New knowledge | in the chain of energy waste and a graphics card is hard to find, is a digital currency mining hot behind the original sin?

On the evening of March 11, "New Knowledge on the Chain" will officially launch the second edition of the column, the theme is "Can't buy graphics card, is it really cryptocurrency mining to blame?" Song Shuangjie, CFA Doctor of Economics and Duke University Co-training Doctor, Meng Xiaoni, CEO of BTC.com, were invited as guests. Zhang Shuhao, Executive Editor of Ru Blockbeats, hosted the guests.

  The following is a condensed transcript of the dialogue:

Host Zhang Shuhao: Last time we talked about bitcoin, this time to talk about mining, mining this thing is very interesting, we invited BTC.com CEO Meng Xiaoni and Duke University joint training doctor Song Shuangjie Song teacher.

Meng Xiaoni: Hello, everyone. I am Meng Xiaoni, CEO of BTC.com. It is a great honor to be invited by Tencent Financial Chain News Live Studio. Today, I'd like to talk with you about the recent hot bitcoin and a topic in the digital currency mining industry. I'd like to take this opportunity to introduce BTC.com to you. BTC.com is the world's leading provider of multi-currency mining pool data query wallet service. We are also committed to providing users and enterprises around the world with efficient and professional blockchain products and services.

2020 年我们的矿池业务服务的用户产出比特币数量超过万枚。区块浏览器目前是全球前三，中文社区最大的区块数据服务平台。我们也提供多维的数据统计的查询服务，以及为 B 端、C 端客户不同的需求提供一系列的 API 定制数据服务。现在也跟多个国际数据中心建立了合作，为行业共同输出具备深度的研究报告，2020 年我们和剑桥大学合作输出了《第三届全球加密资产基准报告》。

Host Zhang Shuhao: Song teacher you do a self-introduction.

Song shuangjie: my name is song shuangjie, I am very glad to participate in this new knowledge on the chain organized by Tencent news knowledge officer column. I have a PhD in economics from Shanghai University of Finance and Economics and a PhD co-trained by Duke University in the United States. I have passed the CFA exam, and have been engaged in investment research and asset management in traditional institutions such as Southern Fund, Guotai Junan, and Oriental Wealth Network. In 2018, I came out from the Southern Fund, engaged in the start-up of blockchain and Internet, and now I am also helping some funds with close to 6-digit Bitcoin assets and helping them with some asset management.

Our company's video number "investment research Shuangjie" in the whole network play volume on the block chain is very high. About Blockchain video one-on-one hit up to nearly 50 million playback, pihotlinkingd and BBB1 a lot. You can pay attention to our "investment and research Shuangjie" account.

ZHANG SHUHAO: Thank you very much, Mr. Song and Mr. Meng. Let's move on to today's topic of mining. As an industry participant, I can clearly feel that there is a little bit of separation between mining and Bitcoin secondary market investment.

Mining is a whole other field. Investors don't know how miners live. How do they dig? Some people even think of it as physical mining. Boss Meng, can you simply explain to us what is digital currency mining?

Meng Xiaoni: In the past, there were indeed many people who would associate digital currency mining with the realistic picture of gold and oil mining. I think this metaphor is pretty vivid. Because it's intuitive to understand the value of this revenue from mining, putting in some infrastructure, he's going to get a commodity with a rising value or this revenue. In simple terms, digital currency mining is just like the reward mechanism of a certain chain block, but it can also be understood as the deep or release mechanism of digital currency.

There are two main mining modes in the market:

The first is to purchase relatively advanced mining machine equipment and fight for the accounting right through specific algorithms, which is also called PoW mining with proof of work mechanism. The mining of Bitcoin and Ethereum through ASIC mining machine that we are familiar with belongs to PoW mining.

The other is to hold a digital currency as a pledge or obtain new interest by a certain action, which is also a new digital currency. This is called the mining of POS Proof of Interest mechanism. For example, some blockchain projects give users an incentive to issue their own digital currency by periodically pledging Ethereum or other certain digital currencies, which is POS mining.

Whatever it does, it gets incentives on the order of digital currency, which miners can trade for explicit returns in liquid markets, or invest in their own safe-haven investments, to put it simply.

Host Zhang Shuhao: What we are going to talk about today is what you just said about PoW. A few days ago, Bill Gates made a lot of remarks about Bitcoin. In one of them, he mentioned that Bitcoin is a waste of energy. Bitcoin allocates power to a natural resource, namely electricity, and mining Bitcoin is quite electricity consuming. There are also people to steal electricity mining. Mr. Song, what do you think of Bill Gates' idea?

Song shuangjie: let me talk about my own point of view, it is divided into three levels.

The first Bitcoin has only been around 11 years since its inception, and we shouldn't measure a new technological breakthrough using a very old framework. If we do not look at new things from the perspective of development, we will not see the subversive power of new things. For example, when cars were first invented, they could not run as fast as horse-drawn carriages. Now let's see, can we still see carriages in the street? Just now, Bitcoin is a technology that has had some disruptive effects. Bitcoin, for example, accounts for 70% of global annual cross-border remittances at less than a tenth of the cost of bank litigation, which is highly efficient and energy efficient.We can't look at new things in the same way we look at them now.

        Second, we're talking about the amount of resources that Bitcoin consumes, and Bill Gates is right, it consumes a lot of electricity. But we can see that there is a term called carbon neutral, and by carbon neutral we don't mean you don't use energy, we mean you use clean energy.比特币挖矿消耗的能源，绝大部分是清洁能源，符合现在我们所倡导的 ESG （ 环境、社会、治理 ）理念Only such things are good things.

Let's talk about a few sets of data. According to our statistics, 73% of the energy used for global digital currency mining is renewable energy. Sichuan's computing power accounts for 54% of the global computing power, and more than 90% of the electricity used for mining in Sichuan is clean energy. What happens when a lot of hydropower goes to bitcoin mining? It brings local jobs and boosts local economic growth. It also helps the local poor people and gives them a better living environment and living conditions. I don't see any harm in Bitcoin mining with clean energy.

Third, even at the current level,We can see that bitcoin is more environmentally friendly than paper money or gold.During thousands of years of human history, the invention of the currency is very great, what currency medium, mainly depends on the physical, such as copper, silver and even gold, has been in the back like a silver ticket, jiaozi, like gold has a large number of mining, mining, refining, processing, transportation, storage, casting, the process of issuing. In this process, a lot of manpower, material resources and energy need to be consumed. Even the paper money also has the links of printing, circulation and destruction.

Bitcoin is a purely electronic calculation and issuance, circulated peer-to-peer in the online world, and settled automatically, which saves a lot of labor costs, so it is very efficient. In comparison, the overall energy efficiency of Bitcoin is much higher than that of the traditional currency system. In total, there is actually an estimate that the traditional bank consumes 2.34 billion joules of heat every year, the gold industry consumes 500 million joules of heat every year, and Bitcoin only consumes 184 million joules of energy.

So we've talked about three levels, and the last thing I want to talk about is, do we think we're polluting the environment? No, the world's PlayStation 4 consumes 27 billion kilowatt-hours of electricity a year, while Bitcoin mining consumes 124 billion kilowatt-hours.

That's my opinion,Personally, I think the contribution and value created by Bitcoin as a whole is far higher than the energy it consumes, and this energy source is also clean energy, which is in line with our concept of clean energy.

ZHANG SHUHAO, HOST: Thank you, Dr. Song. What does boss Meng think?

Meng Xiaoni: Song teacher spoke particularly well, I share a few more relaxed topics. During the Spring Festival, I happened to see a tweet from a well-known financial blogger in the United States, which roughly read: A private jet will produce an average of 6 tons of carbon dioxide per year. In 2019, there will be about 450 private jets flying in the United States, producing 27 million tons of carbon dioxide, which is 20% more than bitcoin mining at that time. The tweet says we should ban all private planes.

This tweet is satirizing the statement that "Bitcoin mining is a waste of resources". It is a negative attitude. Personally, I would argue that, first of all, the nature of the existence of resources is to be used. In fact, a lot of consumption is inevitable. Bitcoin mining can be regarded as a part of the infrastructure of the blockchain industry. Through continuous development over the years, it has possessed a relatively clear value.

The first kind of value,It accelerates the digital development of the global monetary systemAt present, in the face of the challenge of the digital currency represented by Bitcoin, central banks around the world have actually accelerated the research and development of their own digital currencies as an important raw material for the creation of new financial products.

Second,Bitcoin offers asset allocation options that are less correlated with current traditional investment targetsIn this context of macroeconomic redundancy, Bitcoin has a certain inflation-resistant property. For investors, there is a value in asset allocation and a willingness to invest periodically. Back to the use of mining resources, just now Mr. Song mentioned the rational reuse of water and electricity. The surplus that cannot be used for other consumption and production realizes the value transformation, which is also a relatively economic utilization of resources. Looking at the longer term, I do think green energy mining may be a future trend.

Zhang Shuhao: To put it simply, we can't simply look at what bitcoin mining has consumed. We should look at what it has brought. Next, I would like to ask that Bitcoin miners are now basically choosing mining machines as tools. Many people think that mining is very profitable (it is indeed very profitable now because of the high price of Bitcoin). However, do the two teachers have personal experience or friends' stories about mining and stamping pits?

Song shuangjie: the story that trample pit is quite much, I say oneself individual personal experience. When I was a student in 2013, I participated in the trading of Bitcoin. Later, I also hoped to transfer the trading from the secondary market to the primary market in a more advanced process. At that time, there was no professional ASIC mining machine, but only FPGA mining machine. Personally, I was cautious and did not participate in the pre-sale of the two kinds of mining machines. Instead, he cashed in his cash and bought 12 Nvidia 790 graphics cards.

I remember that I bought three different graphics card models and installed them on the motherboard to assemble two graphics card miners. At that time, I mainly mined Bitcoin, Litecoin, C Coin and Dogecoin. Like the C coin has disappeared, at that time also made some money. What does this experience tell me? You have to participate in some things as soon as they come out, and in the process of participation, you can study. When you have a clear study, it may be too late to play again.In the process of participating in new things, we must pay attention to their cash flow, do not borrow, in order to avoid some problems.

Mining itself is not very risky, but mining is definitely not a very risky thing.And that risk I think comes fromHumanity,The greed and fear of human nature make the miners behave in a distorted way. They become what I call "Pavlovian dogs", trying to maximize their profits.

The reason why we can see a lot of people lose money is, he is at its highest level in the market to snap up the futures mill, but if the price of the mill from high to low, spot, you still can't get you to buy that kind of futures mill, cash to your hands to take mine machine, the highest point on the market a lot of people may leverage, capital use high. Got the mill, however, have no money to pay the electricity bills, only in the mill high flange, even cannot afford the prices at low pressure, the mill in the low post moves in the past, in the process, he didn't put any COINS, this creates his high flange, low, caused her fear and greed, caused the very lose money buying and selling.

There are so many stories like this that I won't get into them. There's another one that we think isRisk at the operational level, or risk at the target level. In comparison, I personally think the price of Bitcoin is long-term bullish, as long as everyone insists, should still be able to make money. This is the industry story I see.

Host Zhang Shuhao: Thank you for sharing from the perspective of humanity teacher song, boss Meng side, have a similar story of the pit?

Meng Xiaoni: This question kind of touched me. Last year, the mining machine of our company was stolen. Although we are a very professional platform, we have all encountered such a pit. It can be imagined that what kind of risks ordinary investors will face.

Traditional mining focuses on asset operation, which includes the selection of mining machines, logistics transportation, mining plant selection, electricity price negotiation, operation and maintenance and a series of links. In such a long chain, there are many unknown risks. If we do not have sufficient resources of this kind, problems may arise. Mining was a safe bet when it was a niche market, but now it can easily lose money if it gets it wrong. So now we go to participate in mining, choose their own mining method is also key. If there are customers with rich industry experience, high-quality mines and power customer resources, I still advocate that they can buy mining machines for mining. In the long run, the profits will be very high.

Most people do not have such resources and the ability to predict future returns. If you look at mining as a simple financial investment, I think risk management is the most important thing for everyone. For ordinary users, if they want to participate in the mining industry platform, I suggest that it is more appropriate to choose a professional and safe mining service platform to enter, and the platform to complete the cumbersome procedures. Users only need to invest money, and it is very convenient for them to participate. In fact, the final profit is quite considerable.

ZHANG SHUHAO, HOST: The next question is interesting and also related to the stock market. During the whole year of 2020, the Nasdaq in particular was very hot, because the rise of Bitcoin caused the stocks of technology companies related to Bitcoin or related to Bitcoin mining on the Nasdaq to rise. For ordinary users, is it better to invest directly in Bitcoin or to invest in some companies related to mining and mining machinery?

Song Shuangjie: I have a long-term research on the stock market and have been engaged in investment research for a long time. Like The9, because of the injection of Bitcoin mining business, and even the expectation of injection, the stock price rose nearly 30 times in less than half a year. Let me explain in terms of economics and finance why the shares of mining companies have skyrocketed. What's the logic?

Shares of U.S. mining companies are multiples of Bitcoin. Let's say the volatility of Bitcoin is 10. Let's assume that taking into account the secondary demand, and assuming the amplification effect of bitcoin demand is 3 times, then the VIX of the industry from upstream bitcoin mining will go up to 30 times, because 10 times 3 is equal to 30.

The financial market also has a magnifying effect on the industry. The stock market is not only speculation on the fundamentals, but also a beauty market in which you have to put expectations according to what our economic masters say. Given the expansion of the two markets, price increases and profit growth, the expected fluctuations have magnified the effect. We believe that the financial market is more than three times the amplification effect of the production of Bitcoin, 10×3×3, and the expected price volatility of US stock mining companies is 90. In other words, the price of Bitcoin will fluctuate by 1, and the price of stock will fluctuate by 9, which is the magnifying effect brought by double multiplication.

Through the transmission of demand to supply to the financial secondary market, the price fluctuations of mining companies far exceed the price fluctuations of Bitcoin. Let's take an example. The price of Bitcoin started around October 2020. The price rose from $10,000 to the current $55,000, which is nearly 5.5 times higher. During the same period, the price of the ninth city rose from 3 dollars to nearly 90 dollars, a 30-fold increase, which is the perfect embodiment of the amplification effect.

The price of the stock will rise more than the price of Bitcoin. Doesn't it sound exciting and easy to make money? You should be aware of the high volatility of Bitcoin price. Let's emphasize the risk again. All bitcoin investments are made without leverage.

And logically speaking, the price of mining machine company fluctuates more, maybe its adjustment range is 90% to 99%, 100 yuan may go into the low point is almost zero, so considering the risk tolerance, I personally choose to still (invest) bitcoin, I compared to one day it will definitely rise.

If you're investing in stocks, you're exposed to more risk, not just from the price of bitcoin, but from governance. The price of Bitcoin I see little risk of going to zero, only down; The stock price of Bitcoin stocks, the companies that mine Bitcoin mining, is at risk of being delisted to zero. This is my choice, and it is also to provide you with a share.

Host Zhang Shuhao: thank you song teacher, boss Meng?

Meng Xiaoni: In terms of investment compliance, there is no absolute good or bad in these two ways. Because investing directly in bitcoin, whether through mining or buying coins, is an expectation that bitcoin's value will rise. Invest in the stock of this mining company, the operating operation behind the investment: you are optimistic about the future of the company, it focuses on the company's operational strength and capital operation ability expectations.

The penetration of the stock market in people's life is very strong. From the perspective of the threshold and magnitude of participation, it will still have a significant ability to expand in the future. Which specific way to choose? I think it's important to look at personal risk appetite and expected return. The most critical link in any investment must be risk control. We should not always look at the highest expected return, but see how much risk we can bear.

I also prefer to invest in Bitcoin directly. It is easier to set an investment cycle, choose an investment method suitable for myself, and sell regularly and quantitatively after reaching the expectation. Historically, the Buddha-like effect of holding coins, through continuous mining, to accumulate the coins, now to sell, the yield is very considerable.

Shuhao Zhang: Bitcoin is a more optimistic asset that can be held for the long term. Graphics card has been a hot topic since last year, many people said that a card is hard to find. There are reasons for mining, of course, but many people think bitcoin mining is done with graphics cards. The bosses can explain that graphics card mining is not Bitcoin mining, and that the shortage of graphics cards is not entirely due to mining.

Mr. Song: Bitcoin mining is no longer possible with a graphics card. When I used my graphics card to mine in 2013, I didn't mine bitcoin either, because the percentage I could cut was too low.

As a professional Bitcoin mining machine, it actually has a problem that it will compete for OEM capacity with Taiwan Semiconductor Manufacturing Co., Ltd. If the Bitcoin market comes up, professional mining machine manufacturers will contract out the production line of TSMC, causing Nvidia to produce more graphics cards, but not enough capacity, which will squeeze the production capacity of graphics cards.

At the peak of the market in 2017, Bitmain, TSMC's largest contract manufacturing demand side in China, took the first place. Bitmain was TSMC's largest customer, and the squeezing effect was very obvious. On the other hand, digital mining like Ethereum still relies heavily on graphics cards. Teacher Meng also introduced, or PoW mode, is dependent on the graphics card to excavate, which will form a direct demand for graphics card. Now if you go to assemble a graphics card mining machine, about two months can pay back the cost, resulting in a lot of people are still frantically in the market to buy graphics card, will indeed form a squeeze effect on the so-called graphics card. I think [the need for mining and the difficulty of getting graphics cards] is going to create some competition, that's my personal opinion.

Meng Xiaoni: I may have a slightly different point of view from Mr. Song. The shortage of graphics cards is still affected by the epidemic last year. The global supply is relatively tight, and the production capacity of graphics chips is insufficient. As Nvidia's chief financial officer explained a while ago, graphics cards will be out of stock this quarter, whether there's a mining surge or not. Nvidia's supply chain is limited. GPU foundry and video memory chips are in short supply, so the shortage of graphics cards is fundamentally at the source, and mining is just an external cause. Another external factor is that Nvidia's RTX30 series gaming graphics card is actually one of Nvidia's most successful gaming graphics cards to date, and it's fueled gamer demand at the same time.

Now Nvidia and AMD have announced that they will provide professional mining cards for the mining industry in the future. We believe that with the separation of professional mining cards and the addition of chip supply chain capacity, we can foresee that the problem of graphics cards will be solved better.

Zhang Shuhao: The next question is that the two bosses think it is better for ordinary users to invest in Bitcoin and buy coins in the secondary market. Or is it better to go and mine in the so-called primary market?

Song Shuangjie: My suggestion is quite simple, because considering the ease of operation,Secondary markets are a little bit simpler. Just go buy bitcoinThe price of Bitcoin is still an asset with high volatility, so we must pay attention to the risks we face.

It's also an option to get bitcoins at source, and the logic of mining might be easier to understand. The logic of mining is not extended. In view of the global release of water, I want to say the slogan,The biggest risk of a bubble, in this global environment of flooding, is that you don't actually participate in the bubble.Finally, just pay attention to the risks.

Zhang Shuhao: Thank you very much, Mr. Song, Mr. Meng.

Meng Xiaoni: Since the beginning of this year, there are generally two situations in which Bitcoin has become a hot search. The first situation is that the price of the currency has broken through a record high. The other is information about massive contract implosion by hourly users. The data on the market is more intuitive to verify our problem, ordinary users suitable for speculation currency?

In fact, most of the ordinary users are not suitable for coin speculation, and fewer people can make money through coin speculation. From the perspective of opening time dimension, Bitcoin is a long-term rising market, and frequent short-term operations are not as simple and efficient as holding coins. If you choose mining, it is equivalent to buying a bullish period of bitcoin. In this process of rising, mining may enjoy relatively large gains, and short-term price fluctuations do not have much impact on miners' returns. When the market rises, it shortens the cycle for miners to return to their mines, making overall profits more profitable. At the appropriate time to reduce the position, every day to dig out the currency can also ensure a certain stable cash flow. In contrast, I personally recommend that you choose a compliant platform.

Host Zhang Shuhao: Thank you very much, teacher Meng, just now I still think Meng said that the secondary market on most of the investment and most of the users are not suitable for trading, I have deep feelings. I have not been involved in mining myself, including computing products, so it is a better choice to hold the assets of Bitcoin for a long time than for a short time. I also agree with the views of two teachers. Thank Mr. Song and Mr. Meng very much for coming to the second phase of the new knowledge on the chain, which brings you a lot of ideas to share. That's the end of the new knowledge on the chain column.

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