In 7*24 hours of operation, these mines cost 500 million kWh per month, which is equivalent to the total electricity consumption of 100 million households a day.

In the past, the most popular mining model of the miners, the ant S9, was up to 30,000 units in the market a year ago. In the continuous decline in the price of coins, the second-hand transfer price was only ￥600.

Some miners in Xinjiang want to get the goods, send the coins to the sales, send the car, and even send the house, they believe that "as long as the mining machine can get it, the flowers can be earned back."

Urumqi is 150 kilometres west, and the wind is blown on the Gobi Desert in Shihezi. At the end of November, a snow had just passed, and the temperature suddenly dropped to minus 15 degrees.

Miner Liu Haiyang is busy commanding the workers who are temporarily hired, unpacking the 10,000 bitcoin mining machines that have just arrived, and then moving them to the newly expanded factory. The chimney in the distance spits out smoke, and the setting sun glows through the grey air on the silver metal shell of the mining machine.

Bitcoin, invented by "Satoshi Nakamoto" since 2008, can use the computing power of the chip to continuously perform "hash collision" in the block generated every ten minutes in the Bitcoin system. Earn the billing rights to get the system rewarded bitcoin. This boring and repetitive process is aptly called "mining."

In the first few years of Bitcoin's operation, an ordinary laptop could play the role of mining. However, the entry of Chinese miners has made mining a big business. They have monopolized the most upstream of the industrial chain by virtue of the professional mining machines designed and manufactured in China, as well as the cheap electricity costs in Xinjiang, Sichuan and Inner Mongolia. : Bitcoin mining.

Liu Haiyang is a typical member of Chinese miners. More than a year ago, he won the preferential price of ￥0.28 per kWh of Shihezi Power Company in the name of "cloud computing", rented a factory of a ceramic processing enterprise, and transformed it into a position capable of accommodating 40,000 mining machines. In order to supply power to the mine more stable, Liu Haiyang even spent more than ￥20 million and built a substation with two transformers.

Behind the high investment is the temptation of potential high returns. In Shihezi, there are dozens of large and small mines like Liu Haiyang. In order to avoid attention, they are hiding in cloud-based computing and technology companies. According to incomplete calculations, nearly 500,000 mining machines roared here during the peak period. In 7*24 hours of operation, these mines cost 500 million kWh per month, which is equivalent to the total electricity consumption of 100 million households a day.

And now, they are in crisis.

Since November, bitcoin prices have fallen in a free fall, from a high of ￥45,000 to a minimum of ￥25,200, a range of 40%.

In a series of declines, bitcoin prices have already broken through the cost of multiple mining machines, that is, the gains from mining are not enough to pay for electricity and management fees. According to the data of the fish pond, one of the largest mining pools in China, the Shenma M3 mining machine with a price of ￥20,000 at the beginning of the year has already reached the shutdown price.

Some small and medium-sized mines have been unable to maintain the price of the continuous decline, and they have no choice but to resell the second-hand mining machine. In the miners' group, the most popular mining machine model, the ant S9, was up to 30,000 units in the market a year ago. In the continuous decline of the currency price, the second-hand transfer price was only ￥600.

In the panic, the large mines with lower electricity prices and better costs started the “land merger” campaign. The second-hand mining machines were transported and placed in the new mines, and they continued to operate after plugging in the power.

Bitmain and Jianan Zhizhi, who have crossed the previous cycle and become “mineral fighters”, are now looking for suitable mines and cheap electricity prices everywhere in Xinjiang. “The bull market selling machines and bear mining” are their principles.

Migration with electricity, misplaced competition, using financial instruments to hedge the value of ... ... between the transfer of a shift, a high electricity price from low electricity prices, large mines to eliminate small mines has started.

But even the winners of the merger war can't predict their own destiny, and they have to watch the spring in the long winter.

As the miners grew up due to the tide of the times and the fading of the tides of the times, Tencent’s “Plough” visited many mines in Xinjiang and recorded all of this.

Mining machine from 30,000 to 600

In the constantly falling currency price, Lao Luo, who owns 2000 Avalon A741 mining machines, is the first to pull power.

Unlike Bitcoin's advanced technology, the business model of mining is simple and rude: the coins that are dug are still available after paying for the miner's money and electricity, and the venue fees. Once the price of the currency fell, the currency that was dug was not enough to cover the cost of the electricity bill. In order to stop the loss in time, the miner had to unplug the power station that was continuously roaring and temporarily shut down.

Electricity is the lifeline of the mine, and its price and stability determine the profitability of the mine.

Subject to the scale of the mine, in general, the electricity price that small mines can talk about when they settle in is much higher than that of large mines. As the largest expenditure item in the mine, the price of electricity at the cost end declares that the competitiveness of the small mine is far weaker than that of the large mine.

Lao Luo dug up 25 bitcoins during this time. According to the quotation, the income was more than ￥500,000, but the electricity bill was ￥600,000 during the same period. "The same mining machine, the big mine may run flat, but the equivalent of my Digging over the compensation simply shut down."

The panic mood began to spread. On November 25th, a big Yinxian line was once again highlighted. Bitcoin prices approached ￥25,000, which is also the shutdown price of the most popular ant S9 model miner in the miners.

More small miners joined the liquidation team. But the situation is even worse than they think. The price of the second-hand S9 market is generally around ￥1200 four or five days ago. As the price of the currency approaches the shutdown price, the price of S9 is directly down to ￥600.

"This is a machine with ￥30,000 a year ago!" A small miner who was forced to clear the market was emotional. Like a misguided lamb, at the node where the winter is coming, I can't grasp my own destiny.

An old miner told 《the submarine》, from the time point of view, the miners who only entered after last November, almost failed to escape the fate of the lamb. The worst of them is the wave that entered in January 2018.

At that time, the bitcoin price reached a peak of ￥120,000 in the madness of the year and was able to "produce" the bitcoin mining machine. It was regarded as the golden egg chicken, and the ex-factory price was doubled or tripled. Still not able to grab the goods.

That is the day when the mining machine sales are carnival. Some miners in Xinjiang want to get the goods, send the coins to the sales, send the car, and even send the house, they believe that "as long as the mining machine can get it, the flowers can be earned back."

After 10 months, they did not return the money to buy the mining machine. The price of second-hand mining machines fell and fell again. "It is equivalent to 90% of fixed assets, and it can be said that there is no return to the blood," said the old miner.

Migrating to low electricity prices

As winter approaches, the jungle law of the currency circle is highlighted. Small mines that were successively wound up have become prey in the mouth of large mines. The miners, which were sold by small miners for the second-hand use, went into large mines in batches, connected to the power supply, and continued to roar.

Liu Haiyang determined that this is his chance. The electricity price of ￥0.28, as well as the warehouse of 40,000 units, allowed him to take advantage of this round of power-saving shuffling. "S9, which is received by a few hundred dollars, if it is still the current price of the currency, it will be returned in three months." He paused and added: "In any case, the current S9 on the market, you will not dig, and some people will collect it dig".

Medium-sized mines that are unwilling to stop here are also looking for a way out. In order to find a lower-cost electricity supply, they set their sights on the broader border of Xinjiang.

The Huocheng and Yining areas near the border are the lowest known price of electricity in the miners' circle. However, because Yining has repeatedly witnessed the nature of power consumption in enterprises, many mines were punished by blackouts and boarded the “blacklist” of miners. The miners also use the "JQK" analogy, that is, "start to use the low price to hook your past, then circle you, and finally K you a meal."

However, the nature of counterfeit electricity has occurred in the past. Some mines are affiliated with local energy companies, applying in the name of thermal power, and the electricity price is only over 1 hair after enjoying state subsidies. However, such operations are only suitable for the higher stage of the currency price. They often earned the mined machine money before they were found to have violated the rules.

There are also eyes that aim at neighbouring countries. In Uzbekistan, not far from Xinjiang, the price of industrial electricity is only ￥0.23, and Russia, about ￥0.25, is also the lower price.

But correspondingly, they need to take risks of different systems and cultures, as well as possible security risks. Some miners selected the site in a sparsely populated old industrial building. As a result, the masked man who had stepped on the spot was robbed in a few days, and the newly installed mining machine was washed away.

Infrastructure construction is also an important reason for restricting the mines from moving outward. For those who are looking for a mine in Bitmain, the world's largest mining machine manufacturer, after visiting more than a dozen countries, they summed up《Plough》and discussed that power generation and infrastructure are still the best in China. “Especially in Xinjiang, the 750 kV high-voltage ring network is particularly stable, and it is rich in coal resources and has ample power generation. It is very suitable for mining.”

It is also for this reason that Bitmain currently owns a 50,000 mine in Xinjiang, paying tens of millions in electricity every month.

《Plough》was informed that in addition to its own mines, Bitcoin has recently increased its investment in Xinjiang. At the end of November, Bitmain just placed a 50,000-scale mining machine in a mine near Shihezi. Another domestic mining machine manufacturer, Jia Nan Zhizhi, also placed 10,000 units in the region.

Bear market survival skills

Retail miners are retired, large capital is entering the market, supported by more cash flow, lowering returns expectations and lengthening the investment cycle.

Compared with a month ago, Bitcoin's total network computing power fell by 14.8%, which also means that the difficulty of mining has dropped by 14.8%. The continued separation of the retail miners brought about the reshuffling of the computing power. Under the new round of melee, the miners each searched for survival strategies.

“I entered the industry last year and felt that the money was too good. I feel that this year is too fast.” Jin Xin, the founder of the Mamba mine, said, “To survive in a bear market, you must have the right cost and survival skills.” .

Before entering the mining circle, Jinxin started several projects in succession, but all failed due to the negligence of cash flow. In October 2017 he began researching mining and targeting his relatively small graphics card mining machine. Different from the ASIC mining machines produced by Bitmain and Jianan Zhizhi, the graphics card mining machine corresponds to the digital currency using PoS algorithms such as ETH (Ethernet), XMR (Menrocoin) and Zcash. Among them, Ethereum is the fund-raising currency for the ICO activities that swept the world. At the peak of January 2018, it was about ￥11,000.

Two months later, he was excited to reveal to 《Plough》 that “the money earned in these two months is more than what I earned in my three years of business.”

However, the profits only lasted for two months. In 2018, with the overall decline of the digital currency, he was particularly sensitive to the cash flow. He cut off the ASIC bitcoin mining machine in his mine and invested all of the graphics card mining machine .

Compared with the ASIC mining machine, although the operation and maintenance cost is higher, the power consumption of the graphics card mining machine is slightly lower, and the global computing power of the anchored digital currency Ethereum is more dispersed. More critically, the core component of the graphics card mining machine, the graphics card, can be removed and returned to the game market at any time except for mining. For players who play games in Internet cafes, the graphics card that has been dug mine is no different from the new one.

“The graphics card mining machine has a big price difference between the miners and the game market. The miners are pricing the miners according to the current currency price. In the game market, the value of the core components of the miner is constant.”

According to this, Jinxin has developed its own bear market survival strategy: the second-hand video card mining machine is collected from the miners who are leaving the market. When the currency price can cover the cost and has a slight surplus, plug in the power expansion calculation power once the currency price When it falls to the cost line, it will shut down the graphics card. If the price of the currency rises, it will come to the bull market, and then the graphics card will be sold to the miners.

With the bull and bear cycle, the graphics card flows between miners and gamers. It seems that this is a near-perfect strategy.

"But if the price of the currency has been falling?" 《Plough》asked.

"That is a good time to recognize." Jin Xin's answer is also neat.

At least for now, Jinxin’s strategy is working effectively. He also studied to reduce the energy consumption of the mine by 10%, and some of the calculations were used to undertake orders for artificial intelligence calculations by commercial companies.

At the end of November, Sichuan, another distribution centre of the domestic mine, ushered in a dry season, which brought him a large number of second mobile phones. His team is busy testing the shelves and then plugging in the power.

What makes him proud is that as the mining machine continues to be on the shelves, the mine currently has 1% of the power of the Ethereum network, “equivalent to getting the shares of Ethereum.”

Digging coins while making empty currency prices

The last round of bitcoin’s bear market lasted for two years. Miners who dig their heads and don't sell their coins have gained amazing returns in the subsequent bitcoin bull market and have become legends in the industry.

In the past four years, this round of bear market has no longer been applied by the last round of miners. The miners are faced with a more complex market: more than 4 million bitcoins are circulating, and the market value of circulation is more than trillions of dollars. There are more than a thousand exchanges for realizing exchanges.

The new generation of miners seldom renewed coins, and the spring exchanges that have sprung up have provided more and more financial tools to them. Learning to hedge their income in advance is one of the essential skills for them to survive in a bear market. The factory model of Bitcoin production was upgraded to a financial model.

Hedging, in simple terms, is the same amount of trading in the spot market and the futures market, but in the opposite direction. Use the principle of rising and falling on futures and spot prices to establish a hedging mechanism, and use the surplus of futures to compensate for the loss of the spot.

"For example, in the next month, I will produce 30 coins, but after one month, the price may continue to fall by 10% according to the trend. Then I will sell the order at the exchange, sell at the current price, and deliver 30 coins in one month. Jin Xin explained that this can lock in the legal income of the month, and not suffer more losses in the down market.

However, the frequent hedging operations of the miners have made them the biggest short-selling power of Bitcoin, either intentionally or unintentionally.

"Everyone is shorting. In the end, everyone wants to protect themselves while letting the price of coins continue to fall, but the decline in the price of the currency is not conducive to the operation of the mine." Jin Xin smiled, "a bit like a wilderness to survive, not short-selling, all short, everyone is finally Die together, heroic!"

The anti-phagic nature of financial instruments opened wide mouth, and bitcoin futures, which were born from the hedging mission, lived in speculation.

In the mutual game, every step must be careful to see the spring.

Everything is not over yet

On November 28th, the continuous decline of Bitcoin temporarily stopped the decline, and rose 11% in one day to return to more than ￥30,000.

On the grounds of this, Jia Nan Zhizhi immediately announced several new mining machines and discounted sales.

But the big trend can't be stopped, and after the day has passed, the price of the currency continues to turn downward.

Winter continues. Liu Haiyang’s 10,000-unit mining machine has been plugged into the power supply. Jinxin has received a batch of second-hand goods, and Lao Luo is between the winding up and the migration.

There are also dealers of Zhengtai Electric Shihezi. A hairy guy came to the door and opened a 50,000 power switch. The big list fell on his head and he couldn't believe it.

The 50,000 switches are prepared for the 50,000 managed mining machines that Bit China has just placed. Winter goes to spring and winter comes again. The bull market sells mining machines. The bear market mining is the truth that past experience tells them.

It was also in the last bear market that Bitmain took over a mine in Dalat Banner, Inner Mongolia, from the hands of Jia Nanzhi, who invented the world's first ASIC bitcoin mining machine. In the reshuffle of power, the Bitland has become a rising pole.

Such stories inspire the miners of the winter. On December 2, Shihezi started the third snow since winter. At minus 18 degrees, the wind blew, the miners crouched and waited for the spring. Hundreds of thousands of mining machines are still running, smashing, carrying their hopes and never sleeping. (Translated from Tencent Technology)