2020 Mining Ecology Review: Changes in the Mining Machine Market Pattern

Author: Rhythm Research Institute

This article is the second research report "2020 Mining Industry Report" of Rhythm Research Institute. The report is mainly divided into four parts: the historical background and market share analysis of the four major mining machine manufacturers, the proportion of computing power in countries around the world, mining costs and benefits, and the impact of the 2020 black swan event on the mining industry. Reply to the "Mining Report" on the Rhythm Official Account to get the full text of the "2020 Mining Report".

1. Foreword:

In 2008, the financial turmoil swept the world, and the central banks of various countries started quantitative The easing mode has caused serious inflation problems around the world. In November of the same year, on a non-profit organization forum called P2Pfoundation, a geek named Satoshi Nakamoto published an article titled "Bitcoin: A Peer-to-Peer Electronic Cash System" (Bitcoin: A Peer-to-Peer Electronic Cash System), which is the white paper of Bitcoin. The Bitcoin network is a distributed database composed of a chain structure encrypted using the SHA-256 algorithm. Bitcoin is the value carrier of this network. Transactions in the network are transmitted between nodes through the P2P network, and the Proof of work consensus algorithm is applied to reach a consensus in the entire network.

The act of providing computing power in the Bitcoin network, maintaining network security and obtaining Bitcoin as a reward is called mining. In the early days lü, the overall computing power in the network was not high, and people could easily mine bitcoins through CPU or GPU. However, as the price of Bitcoin and other cryptocurrencies gradually climbed, cryptocurrency mining became an industry. Many companies began to provide mining machines dedicated to mining, and branch businesses such as mining farms and cloud mining gradually appeared in the market. This report will conduct an in-depth analysis of the mining industry around mining machine manufacturers, computing power, mining costs and benefits, and the impact of the black swan event on the mining industry.

(Note: Thanks to Bitmain’s mining pool BTC.com  for its data contribution and guidance in this article. BTC.com Yes Bitmain's largest mining pool is currently ranked third in the global mining pool list, accounting for 13% of the total network computing power.)

Because Mining machine data is relatively sensitive. This article only uses part of the data for analysis, or there may be incompleteness. Readers are welcome to correct and guide.

2. Background and analysis of the four major mining machine manufacturers

2.1 Each mine Machine manufacturer background introduction

Bitmain

When it comes to Bitcoin and cryptocurrency mining, the first thing people think of is Bitmain. Bitmain products include Antminer,  BTC.com  mining pool and blockchain browser service, Antpool, Bit Deer one-stop mining cloud service platform, supercomputing center, Sufeng ( artificial intelligence), etc.

Bitmain was created by Wu Jihan and Zhan Ketuan in 2013 Founded in 2009, in April of the same year, Bitmain began to prepare for research and development and completed the angel round of financing. Subsequently, Ketuan Zhan developed the first ASIC chip dedicated to mining within half a year: the 55nm chip BM1380, and Bitmain launched the first mining machine Antminer S1. It can be said that this product drove the first rapid growth of Bitmain.

In 2014, Bitmain launched the Antminer S2 mine machine (55nm chip) and developed the first version of the 28nm chip BM1382, and applied this chip to the ant mining machine S3.

In November of the same year, Bitmain mining pool service Antpool officially launched. In 2015, BTC.com  gradually appeared in people's field of vision. The BTC.com  team started with the block browser infrastructure, and then the services provided by its website extended to wallets, mining pools, market prices, information and other fields.  BTC.com The team members are all from domestic first-line Internet companies. They have been serving the Bitcoin mining machine and mining industry for many years, and have many years of experience in system design, development and maintenance, and operation management. In the next few years, the two mining pools under Bitmain have always occupied the top two positions in the mining pool computing power rankings.

In September 2017, Bitmain obtained the Sequoia Capital, IDG Capital and other US$50 million A-round financing.

In July 2018, Bitmain completed the B round The financing was led by Sequoia, and the US hedge fund Coatue and Singapore's state-owned emerging market investment fund EDBI both had shares. Bitmain received a total of US$300 million in financing and was valued at approximately US$12.4 billion.

Received USD 442 million in the B+ round in August of the same year The financing was led by Crimson Partners, followed by Palace Investments, Pavilion Capital Fund, Lioness Capital, and other institutions. At this time, the total valuation of Bitmain came to 14.2 billion US dollars.

Subsequently, Bitmain is preparing to go public in Hong Kong. However, with the downturn in the currency market in the second half of 2018, Bitmain's revenue data was bleak, and the company carried out large-scale layoffs. Finally, in March 2019, Bitmain's prospectus on the Hong Kong Stock Exchange expired and its listing plan failed.

Bitmain-2020 new mining machine Launch Status

Bitmain, as one of the leading companies in the field of mining machines, has been deeply involved in the mining machine market and continues to promote the replacement of mining machines. At the end of February 2020, Bitmain released the S19 series of new mining machines. The rated computing power of the S19 Pro is 110 T±3%, the power consumption on the wall is 3250W±5%, and the front and rear dual fans are connected in parallel for exhaust and heat dissipation. Although the price is much more expensive than the previous mining machines, it has significantly improved in terms of computing power and energy consumption. The firmware of the S19 Pro is a new design, the mining machine starts up very fast, and the process of self-test and frequency adjustment is optimized, and mining starts immediately (about two minutes) after setting up the mining pool.

As the price of Bitcoin rises, this year The mining machines of major manufacturers raised their prices again. In the middle of the year, the price of a single S19 Pro mining machine was only more than 10,000 yuan. By the time this report was issued, the price of a single S19 Pro mining machine had reached 25,610 yuan, and the spot has already been sold out. The official website shows the futures delivery time Scheduled until August 2021.

Bitmain advantage:

1. The cost-effectiveness of the new mining machine is extremely high, the market share is the first to develop the advantage, and the industry has a strong reputation and brand effect;

2. There are the most types of mining machines, and it is currently one of the few companies that can provide multi-currency mining machines;

3. Almost exclusively TSMC resources, Other strong competitors can only choose Samsung and other chip manufacturers for cooperation;

4. Rich customer resources and strong advantages in overseas markets (with overseas sales outlets and overseas Factory);

5. The after-sales service of mining machines is good, there is a professional mining machine maintenance department, and all new mining machines are under warranty.

Disadvantages of Bitmain:

1. Previously, the internal fighting among the founders of the company seriously affected the mining machines Although the business has recently been suspected to have been resolved, it still takes time to recover its market share;

2. According to media reports, after Wu Jihan and Zhan Ketuan reached an agreement, the mine The aircraft department is under the responsibility of Ketuan Zhan. Ketuan Zhan prefers the AI business, so the future layout of the mining machine business line is still unclear;

Summary: This year, Bitmain maintains its technological advantages and launches 2 S19 series mining machines, 7nm chips, TSMC for the wafer body. The S19 series has high computing power and low energy consumption ratio, and continues to follow the price war route, with an extremely high overall cost performance. If there are no internal competition problems, the production capacity can keep up, and the market share should be maintained. However, due to internal strife and the epidemic, according to Rhythm, the domestic sales of Bitmain in the first half of the year were not satisfactory. But fortunately, the advantage in the overseas market is still there. According to previous reports, Bitmain has received multiple overseas orders this year, including over 30,000 Antminer S19 series mining machines scheduled for this year by Riot Blockchain, a NASDAQ-listed encryption mining company; 17,595 ant mining machines, etc.

In addition, Bitmain has also deployed strategically, taking the lead in launching a binocular design in an attempt to reshape industry standards. Different from the design of the single-cylinder mining machine, although the volume of the double-cylinder mining machine is larger than that of the single-cylinder mining machine, its power consumption is all reduced. More importantly, if the mine purchases a double-barreled mining machine, it needs to modify the frame to match the shape of the mining machine. This also means that some mining farms need to make a choice: whether to transform the racks one after another or to maintain the status quo and abandon the use of double-barreled mining machines.

According to the current market information, Canaan Creative’s Avalon mining machine has adopted a double-barreled design, while MicroBT’s Shenma mine The machine still adheres to the monocular design. There is a game situation in the industry standard of the mining machine market.

Left: Bitmain Antminer double cylinder design, right: Bitmicro Whatsminer single cylinder design

At the same time, according to Rhythm, Bitmain still holds an ultimate weapon, the chip order with TSMC. Competing products that cannot obtain orders from TSMC are mostly turned to chip manufacturers such as Samsung, but TSMC’s quality is slightly higher in terms of production capacity and performance, which is undoubtedly a strategic advantage for Bitmain.

In terms of mining machine types, Bitmain has also launched another new mining machine this year, which is used to mine CKB (public chain Nervos generation) currency), very competitive. Throughout the mining machine market, Bitmain is almost one of the few manufacturers that can provide multi-currency mining machines.

In December 2020, according to the media, Wu Jihan and Zhan Ketuan had reached a preliminary agreement to "split Bitmain in two". Among them, the main profit-making department Antminer will belong to Ketuan Zhan, and BTC.com, BitDeer and overseas mines will be controlled by Wu Jihan. This has resulted in a situation where Bitmain’s business will be separated. It remains to be seen whether Bitmain can maintain its advantage in the mining machine market in the future.

Canaan:

In August 2011, Zhang Nangeng appeared on the Bitcoin forum Bitcointalk with the ID "ngzhang", and launched his invented FPGA mining machine - Icarus (Icarus) and Lancelot (Lancelot), which is also the earliest FPGA mining machine in China. The ID "ngzhang" is why later generations call Zhang Nangeng "Pumpkin Zhang".

Research and develop ASIC mining machines. Butterfly Labs said that after making the ASIC mining machine, it will not sell it to the public, but only use it for itself, which means that the Bitcoin computing power will be fully concentrated in the hands of a certain organization. Zhang Nangeng couldn't sit still, and decided to develop ASIC mining machines himself to prevent the "crisis" of Bitcoin computing power monopoly. Zhang Nangeng asked his supervisor to take a one-year leave of absence from school, but was rejected, so Zhang Nangeng decided to drop out of school to concentrate on ASIC. In China, like Zhang Nangeng, there is another person named Friedcat who intends to make ASIC mining machines.

In 2013, Zhang Nangeng established Canaan Technology, and the main body in the mainland is named Canaan Zhizhi. In January of the same year, he made Canaan Zhizhi's first ASIC mining machine, named Avalon, which also led the industry into the ASIC era.

In 2014-2015, Jianan Zhizhi was a bit lonely, but he also completed his important turning point. In June 2015, Shuimu Zehua Fund, a subsidiary of Zhejiang Tsinghua Yangtze River Delta Research Institute Hangzhou Branch, and Jianan Zhizhi signed an investment agreement and led the investment of 2.5 million yuan. Canaan Creative was introduced to Hangzhou from Zhongguancun, Beijing, and has since then taken root in Hangzhou, receiving much attention from the local government.

However, Canaan’s road to listing has been full of twists and turns. In 2016, Jianan Zhizhi tried to land in the A-share market through the "backdoor" method, but was stopped by the Shenzhen Stock Exchange. In August 2017, it once again sought to be listed on the New Third Board. This time it happened to encounter the "94th" storm, and the domestic cryptocurrency market encountered a storm of policy regulation. Relevant departments began to ban all cryptocurrency transactions and ICOs in the country. Canaan Zhizhi also received inquiries from share transfer companies for four consecutive times in October and November of that year, and finally voluntarily gave up listing in March of the following year. In May 2018, Canaan Zhizhi formally submitted a proposal to the Hong Kong Stock Exchange, but it ended in failure.

On November 21, 2019, Canaan finally successfully landed on NASDAQ with the stock code "CAN", becoming a "domestic mine In addition to its own strength, it also benefits from the relatively tolerant listing policy of US stocks.

Canaan Intellectual - Launch of new mining machines in 2020

Avalon has launched three mining machines this year, namely A1166, A1166 Pro and in October Launched the latest model A1246. The A1246 has a rated computing power of 90T and an energy efficiency ratio of 38J/T. This is Avalon's first large computing power model that has reached 90T.

Due to the recent good market conditions, mining machine prices There are also large fluctuations. Canaan’s official website has not announced the price of the latest mining machines. According to Rhythm BlockBeats, the spot price of A1246 in December this year is 19,300 yuan, while the futures mining machine price in May next year is 14,450 yuan, and futures require a 50% deposit in advance.

This price is an advantage compared to other competing products Not too big. From the perspective of computing power, 90TH/s is still much inferior to the 110TH/s of S19pro and the 112TH/s of Whatsminer M30S++. From the perspective of energy consumption ratio, the performance of 38J/T is really not impressive. Therefore, Canaan Creative, which is busy with the NASDAQ listing, has launched new models to try to catch up with its competitors after the successful listing, but it has fallen behind in technology and R&D. Will it have a chance to regain market share in the future? To be investigated.

Canaan’s advantages:

1. The older generation of mining machines has a certain reputation and user base;

2. The founder, Zhang Nangeng, is a technical leader and has a good understanding of the mining machine market;

The top management of the Jianan Zhizhi team has completed the change, and the internal management is relatively stable;

3. It has been successfully listed on Nasdaq, which has attracted widespread attention in the encryption circle.

Canaan Intellectual Disadvantages:

1. Low cost performance of mining machines;< /p>

2. The frequency of new mining machines is slow;

3. The overseas market is weak.

Summary: Canaan is one of the early mining machine companies. However, in recent years, Canaan has been focusing more on the AI field due to its pursuit of going public. The mining machine market is quite different from that of MicroBT and Bitmain, and the computing power of the new mining machines is quite different from that of the S19 series or M30 series. According to Rhythm’s understanding, its previous new mining machine A1166 Pro has not been delivered for more than half a month after its release, while Antminer and Shenma Mining Machine have almost completed the delivery of the first batch of new mining machines. In addition, some miners told Rhythm BlockBeats that since the performance is not as good as the S19 series or M30 series, and the price is not cheap, most miners may not choose Canaan’s new mining machines, but Canaan’s second-hand old mining machines still have certain market share.

Canaan has also experienced high-level changes this year, but the process of position changes and power transfers has been relatively smooth, and the transfer of company management rights has been completed peacefully. At present, Zhang Nangeng, the founder of Canaan Zhizhi, leads the company's business development.

Microbit

MicroBT was established in July 2016. Compared with the other three companies, MicroBT was the latest to enter the market. The founder of MicroBT, Yang Zuoxing, actually entered the mining circle as early as 2014. After experiencing the "roasted cat running away" incident and the "Bitmain Equity Dispute" incident, he decided to start his own portal to establish MicroBT. And its mining machine brand "Whatsminer Mining Machine" also has a soaring market share after its launch. With its high cost performance, it has begun to try to compete with Bitmain.

In September 2016, MicroBT got the A $5 million angel round of financing. In December of the same year, the 28nm chip BT1000 developed by it was officially taped out.

In April 2017, Whatsmart, a subsidiary of MicroBT The M3 mining machine was officially mass-produced, and the sales of the first batch of M3 mining machines were nearly 10 million yuan. With the success of the M3 mining machine, MicroBT launched a follow-up financing.

Bitmicro-2020 new mining machine launched Situation:

This year, MicroBT is the manufacturer that launched the largest number of new mining machines among several mining machine manufacturers. In April, 5 new mining machines with different computing power were launched consecutively. Compared with the Antminer S19pro, the WhatsMiner M30S++ has a 2TH/s increase in computing power, and its overall weight is 0.3kg lighter. The overall chassis size still adopts a single-tube design, which is in line with the new standard "double-tube mine" advocated by Bitmain. Machines are all different.

This is about the mining machine "single and double cylinder" In the industry-standard competition for design, it's hard to tell the winners and losers right now. In the future, when small computing power mining machines are phased out and large computing power mining machines dominate the market, it remains to be seen whether the mining farm will choose Bitmain's dual-cylinder design or continue the single-cylinder mining machine position setting.

Same as Bitmain, in the current good Under the current encryption market conditions, the price of MicroBT's Whatsminer mining machine has also soared. Among them, the unit price of the M30S++ mining machine has skyrocketed from 10,000 yuan in the middle of the year to nearly 30,000 yuan per unit at present, and it is also a futures.

Microbit advantage:

1. The founder Yang Zuoxing has a strong technical level, and the performance of the 8nm mining machine developed by him is not weaker than the current part of the 7nm mining machine;

2. Spot mining machines are now available, and have occupied a certain market share during Bitmain's civil war;

3 .After the middle of the year, the production capacity has been increased, and tens of thousands of mining machines can be provided to the market every month.

Microbit Disadvantages:

1. Yang Zuoxing was involved in legal disputes and has now resigned MicroBT legal person and executive director;

2. Previously, it was revealed that the production capacity was insufficient and the mining machine was in arrears for several months;

3. There is a large gap in the overseas market, and most of the sales are from domestic distributors;

4. The market operation is relatively weak , with little media publicity.

Summary: Rhythm BlockBeats found that according to the official data of MicroBT, 300,000 Whatsmart M3 units were sold in 2018, accounting for 9%; 600,000 M20 units were sold in 2019, accounting for 35% of the total network computing power at the end of the year. The market share has been rising steadily. MicroBT has always been relatively low-key internally. Compared with marketing and other aspects, MicroBT pays more attention to technology, which also limits its brand awareness. Yang Zuoxing previously disclosed in an interview that the company has about 70 people, 50-60 of whom are technicians. In addition, Yang Zuoxing's technical level has been recognized by the industry, and he has a good relationship with many mining pool companies in the industry.

Yibang International

Ebang International was established in 2010. At the beginning of its establishment, Ebang was engaged in business based on communication equipment, and the communication industry is cyclical. Hu Dong, the founder of Ebang, paid close attention to Bitcoin in 2011 and came up with the idea of making a mining machine. When encountering a downturn in the communication industry, Ebang International considered whether to do research and development in the blockchain field.

Ebang began to invest in Bitcoin mining machines in 2014, and it was not until 2016 that the mining machines It went online and changed 9 versions before and after. After that, Yibang's main business was the sales of Bitcoin mining machines and accessories, mining machine hosting and maintenance services, and the telecommunications network only accounted for a small part.

Ebang International has been listed on the New Third Board and has done two rounds of fundraising. In the second half of 2017, it began to consider listing in Hong Kong.

This time, Yibang moved to the U.S. stock market to a certain extent. Failed. The reason is that the Hong Kong Stock Exchange has an extremely indifferent attitude towards mining machine companies.

On June 26, 2020, Ebang International officially landed on Nasdaq and became the No. shares", the stock code is EBON, and the total fundraising scale is about 100.75 million US dollars.

Ebang International-New mining machine launch in 2020

Ebang International, which is busy with listing, will hardly focus on the mining machine business throughout 2020. Launch any new mining machine. The overall data of the mining machine E12 launched in 2019 is mediocre, and it cannot be compared with the other three high-power models at all. The original matching model of E12 should be MicroBT’s M31S. The prices are basically the same, but MicroBT's M31S has better performance in terms of computing power and energy efficiency.

Ebang International Advantage

1. Already listed;

2. An old mining machine company with a certain reputation.

Ebang International Disadvantage

1. Mining machine cost-effective;

2. Almost no market.

Summary: Although Yibang International is an old brand mine One of the machine manufacturers, but its R & D technology is not strong. And in the later stage, I was addicted to listing, and basically had no intention of deeply cultivating in the field of mining machines. Compared with the frequency with which other competing products will launch new products across the board in 2020, Yibang has already been “left behind” by the market. There has been no new Bitcoin mining machine launched for a year, and the price is too high and the cost performance is low. Market share is almost negligible. After its listing, it has not made any moves in the field of mining machines. It may be difficult to see Ebang in the future market competition.

2.2 Analysis of the market share of each mining machine manufacturer
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The computing power from the mining machine is large Divided in small ways, we can see that the global computing power statistics provided by  BTC.com  show that in recent months, the computing power above 80TH/s accounted for 16%; Compared with 27%, it shows that the new generation of 7nm or 8nm bitcoin mining machines in the market has already been put into use.

According to the rhythm in October with the mine and The miners learned from the conversation that around July this year, most of the mining machines above 75 TH/s were the M30 series of Bitmain’s S19 series. The Canaan A1160 mining machine has not yet shipped. This conclusion was subsequently confirmed by people familiar with the mining pools of  BTC.com  and Biyin. According to data at the time, 75TH/s computing power mining machines accounted for nearly 33% of the total network computing power, which means that Shenma mining machines accounted for as high as 33% of the computing power at that time.

However, with the end of the dispute between the two founders of Bitmain, the later shipments have been much smoother, and many miners have received new mines that had previously been delayed. machine and complete the deployment.

On the other hand, from September to November, the total proportion of mining machines with a computing power below 60TH/s is about 73%. Among them, the computing power of mining machines below 40 TH/s accounted for 47%. In July, mining machines with a computing power below 40T/s only accounted for 39%, which once again confirmed that as the currency price recovered, many old-type mining machines started up again.

Looking at the main four manufacturers in the market, all of them have mining machines that meet the computing power of less than 60TH/s. But at that time, MicroBit Miracle had just started and its market share was not high, so Rhythm BlockBeats speculated that the 47% share should actually be shared by Bitmain, Canaan and Ebang International. However, considering that the popularity and performance of Ebang International Mining Machines in the market is slightly inferior to Canaan and Bitmain, this part of the market is likely to be held by Canaan and Bitmain. And in May 2020, Bitmain's Antminer S9 series hardware was upgraded, its computing power was upgraded from 14TH/s to 37 TH/s, and the computing power also rose back to 32%.

Because Canaan’s new mining machines are still unable to be shipped on a large scale, and Ebang International has not yet launched high-power mining machines, it can be speculated that 27% The medium and high computing power market (computing power over 60TH/s) has been occupied by Bitmain S19 series and Shenma M30 series with a high probability.

Summary: In recent months, the medium and high computing power market (above 60TH/s) has fallen into the cyst of Shenma mining machine and Bitmain mining machine. On the other hand, Bitmain still accounts for at least 20% of the computing power of the entire network relying on the S9 series. As the currency price recovers, perhaps this proportion will be even higher. Coupled with the computing power of some medium and high-performance mining machines, Bitmain’s market share in the mining machine market is about 40%-45%.

2.3. Summary of recent market performance of mining machine manufacturers 

1 .Before the time when Bitmain was fighting internally, Bitmicro (Shenma) had already occupied the high computing power market. However, as the internal order of Bitmain was restored, mining machines were delivered normally, and part of the high computing power market has been regained. In addition, relying on the original brand advantage and the high price of cryptocurrency, this has led Bitmain to capture more low-to-medium computing power markets.

2. The sales volume of high-computing mining machines of Microbit MicroMiner is considerable this year, and the spot was sufficient before; while Bitmain’s original planned production capacity could have been It meets the market demand, but due to the problem of the Shenzhen factory, most of the high-performance new mining machines have not been put into use before October. However, as the internal dispute subsided, the S19 series resumed normal delivery.

3. Bitmain’s giant advantage is still there. In the low-computing power market, which accounts for about 47% of the entire network, S9 and other series mining machines still occupy At least 20% of the share, other types of mining machines, such as T17 series mining machines also occupy a lot of shares; and in the 27% of the medium and high computing power market, Bitmain and BT Micro (Shenma mining machine) almost occupied Most of the market share, it may be difficult for Canaan to catch up.

4. Combining the data of both parties, it is predicted that the market share of Bitmain and Microbit mining machines may have begun to be flat, each accounting for about 40% ( or higher).

5. The market structure has changed, from Bitmain No. 1 and Canaan No. 2 to Bitmain and Bitmicro (Shenma ), Bitmain resumed shipments in time and the U.S. market continued to expand, delaying the momentum of Godmonger’s overtaking to seize market share in time. There is a certain first-mover advantage in the mining machine market. If the market demand cannot be met all the time, it will be more difficult for miners to seize market share after deploying new mining machines.

6. The competitiveness of other manufacturers, such as Innosilicon and Ebang International, has gradually weakened. From the perspective of the international situation, overseas mining machine manufacturers are mainly Bitfury (mainly container-type mining machines, mainly for mining farms, and there are few bulk mining machines), but they do not pose a major threat.

3. Analysis of the proportion of computing power in various countries around the world

According to BTC.com  According to the statistics of the mining industry in the past six months, about 50% of the global computing power is currently in China, which is basically consistent with the data reported by BitOoda, an overseas research organization commissioned by Fidelity Capital. It has become an indisputable fact that China's share of computing power in the Bitcoin network is declining.  

BTC.com  is the largest mining pool under Bitmain The computing power is 16.8%. The following mainly takes the statistical data of  BTC.com  as an example to briefly analyze the proportion of global computing power and the market proportion of various mining machine manufacturers.

The proportion of global computing power from January to July 2020 is shown in the figure below

The proportion of computing power in China is still relatively high, but it reached nearly 70% in 2019. The reason for this year's decline is related to the policy and the distribution of old and new mining machines in mines.

According to the data, starting from May, China has entered a wet season, and the proportion of computing power in China The overall advantage is still maintained, at about 55%.

Mining in Russia (accounting for 14%) and the United States (accounting for 12%) has basically been legalized. There are several large mines in the United States. Many of them are listed companies. According to Rhythm’s report in June this year, Bitmain signed an order for about 18,000 mining machines with one of the mining farms, worth about 200 million yuan (the price of mining machines changes at any time, and the value will change accordingly). There are many bitcoin mines in Russia and its surrounding areas, and it is also the location of Bitmain's major customers. Rhythm learned that Bitmain has set up dedicated sales branches in Russia and the United States, as well as sales in China and overseas who are proficient in Russian and English.

In the second half of 2020, the global computing power began to change slightly. The wet season in the territory is over, and mining machines begin to migrate.

Among them, in August and September 2020, the proportion of China's computing power remained at about 52-53%, and in October there was a sudden surge, accounting for At one point it reached 72.21%.

This happens The reason may be the sudden rise in the price of Bitcoin in October, and the mining machines that had been shut down due to the low price of the currency were restarted. As can be seen from the figure, not only China, but other regions also saw a rise in computing power in October.

On December 1 this year, Rhythm BlockBeats interviewed Fan Jianwei, head of the Bitmain Supercomputing Center, he said that the S9 and some old mining machines (16nm) of the same series accounted for the total network computing power. Still around 25%, which is in line with gains in China in October.

In contrast, Russia’s computing power has declined severely, and its computing power has dropped sharply from 12.55% in September to 3.8 percent in October. This is related to the serious aging of the local mining machines, and the mining farm has not purchased new mining machines; in addition, the attitude of the Russian authorities towards the mining industry has always been unclear, resulting in a certain degree of instability in the local mining industry.

The computing power of the United States began to rise in October, which is consistent with the previous market news. According to the report of Rhythm BlockBeats this year, mines are being built in batches in many places in the United States, and most of the new models of mining machine manufacturers such as Bitmain are also booked in advance by the North American market.

Among them, Riot Blockchain, Inc., a listed company in the United States, ordered more than 30,000 S19 series mining machines from Bitmain for several times this year, and another company, Core Scientific, also ordered Reached an agreement with Bitmain to purchase 17,000 mining machines from Bitmain this year. These companies deployed mining machines in local mines in the United States, which further helped the growth of computing power.

However, by November, China’s Bitcoin computing power declined again. One of the main reasons is the end of the high water season, and the mines began to relocate away from areas rich in hydropower such as Sichuan. At this time, the epidemic recurred, resulting in lower logistics efficiency and longer migration time. In addition, although the high water season is over, there are still mines that use hydropower. This year, many places in China have issued reports that power resources are tight, which to a certain extent has also affected mines that rely on hydropower for mining.

4. Mining costs and benefits

The cost of mining is basically It can be divided into two categories: hardware cost (mining machine cost) and operating cost (electricity fee, manual maintenance...). Mining revenue can be roughly divided into block rewards and transaction fees.

Cost:

From the perspective of hardware cost, the new mining machine is The performance is lower, so each time the mining machine is iterated, the price tends to be higher than the old mining machine. However, the price of the mining machine is closely related to the price of the currency. When the cryptocurrency market is booming, it is often difficult to find a mining machine. Hundreds of thousands of dollars. But when the currency market is bleak, the price of mining machines will also plummet, and some old mining machines even become "scrap iron" sold by the catty.

We can see that the new high-performance mining machines launched by various manufacturers are basically in the price range of 20,000 to 30,000, and the prices of other types of mining machines are also in the thousands Yuan varies.

So how long can such an expensive mining machine usually mine? The service life of a mining machine can usually be divided into physical life and economic life.

The physical life of the mining machine refers to the time elapsed from the time the mining machine is put into use in a brand new state until the mining machine is damaged and scrapped. There are two main factors that affect the physical life of the mining machine: the quality and operation and maintenance of the mining machine.

The quality of the mining machine is closely related to the mining machine manufacturer, the structural design of the mining machine and other factors. For example, in the Antminer, which is known for its low power consumption, the hashboards use series circuits for power supply. If there is a problem with one of the hashboard circuits or chips, the entire hashboard will be unavailable.

The level of operation and maintenance will also affect the physical life of the mining machine. When the mining machine is running, it will generate a lot of heat. If the heat dissipation is not timely or the fan of the mining machine is damaged, the continuous high temperature will cause the mining machine to shut down, and even cause a short circuit inside the mining machine. This is why mining machine manufacturers always emphasize the heat dissipation performance of the mining machine when they promote their new mining machines. In addition to temperature, there is also humidity. If the air is too humid, it may cause the mining machine to rust and corrode. In addition, in the mines in Xinjiang, Inner Mongolia and other places, due to the excessive wind and sand, the mines need to regularly check the dust of the mining machine. If the dust is not cleaned in time, it will also affect the physical life of the mining machine.

Under normal circumstances, the physical life of the mining machine can reach 5-10 years. For miners, what needs to be paid more attention to is actually the economic life of the mining machine.

The economic life of the mining machine refers to the useful life of the mining machine from the perspective of cost and income. There are usually two indicators that determine the economic life, "electricity expenditure" and "mining income".

When the mining income of the mining machine cannot cover the electricity expenses, the economic life of the mining machine is over. In general, the economic life of the latest mining machines is more than three years.

Let's take a look at the operating costs. Electricity expenses are the most important operating cost. For mining farms, there is also the labor cost of mining machine maintenance, but compared with the cost of electricity, the labor cost is basically negligible.

The power used by the mine is mainly thermal power and hydropower. Thermal power is mainly concentrated in remote areas such as Xinjiang and Inner Mongolia. Not only is the price of photovoltaics relatively low, but more importantly, it will be relatively stable, which reduces the cost of building factories; hydropower is mainly concentrated in Sichuan, Yunnan and other places. Affected by seasons, Sichuan and Yunnan have The wet season and the dry season. The wet season is usually from May to October, and the electricity price is very cheap, but the electricity price will increase during the dry season. The disadvantage is that the electricity price is unstable, and the local water volume will greatly affect the electricity price.

During the dry season, some mines will choose to shut down and store them, and the miners will not restart until the wet season. Some mining farms even choose to relocate mining machines from other places to Sichuan, Yunnan and other places during the high water season to enjoy low electricity prices.

The cost of electricity is the core competitiveness of miners. Therefore, the economic life of the same mining machine is also different. For example, because the currency price was too low, many small miners had to shut down their machines due to the high electricity cost, and sold their mining machines to large miners who had an advantage in electricity costs (generally, large miners would sign power supply contracts with power supply companies to enjoy relatively low electricity prices) . There are still some domestic miners who will also ship the mining machines that will be eliminated to countries with lower electricity costs such as the Middle East.

According to Coinshare's data statistics and estimates, about 74.1% of the energy used for global Bitcoin mining is now renewable energy. The Cambridge Bitcoin Power Consumption Index pointed out that the total global power supply is 25082TWh, while the electricity consumption of Bitcoin accounts for 0.26% of the total power supply and 0.30% of the total global power consumption (20863TWh).

Income:

In terms of income, the main income of Bitcoin mining now It still comes from block rewards. The total number of bitcoins is 21 million. Initially, each block will reward miners with 50 bitcoins, and an average of one block will be produced every 10 minutes. Every 210,000 blocks thereafter, which is about 4 years, the Bitcoin block reward will be halved. At the time of writing, Bitcoin has just completed its third halving, reducing the block reward to 6.25 BTC per block.

Miners will also receive transaction fees while receiving block rewards. In order to prevent dust attacks on the network, users must pay a certain transaction fee every time they initiate a transaction. At the same time, users will voluntarily increase this rate in order to make their transactions get confirmed faster. However, transaction fees on the Bitcoin network are now far lower than block rewards. For miners, block rewards are still their main source of income. Based on the current daily output of 144 blocks and 6.25 bitcoins per block, the daily fixed output of bitcoins is 900. According to Ycharts data, the recent daily miner fee income ranges from 50 to 150 bitcoins, accounting for about 5% to 15% of block rewards.

However, Ethereum’s recent transaction fees show the exact opposite. With the upsurge of liquidity mining, the activity of DeFi applications in the Ethereum ecosystem has been pushed to a new high, followed by the congestion of Ethereum and the surge in transaction fees. Ethereum miners generated $285.1 million in August, a 98.2% month-on-month increase and a 25-month high. Transaction fees accounted for an all-time high as a percentage of miners’ total revenue, exceeding 40.5% of total revenue, compared to just 10% in May. There were even days in August where fees exceeded block rewards. Miners earn 5 ETH per block, 2 from block rewards, and 3 from handling fees.

5. The impact of the black swan event in 2020 on the mining industry 

2020 At the beginning of the Spring Festival, two black swans "flyed" one after another in the encryption mining market.

First, the domestic prevention and control of the epidemic, and then, the global economy affected by the epidemic has been hit hard. Of course, the encryption industry has not been immune to it. Starting from March 8, the entire market fell for several consecutive days, hitting a low of $3,600 at one point.

Epidemic:

Affected by the epidemic, all major manufacturers are facing difficulties in production and delivery Delay. However, with the arrival of Bitcoin halving in May, users' demand for new mining machines is surging again, but most factories have to stop all production operations.

The epidemic has not only affected the production of mining machines, but the transportation chain of mining machines has also been interrupted for a long time. It is understood that many new mining machines should have been delivered to the miners in April this year, but due to the epidemic, some miners who have ordered mining machines did not receive the mining machines until May-June, which indirectly affected the computing power of the entire network .

At the same time, the epidemic has also affected the return of workers from their hometowns. According to local policies, it often takes a two-week quarantine to rework from a different place, which brings troubles to mines that require personnel to operate, maintain and manage. Some miners said that their entrusted mines received notices of clearing and shutting down. Fortunately, there are not many similar situations. Most of the mines are actually built in remote mountainous areas, and the flow of personnel is limited. In addition, the person in charge has arranged on-duty personnel years ago, so the impact will not be particularly large.

With the impact of the epidemic, the growth rate of the entire network computing power and mining difficulty has declined.

312 The market plummeted:

Bitcoin fell and the computing power of the entire network dropped , the mine shut down. Beginning in the afternoon of March 8, BTC fell rapidly, and once touched $3,600 in the next few days. The volatile price stimulated the fragile nerves of crypto investors. Facing the eye-catching and dazzling shutdown currency prices, some Bitcoin mine owners and miners Dilemma: turn on, loss; turn off, also loss.

The most affected are those small mines and miners, who do not have sufficient cash flow, or because of liquidation of encrypted loans, or because they are unsustainable, Some have already fallen on the eve of the halving.

On March 12, the price of Bitcoin fell by nearly 40%, but the computing power did not fluctuate significantly. This is not because miners can still make a profit through mining, but because most miners have no choice. Mining is an industry. In order to obtain the best electricity price, most mining farms will sign contracts with local power supply companies, and the contract will clearly indicate that miners need to pay fines for large-scale shutdowns, or the number of machines running after shutdown does not meet the agreement The standard of electricity will increase in price. Therefore, considering that the shutdown cost is too high, the mine can only continue to operate the mining machine.

However, if the currency price falls further, most of the old mining machines with low computing power and high energy consumption will not be able to make profits even in the wet season. Then the only thing left is the new high computing power mining machine, which will lead to a decline in the computing power of the entire network to a certain extent and affect the security of the Bitcoin network. However, if the total computing power of the new mining machines can exceed that of the eliminated old mining machines, then the network security will not be affected in any way.

Bitcoin halving:

In fact, Bitcoin halving is not a black swan event However, the previous halvings were regarded as positive events by the market. Because the price of Bitcoin often ushers in a wave of rise before and after halving. As mentioned earlier, Bitcoin rewards are halved every 4 years. This year coincided with the 3.12 market crash, and the block rewards were halved before the market and miners recovered. For miners, it is undoubtedly worse.

Bitcoin halving in 2020 will directly wipe out miners with insufficient funds, while prepared miners have already made full preparations. Many miners have learned to hedge this year: some did hedging; some bought double-limit insurance for call and put options, and even sold some bitcoins before, all in order to reduce the uncertainty of income.

The most direct impact of this year's halving is to increase the mining cost of Bitcoin, and many small mining companies will be forced to shut down old mining machines. It may withdraw from the mining industry because it is difficult to bear the high cost of new mining machines; on the other hand, in order to cope with the halving of output, miners have to upgrade the mining machines, which requires higher performance and efficiency of the mining machines. Mines and miners who have not made sufficient preparations in advance are destined to be abandoned by the market. For mining equipment manufacturers, whoever takes the lead in technology first will occupy more market share, and the upstream mining equipment market structure may therefore change.

After this halving, Willy Woo, the creator of the Bitcoin NVT valuation model, put forward a very interesting point of view. Half of the time, trading platforms will replace miners and become net sellers in the market.

In any case, the encryption market after 2020 is full of challenges for the entire mining industry. 2020 is destined to be a year of renewal and iteration. The market is starting its own evolutionary model. Miners who lack plans, do not have sufficient financial support, or even do not comply with regulations may slowly be left far behind by the market.

The views of most investors and industry insiders in the market before the halving are relatively unified: if the price of Bitcoin remains at the level before the halving, then there will be a large number of If miners are forced to stop mining, the computing power of the Bitcoin network will also be halved. If the price of Bitcoin doubles, then the computing power can still be maintained at the original level before the halving.

As of today, more than half a year has passed since the halving. According to data from  BTC.com , the computing power of the entire network has increased by 11% from 121TH/s when it was halved on May 12 to 135.62TH/s recently. The price of Bitcoin has increased by nearly 180% from the lowest level of US$8,206 on May 12 to breaking through US$20,000 to around US$22,800. The overall operation of the Bitcoin network remains healthy and stable, and the market sentiment is good.

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