At the close on December 27, Canaan Technology’s share price was US$5.58, a 38% drop from the issue price of US$9.
The previous three IPOs have hit a wall. Canaan Zhizhi, which was successfully listed on November 21 this year, has sold 90 million US dollars of US stocks. In the first 17 trading days, except for 4 trading days, the stock has fallen at other times.
And research firm TradeBlock also wrote in a December report that “Bitcoin miners are facing a challenging environment, and their stock prices are falling.” Industry executives also said that large manufacturers of bitcoin mining computers are experiencing sluggish sales state.
And this downturn may be due to China's current regulation of the virtual currency mining industry. At present, many places in China have successively launched crackdowns on the virtual currency mining industry.
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China's virtual currency mining industry suffers another "four combos"
At present, China's supervision of the virtual currency mining industry has gradually rolled out.
Just today (December 27), the Ganzi Tibetan Autonomous Prefecture of Sichuan Province held a "Statewide Bitcoin Mine Clean-up Work Symposium". The person in charge of the company participated in the meeting and expressed his opinions on the clean-up work of the Bitcoin mine.
On December 24th, Ganzi Tibetan Autonomous Prefecture also disclosed in a notice that it would issue the "Work Plan for Cleaning and Regulating Bitcoin Mines in Ganzi Prefecture".
On the same day, the People's Court of Dantu District, Zhenjiang City opened a court hearing in accordance with the law in Zhenjiang's extraordinarily large "mining machine" case of stealing electricity and mining bitcoins. The principal offender was sentenced to a maximum of 13 years in prison; Continue to carry out special operations against electricity theft crimes. Police in Tangshan, Hebei confiscated 6,890 Bitcoin mining machines during the operation; according to blockchain media, on the morning of December 18, the Shenzhen Mutual Finance Rectification Office held a special rectification meeting on illegal virtual currency activities. At the meeting, an interview was held with Shenzhen Internet Online Information Technology Co., Ltd., a "mining tycoon".
Since the five ministries and commissions of the Inner Mongolia Autonomous Region issued a notice to clean up and rectify virtual currency mining in September this year, China's mining industry has been in a "regulatory season", and it has encountered "four combos" in December.
And this continuous strong supervision will to a certain extent have an impact on my country's mining ecology and global Bitcoin computing power.
At present, not only Bitcoin manufacturers such as Canaan Zhizhi are in a downturn, but the domestic mining machine trading market is also in a downturn. At the end of October, there was good news in the blockchain field, but the Daily Economic News visited Huaqiangbei on the spot and said that the good news did not bring much warmth to the sluggish mining machine market.
According to public data, my country currently holds more than half of the computing power in the world. China accounts for 66% of the global computing power, and Sichuan alone accounts for more than 50%. China's regulation of the mining industry and the cleanup of Bitcoin mines will inevitably lead to a decline in Bitcoin computing power.
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The Essence of China’s Regulatory Bitcoin Mining: Denial of Bitcoin’s Currency Attributes
Some people in the industry believe that China should control Bitcoin computing power.
However, the Chinese government does not seem to agree with this view. A deep dive into the root cause of China’s regulation of bitcoin mining reveals China’s attitude towards bitcoin. China does not believe that Bitcoin has the functions of means of circulation, means of payment, and means of storage that currency should have, so naturally it will not want to grasp this "nothingness" thing.
Zhou Xiaochuan, former governor of the People’s Bank of China, said during his tenure that the central bank does not accept bitcoin or any other digital currency as a legal form of payment. Bitcoin and other digital currencies are not yet recognized as tools for retail payments like banknotes, coins, and credit cards.
Mu Changchun, director of the Central Bank's Digital Currency Research Institute, also said that private digital currencies such as Bitcoin and Ethereum, which are often mentioned, are actually positioned as encrypted assets by various international organizations and cannot be recognized as currencies.
And in official documents, China only refers to Bitcoin mining as "virtual currency mining" rather than "digital currency." In China, Tencent's Q currency is a virtual currency.
It can be seen from the above statement that my country's central bank does not recognize the currency attribute of Bitcoin, nor does it believe that it has payment value. In addition, my country does not regard Bitcoin as a means of storage like "digital gold".
The Financial Stability Analysis Group of the People's Bank of China mentioned in the "China Financial Stability Report 2014" that some people think that the emergence of Bitcoin is a huge challenge to the current monetary system, and some even call it "the gold of the future." In terms of attributes, Bitcoin is not a currency in the true sense. First, Bitcoin has no national credit support, no legal compensation and coercion, so the circulation scope of Bitcoin is limited and unstable, and it is difficult to truly play the role of circulation payment means. Second, there is an upper limit on the scale of Bitcoin, which makes it difficult to adapt to the needs of economic development. Third, Bitcoin lacks a central regulation mechanism and is prone to over-hype, resulting in violent price fluctuations, making it impossible to become a denomination currency and a means of circulation. Fourth, Bitcoin is highly substitutable, and it is difficult to be fixed as a general equivalent.
Gold, on the other hand, cannot be copied, modified or destroyed; its price is stable because its value is tied to physical supply. Due to its digital characteristics, Bitcoin cannot achieve the value attribute of gold, so naturally it cannot be regarded as "digital gold".
Therefore, China is not like North Korea. North Korea regards Bitcoin as "digital gold" for foreign exchange reasons. In 2017, many blockchain data agencies detected a phenomenon: the activity of Bitcoin nodes from North Korea suddenly increased exponentially, and the data went from zero to hundreds of times a day. Western media even speculated that North Korea may be using the whole country to mine bitcoins.
It can be seen that China's attitude towards Bitcoin is the fundamental reason for the regulation of virtual currency mining, and the real reason for the triggering of regulation is the "waste of resources" caused by Bitcoin mining and the accompanying crimes of illegal electricity theft.
In 2018, according to the statistics of Shilian Tower Think Tank, the current annual electricity consumption of Bitcoin is 68.08 trillion watt-hours, which is equivalent to 0.3% of the world's total electricity consumption. The global annual mining revenue is nearly 7 billion US dollars, while the mining cost is nearly 3.4 billion US dollars. That is, half of the Bitcoin mining revenue is used for mining costs.
And almost all bitcoin mining is done on coal-fired power plants that have a certain polluting impact. Mining power consumption will produce a lot of carbon dioxide, and the annual carbon dioxide emissions will exceed 30,000, which will cause a certain burden on the environment.
It is also true that in April this year, virtual currency "mining" activities were also included in the eliminated industry. On November 6, the National Development and Reform Commission deleted the virtual currency "mining" activities that were originally included in the eliminated industries. This makes the industry think that the country has started to promote virtual currency mining, but it is not the case, and the government's attitude has not changed. On November 11, the Inner Mongolia Autonomous Region issued a notice on the clean-up and rectification of virtual currency "mining" companies.
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After regulation, cloud computing power mining may become a future trend
Observe China's current definition of the nature of Bitcoin and the regulation of virtual currency mining. In the future, China's mining industry may not focus on POW. Generally speaking, under the POW mining mechanism, the number of bitcoins miners obtain depends on the effective workload contributed by mining. Therefore, the higher the computing power, the longer the mining time, and the more bitcoins you get.
However, mining under this mode often leads to waste of resources, and POW consumes calculations and slow block generation, resulting in slow operation and difficult to effectively promote the development of landing applications.
Therefore, cloud computing power mining has become another choice direction. Cloud computing power is a remote mining mode. Users purchase cloud computing power contracts through the platform, lease computing power for mining, and obtain regular income. The advantage is that users do not need to have an in-depth understanding of mining principles and various hardware and software, or purchase expensive mining machines, and do not need to maintain 24 hours by themselves. They can participate in mining as long as they place an order, similar to purchasing income rights products.
Recalling the initial Bitcoin mining, it was the era of "everyone can mine", but with the development of the industry, specialization and scale are inevitable. The form of cloud computing power mining can just lower the threshold of the mining industry and make the industry a field that everyone can participate in again. Therefore, this direction is in line with the trend of future business development.
And the trend of developing towards cloud computing power is also in line with the government's attitude of encouraging the application of the blockchain field. At present, the POW mechanism requires a long period of time to reach a consensus, so this mechanism is not suitable for commercial applications, and it is difficult to promote landing applications.
