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Bitcoin Mining 2020: Big players enter, China fades

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The Bitcoin mining center is gradually shifting from China to Northern Europe, North America, and Central Asia.

Original title: "Bitcoin Mining 2020: Big companies enter the market, China gradually loses power"

Original source: Shenchao TechFlow

At the beginning of 2021, Bitcoin has broken through a new high, reaching US$32,000, and many cryptocurrencies have also launched an impact to the high point.

As a miner at the top of the food chain in the currency circle, what have you experienced in the past year?

In this year, from the sharp drop of 312 to the halving of mining output, from the wave of DeFi to the new high of Bitcoin, from internal fighting in Bitmain to reconciliation and separation …the mining industry is undergoing a quiet upheaval.

These changes are geographical. The center of Bitcoin mining is gradually shifting from China to Northern Europe, North America, and Central Asia; it is also psychological. The cost of entry for new miners is getting higher and higher, and the old miners who have experienced multiple rounds of bulls and bears are "waiting for a rabbit" to deal with the hidden reefs and vortexes of the currency market at any time.

These changes are concrete, the Antminer S9 mining machine has changed from a "retired" scrap iron at the level of 100 yuan, to being sought after again; it is also abstract, the status of miners A huge transformation from nobody caring to everyone envying.

What will 2020 leave for the crypto mining circle? Deep Tide TechFlow tried to summarize 5 major changes.

Bitcoin Mining 2020: Wall Street enters the market, mining centers move abroad

Bitcoin halving: insufficient supply of miners or reason for Bitcoin growth

On May 12, the Bitcoin block reward was reduced from 12.5 BTC to 6.25 BTC. After the halving, Bitcoin’s annual inflation rate fell to 1.8% from the previous 3.7%.

Lack of supply is fueling Bitcoin's rally. Bitcoin miners regularly sell mined bitcoins to the market in order to pay electricity bills or buy new machines. After the halving, output and selling pressure were halved, and Bitcoin’s annual inflation rate fell from 3.7% to 1.8%, lower than most central bank fiat currencies in the world.

At the end of October, after PayPal launched its bitcoin service, its purchases of bitcoin have exceeded 100% of the new supply.

Source: Pantera Capital

At the same time , Institutional funds from the United States are constantly buying Bitcoin, driving up the price of the currency.

On December 11, according to the "Wall Street Journal" report, MassMutual, one of the five largest life insurance companies in the United States, has passed New York Digital Investment Group (NYDIG) purchased $100 million worth of Bitcoin for its general insurance account.

Another crazy public company is MicroStrategy. Beginning in July this year, MicroStrategy began to buy bitcoins on a large scale. Through several continuous purchases, it exchanged 475 million US dollars for 40,824 bitcoins.

According to the statistics of Bitcoin Treasuries, there are currently more than 16 listed companies on the market holding Bitcoin. In addition, the trust company Grayscale Investment bought 350,000 bitcoins in the second half of the year.

In 2020, Bitcoin has tripled, and the "halving market" predicted by encryption analysts at the beginning of the year has been fulfilled.

Chinese and American major companies enter Bitcoin mining

With Bitcoin leads the take-off of major cryptocurrencies, and encryption mining has become a business coveted by big companies.

On January 4, Ninth City, a Nasdaq-listed company, announced that it would enter cryptocurrency mining. "The expected goal is to contribute 8-10% of Bitcoin's global computing power, 10% of Ethereum's computing power and 10% of Grin's computing power."

The Ninth City is an online game operator, and from 2004 to 2009 it was the sole agent for the operation of "World of Warcraft" in China.

Before the Ninth City, Wall Street capital had entered the Bitcoin mining industry aggressively.

In 2020, American mining companies are the largest customers of mining machine manufacturers such as Bitmain. According to incomplete statistics, in 2020, Bitmain and an American company reached a cooperation of 200,000 S19 mining machines.

According to Bitmain's official website, on December 18, Bitmain announced that it has signed an order agreement with North American blockchain custodian Core Scientific, which will last until September 2021. Bitmain will deliver more than 58,000 S19 series antminers successively.

In the past 12 months, Core Scientific has purchased a total of 76,024 S19 series ant mining machines, worth more than 129 million US dollars.

Core Scientific has won cheap electricity in 5 cities in the United States, and the project covers a total area of more than 600 acres.

U.S. listed company Riot Blockchain, Inc. has ordered more than 30,000 S19 series mining machines from Bitmain in batches this year.

After purchasing 10,500 S19 Pro Miners in August this year, Marathon, also a listed company, announced in October that it will form a joint venture with Beowpf Energy to establish a 105-megawatt bit In the same month, it signed a new contract with Bitmain to purchase another 10,000 S19 Pro mining machines.

Why are these big companies stepping into Bitcoin mining? In addition to bringing bitcoin mining benefits, its exciting incentives for stock prices may be an important reason for large companies to deploy mining.

Bit Digital, Inc. (NASDAQ: BTBT) has seen its share price rise more than 70-fold in the past 12 months.

The financial report disclosed by Bit Digital for the first three quarters of 2020 shows that as of September 30, 2020, the company operated 22,869 mining machines, of which the third quarter Added 16,964 units, accumulatively outputting 814.23 bitcoins, of which 739.51 were added in the third quarter.

On the other hand, after Bitcoin hit a new high of $24,273 on December 20, listed Bitcoin mining companies all rose to varying degrees on US stocks: Marathon rose 24%, Riot rose 10%, Bit Digital rose 12%, and CleanSpark rose 18%.

In addition to raising the stock price, behind the above-mentioned companies entering mining is also the battle for the mining center by the American consortium.

“The United States is rapidly developing into the world’s major bitcoin mining center, and the country’s bitcoin mining power energy accounts for 14% of the world’s total.” This year’s 7 According to a mining industry report commissioned by Fidelity Investments and BitOoda in March, China's mining industry only accounts for about 50% of the world's total.

A month before the report was released, Fidelity was revealed to have participated in the $6.1 million public offering of Canadian mining company Hut.

At the beginning of this year, the mining company Layer 1, which was invested by PayPal co-founder Peter Thiel and DCG (Digital Currency Group, the parent company of Grayscale Investment), invested in Texas begins operations and will cover dozens of acres.

The purpose of Layer 1 is "to change the situation that the U.S. mining industry lags far behind China." It plans to control 30% of Bitcoin's computing power by the end of next year and become the world's largest mine.

The manipulator behind Core Scientific is an institution called Foundry, and the $23 million in financing that Core Scientific just announced came from Foundry. Foundry is a subsidiary of Digital Currency Group (DCG).

Although part of the early dividends of mining has been missed, the determination of American companies to enter mining cannot be underestimated. Americans want to take back the initiative of Bitcoin from Chinese miners.

It is not difficult to find that DCG appears behind both Core Scientific and Foundry, which is the parent company of Grayscale Trust.

In addition to controlling Grayscale Trust, DCG is also one of the largest cryptocurrency over-the-counter trading and lending platforms Genesis, the famous blockchain media Coindesk, and the exchange Luno parent company, and directly invested in encryption institutions such as Bitpay, Circle, Coinpst, and Coinbase.

DCG has played a big game in the encryption ecology. As a source of supply for Bitcoin mining, DCG has obviously also considered it.

The transfer of mining centers to foreign countries

In 2020, an easy What has been overlooked is the quiet transfer of Bitcoin mining centers from China to abroad.

In Q2 2020, Kazakhstan’s mining industry accounted for Bitcoin’s average monthly hashrate, according to the Bitcoin Mining Map designed by the Cambridge Center for Alternative Finance About 6.17% of the total, only slightly lower than Russia (6.9%) and the United States (7.24%), while China is still the undisputed number one (about 65%).

In September 2019, China's mining accounted for 75.62%.

Bitcoin Mining 2020: Wall Street enters the market, mining centers move abroad

Source: https://cbeci.org/ mining_map

In half a year, China’s mining share has dropped by 10 percentage points. This part of the share lost by China is divided up by North America mentioned above, as well as Northern Europe, Central Asia, Southeast Asia, Iran, Russia and other places.

For Bitcoin mining, the cost of electricity is the key to the rate of return. Lower electricity bills mean greater returns.

Recently, Phipp Salter, director of operations at Genesis Mining, told Bloomberg that miners are moving from China to the Nordic countries, namely Sweden and Norway, because “these countries are considered safer and more stable.”

He explained that the profitability of the company's data center in Boden, Sweden has more than tripled due to the wet weather and the continued rise in bitcoin.

"Without fees and taxes, electricity prices here are among the lowest in the world, and it's virtually carbon-free, largely composed of hydro, nuclear and wind power. ” said the Bloomberg article.

In addition, in November this year, Dutch blockchain company Bitfury Holding BV announced an investment of US$35 million to expand the Norwegian mine.

In addition to Northern Europe, Kazakhstan has also become a new center for Bitcoin mining.

In June, Bagdat Mussin, Minister of Digital Development of Kazakhstan, announced that the ministry plans to attract $738 million in investments by 2023 for cryptocurrencies mining related activities.

According to Zhumagapyev, there are currently 14 cryptocurrency mining farms that have brought in a cumulative investment of about $201.7 million.

Kazakhstan, which is dominated by thermal power, has a power surplus of 4000MW (megawatts). The cost per kWh is around $0.03.

“There are a lot of local mining people in Kazakhstan now. The president’s brother is digging, and there are people from Greece, Germany, Japan, South Korea, and Iceland.” A miner in Kazakhstan said.

The main mining companies in Kazakhstan come from China, South Korea and other countries, including the above-mentioned Genesis Mining and Bitfury, which have deployed mining in Central Asia.

On the other side, the location is pulled to Siberia. At the beginning of this year, Rosatom, the leader of Russian nuclear power, was exposed by Coindesk to open its energy supply to Bitcoin. On December 30, a subsidiary of Russian natural gas giant Gazprom announced the opening of a Bitcoin mine.

In July of this year, Abdolnaser Hblockquotemati, Governor of the Central Bank of Iran, issued a statement: "The government economic committee approved a mechanism for digital currency mining, which will be released later

Three months later, the Iranian Republic News Agency (IRNA) reported that Iran revised the country’s cryptocurrency regulations to require Licensed bitcoiners sell their bitcoins directly to the Central Bank of Iran to fund imports.

Iran has issued 1,000 licenses to crypto miners, including licenses from Turkish mining giant Iminer. Power plants in Iran are allowed to mine cryptocurrencies, while bitcoin miners are granted exclusive access to the electricity produced by three of them.

In November of this year, the Venezuelan army posted a video on instagram turning the camp into a mining center. Prior to this, the Venezuelan government clearly stipulated the legality of encryption mining.

In December, the Venezuelan Encrypted Assets Supervision Agency (Sunacrip) and the Venezuelan National Electricity Company (Corpoelec) signed an agreement to implement guidelines nationwide Improve the development of Bitcoin and other cryptocurrency mining activities within.

………

Low electricity bills, policy incentives, clean energy, giants entering the market …These conditions are enough to give birth to batch after batch of mines and new mining centers.

Will China lose its dominance in Bitcoin mining? Due to China's unique advantages in the hardware industry, cryptocurrency mining has risen rapidly. Mining machine manufacturers, mine farms, miners...China covers the entire cryptocurrency mining industry chain. Bitcoin was once called "Chinese currency" by Americans.

On the one hand, it is the encouragement of foreign policies and the rise of local miners, and on the other hand, the transfer of domestic miners to foreign countries. In the future, can China maintain its leading edge?

Attitude of miners: not recommended, but newcomers are welcome

According to Tokenview data, Bitcoin mining revenue reached a new high of $0.209/day/T hash per second on December 29.

But this is far from last year's highest of $0.498/day/T hash per second and 2018's $3.839/day/T hash per second far.

Bitcoin Mining 2020: Wall Street enters the market, mining centers move abroad

For Ethereum miners, 2020 is even more thrilling. With the popularity of DeFi, Ethereum miners earned $295.1 million in August, a month-on-month increase of 98.2%, a two-year high.

In September of this year, Ethereum mining revenue reached $0.103/day/M hashes per second. "The cost can be recovered in one month, and the rest is the residual value income of the machine." Xiaoming, a miner, said.

Bitcoin Mining 2020: Wall Street enters the market, mining centers move abroad

Source: Coinprint Mining Pool

1 On April 4th, as the price of ETH broke through 1100 US dollars, the income of major mining machines also soared. OKpnk shows that the fee income of Ethereum miners is 3% of the block reward (2 ETH). times (6 ETH).

In the past three months, the computing power of Bitcoin’s entire network has fluctuated in the range of 120-160 EH/s. In the past three weeks, the fluctuation range has shown signs of narrowing.

According to past statistics, the price increase of Bitcoin will lead the computing power for about half a year. This wave of bitcoin prices rose in mid-October this year and has so far increased by more than 150%.

Therefore, some organizations predict that the next six months will be the golden period of mining.

Has the golden age of mining really come?

But it is not the case. Bitcoin miner Xiaoming revealed that mining will be more difficult in 2021, because a large part of mining machines and mines are still in a dormant state. When the income rises, it will start up, and then the income will fall.

"Many S9 level mines and mines with slightly higher electricity costs and poor environments are not running. If the income is suitable, they will start to suppress the income." Xiaoming said.

As Bitcoin broke through 34,000 US dollars, the price of Antminer S9 also rose from 110 yuan "scrap iron" to 600 yuan in a month, a 5 times.

"Recently a Russian miner directly placed an order for 10,000 S9s." Xiaoming revealed.

Jiang Zhuoer from the Litecoin mining pool recently said that he still has "a vast number of BTC mining machines, and the S9 alone has nearly 100,000 units to find a place" boot".

But it is still a money-making business, but it is not as profitable as imagined. There is no more sudden wealth, and Bitcoin mining is a sea of red.

Xiaoming's current attitude is: new miners are welcome to enter, but not recommended. "Whether a novice buys a machine or builds a mine, it is good for the old miners. Otherwise, how can there be cheap mining machines when the market is bad, and who will sell the high-priced mining machines when the market is good?"

05 Outlook 2021

Taking Antminer S19 95T as an example, the futures price on the official website is 19,200 yuan , but the lowest over-the-counter transaction price has been fired to 25,000 yuan.

According to media reports, mining machine manufacturers such as Bitmain have scheduled their mining machines for July next year.

Is now a good time to start mining?

For the purchase of new mining machines, the investment of 20,000 to 30,000 yuan per machine is also adding up costs and risks.

"The power consumption ratio of the S19 is so good, I am betting that other people will not follow up with this level of machines." Xiaoming explained that once a machine with a large computing power Invest in it, and the computing power will skyrocket. However, according to the current computing power growth and currency prices, he expects to be able to pay back in one year, "the remaining machines are considered profits."

On the other hand, the technological improvement of mining machines has less influence on the industry, and the iterative energy consumption of mining machines before S9 has more than doubled.

As far as Ethereum miners are concerned, the average payback period for buying graphics card machines at this moment is about one year. According to Wu, there are still more than 10 mining machine manufacturers manufacturing new Ethereum mining machines, many of which are ASIC machines with large computing power.

Ethereum 2.0 was launched on December 1st. According to the roadmap formulated by Vitapk Buterin, the co-founder of Ethereum, Ethereum 2.0 will be launched in the next five to ten years. year to achieve.

The technological iteration is no longer rapid, and the payback period is longer, which is precisely the premise of the institution mentioned in the second part to enter the market.

In the early days, Bitcoin mining did not require complex and high-performance equipment, as long as a personal computer CPU was used to mine Bitcoin, and with the Bitcoin network The expansion of computing power, the increase in computing power, and the rising cost have eliminated generations of miners.

In the next few years, as the Bitcoin halving process advances, Ethereum mining machines will gradually shift to POS, and miners will be able to mine less and less cryptocurrency , And in this increasingly small world, what miners can hope and expect is that the currency price will maintain the status quo or continue to rise.