shutdown

Halve, shut down.

In the early hours of May 12, Bitcoin completed its third halving. At the same time, Sichuan bitcoin miner Wang Baoguo turned off a large number of his mining machines.

Most of these mining machines are Antminer S9 launched in 2016.

In the mining circle, Antminer S9 used to be the king of the generation, accounting for 70% of the computing power of the entire network, but today's S9 is withdrawing from the stage of history.

According to F2Pool data, under the electricity fee of 0.3 yuan per kilowatt-hour, the electricity fee of S9 accounts for as high as 140%. This means that if the S9 is turned on for one day, the miners will have a net loss of 2.67 yuan.

"Now, only when the currency price rises to 15,000 US dollars, can mining with S9 not lose money." Wang Baoguo said.

A month ago, he started looking for buyers for the batch of S9s in his hand, but no one has taken over so far.

"In the past, even if there was a mining accident and the price of the mining machine plummeted, some people would still buy the S9. Most of the people who bought it were the bosses of large mines. When the currency price recovered, they could dig it themselves or sell it to others to make a difference. "Wang Baoguo said.

But this time, S9 has almost no hope of turning over. "Unless the currency price can rise to 20,000 US dollars this year, hyping S9 is a dead end."

Also in Sichuan, mine owner Zhou Wenbo sold his mine.

In 2018, Zhou Wenbo entered the mining circle and built his own mine in Yibin, Sichuan. At most, his mine had 8,000 mining machines roaring day and night.

However, just a week before the Bitcoin halving, he sold the mining farm. "Even the transformers were sold, 6 sets, a total of 600,000."

The buyer who took over the mine was unwilling to buy his second-hand mining machines, such as Antminer S9, Avalon 852, and Innosilicon T2.

These mining machines are the main models in the mining circle from 2016 to 2018, with a computing power between 13T-17T. But in the current mining circle, they are all outdated.

According to F2Pool data, even with the low electricity cost of 0.25 yuan/kWh, these three types of mining machines have all reached the shutdown price.

"This is halving." Wang Baoguo said, "The cost of electricity remains the same, and the income is directly cut in half. Mining machines that were profitable yesterday are losing money today."

After the halving of Bitcoin this time, it is far more than the above three types of mining machines that have reached the shutdown price.

According to F2Pool data, as of May 14, based on the electricity cost of 0.35 yuan/kWh, 45 types of mining machines have reached the shutdown price, accounting for 49% of the total number of mining machines.

Among them, there are many star mining machines newly launched in the past two years, such as Bitmain’s first-generation 7nm mining machine Antman T15, and Canaan’s main model Avalon A1066 in 2019.

Even the ant S19 Pro, which currently has the best energy consumption control and sells for as much as 20,000 yuan, accounts for as much as 48% of the electricity bill. Based on this calculation, the payback period of this mining machine exceeds 600 days.

When mining becomes unprofitable, the computing power of Bitcoin's entire network will naturally fluctuate.

Bitcoin block data shows that since 3 am on May 12, the speed of Bitcoin block production has dropped significantly.

In the first 24 hours after the halving, the Bitcoin network produced 137 blocks; in the second 24 hours, the Bitcoin network produced 132 blocks. Seven days before the halving, the Bitcoin network produced 180 blocks per day.

According to data from BTC.com, if the speed of Bitcoin’s block generation is used as a reverse parameter, the estimated value of Bitcoin’s entire network computing power on May 14 is 95EH/s, which is a drop compared to 115EH/s on May 5. 17%.

"This halving is too cruel for the mining industry." Zhou Wenbo said.

Survive

Facing the halving, miners began to struggle to survive.

In the mining circle, when there is buying, there is selling. Zhou Wenbo sold the mine, and Wang Baoguo sold the mining machines. So, who will take over or may take over their business?

Wang Baoguo said that before the halving, the price of a second-hand S9 was around 200 yuan, but after the halving, it fell to around 100 yuan, which is directly halved.

He revealed that although the S9 is extremely difficult to sell, there are indeed people in the mining circle who are taking over the S9.

Most of the receivers are the owners of large mines.

Their purpose is to use the cheap S9 to fill the "base load".

In Sichuan, Yunnan and other places, when many mining farms cooperate with power plants, they will agree on a base load, that is, a certain amount of electricity must be used up every day—even if it cannot be used up, the mining farms must pay according to the contract.

"It is extremely difficult to attract investment in mines this year. Many new mines can't find miners at all, and they can't even fill the basic load. In order to fill the load, some mines may receive a small amount of S9." Wang Baoguo said.

The other direction of S9 is the miners who use "free electricity" to mine.

"The use of 'free electricity' for electricity stealing and mining, but now, 'free electricity' refers more to mining with 'abandoned hydropower'." Chen Hanping told a blockchain.

Abandoning water refers to letting the water that should have been used for power generation flow away in vain; using abandoned water to generate electricity is abandoning hydropower.

The causes of abandoned water are very complex. In most cases, the abandonment of water is due to the imbalance between supply and demand of electricity, that is, too much electricity is generated and too little electricity is used, and hydropower resources are wasted in vain.

Obviously, Bitcoin mining can solve this problem.

"Some mines in Sichuan and Yunnan have a hydropower background. For them, mining with abandoned hydropower is equivalent to using free electricity." Yu Ming, the owner of the Yunnan mine, said.

Today, the predicament brought about by the halving of Bitcoin production is making many miners tread on eggshells.

"I sold the mine before the halving. I was lucky. After the halving, the situation of the mine will be even more difficult, and many mines will not be able to recruit customers." Zhou Wenbo said.

He explained that in terms of computing power, old mining machines such as S9 do not account for a high proportion of the computing power of the entire network; however, in terms of the number of mining machines, they still have a large amount in the mining circle. The old mining machines were out, and the mine lost nearly half of its customers.

However, even miners with powerful machines are in a tough place right now.

"Our mining farms are almost all machines with a large computing power of more than 50T, but now they can only run in low power consumption mode." Yu Ming said.

In low power consumption mode, the computing power of the mining machine will drop, but the power consumption of the mining machine will drop even more. "The miners earn less, but they spend even less on electricity bills." He explained, "This is also one of the miners' winter means."

Compared with small and medium-sized miners, large miners and mine owners are more able to survive the winter: in the wet season, small and medium-sized miners get a managed electricity price of about 0.35 yuan per kilowatt-hour, while large miners and mine owners get electricity from power plants. The electricity price obtained is often below 0.25 yuan per kilowatt-hour.

If the big miners can get the electricity price of 0.2 yuan per kilowatt-hour, even if they use the old S9 mining machine to mine, it will still be profitable.

Recently, a mysterious "roadside mining pool" (lubian.com) appeared in the mining circle, and its computing power once reached the top five in the entire network. The outside world speculates that this mining pool is likely to be jointly established by several large mines and large miners.

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Roadside mining pools now rank sixth Source: BTC.com

"Self-built mining pools can save about 3% of mining pool commissions, which may also be one of the self-help methods for big miners." Yu Ming said.

But at the same time, he admitted frankly that at the moment, the big miners are inevitably anxious.

"Based on the current currency price, electricity price, and mining difficulty, even with the latest mining machines like S19, it will take at least 500 days to pay back. What will happen in these 500 days? No one can say."

Faced with uncertainty, miners mostly choose to wait and see.

"Now we continue to attract foreign investment, and our own machines will not be shut down or sold, so we will remain on the sidelines," Yu Ming said.

secondary title

future

A number of people in the mining circle told Yiben Blockchain that they need to pay attention to the leverage issue in the mining circle.

"Now that the mining circle has become financialized, many miners not only do hedging, but also use various mortgage loans to expand investment. Excessive leverage may make some miners lose their positions." Zhang Heng, a miner, told a blockchain.

In the mining industry, the miners' income is Bitcoin, but the cost is paid in the form of legal currency. Some miners are staunch coin hoarders, reluctant to sell coins, but choose to mortgage bitcoins to obtain loans to buy mining machines and pay electricity bills.

In other words, miners are overdrafting the future earnings of Bitcoin to pay for today's expenses.

In this regard, the American blockchain media Decrypt has thrown out a point of view: after the Bitcoin production is halved, the United States may replace China and become the global mining center.

In recent years, the mining industry in North America has indeed been on the rise. In the past two years, blockchain companies Blockstream and Data AG have entered the United States for mining. The scale of their mines has reached 300MW, which is equivalent to the size of a medium-sized thermal power unit.

"The two major advantages of mining in North America are cheap electricity prices and clear laws. The annual electricity price of our mine is 2.5 cents per degree, which is less than 20 cents in RMB, which is similar to the electricity price in Sichuan's high water season." Mining in the United States Mark, a Chinese miner at the mine, told a blockchain.

Decrypt noted that Chinese miners are more leveraged than those in the United States. After Bitcoin is halved, the income of miners will be halved, but costs such as electricity bills will remain the same.

This means that, one day, the money borrowed by miners to mortgage Bitcoin will not be enough to cover costs such as electricity bills.

In addition, if Bitcoin plummets, over-leveraged miners may "crash".

However, some people do not agree with Decrypt's point of view.

Yu Ming pointed out that increasing leverage is not a common phenomenon in Chinese mining circles. In recent years, some new miners with a large amount of capital and backgrounds in electricity and manufacturing have entered the mining circle. Compared with old miners, they have less leverage.

The policy environment of China's mining industry is also improving. Recently, the governments of many places in Sichuan have held symposiums or issued documents, and began to give mining farms "names" in the name of the blockchain industry to guide mining farms to absorb hydropower, especially to abandon hydropower resources.

There is no doubt that after the halving, the Bitcoin mining industry will inevitably fall into a period of downturn.

After the halving of Bitcoin, the computing power of BCH and BSV has rebounded, but it still has not returned to the level before the halving.

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Source of recent BCH computing power: Tokenview

"With a few more halving cycles, there will be fewer and fewer BTC miners." Zhimi University founder Liu Changyong wrote on Weibo.

"For Bitcoin, this halving is a milestone." Block Ledger co-founder Mehmood said on Twitter, "The 'children' have grown up and no longer need to be raised by amateur players. Institutional mining will Will rise, even the most die-hard small miners will fall into crisis. The future will be more interesting."

On January 3, 2009, in the genesis block of Bitcoin, Satoshi Nakamoto recorded the headline on the front page of The Times that day: "Chancellor on the verge of implementing a second round of bank bailouts."

In the early hours of May 12, 11 years later, someone recorded the title of the New York Times article on April 9 in the last block before the Bitcoin halving: "Injection of $2.3 trillion, the scale of the Fed's bailout far exceeds Year 2008."

This move is considered to be a tribute to Satoshi Nakamoto. In 11 years, time flies, and digital currency has grown from scratch, with ups and downs.

But everyone knows that for Bitcoin, a new era has begun.

* Some interviewees in this article are pseudonyms.