China is slowly recovering from the Covid-19 epidemic, and businesses in the country are also slowly recovering. Yet bitcoin mining, although initially resistant to viruses, has suffered and could be much more painful.
This is partly because of quarantines, manufacturers of mining platforms, such as Beijing-based Bitmain and Shenzhen-based MicroBT, were unable to ship new equipment to mining operations, which are mainly found in the northwest of the country (where hydroelectricity is abundant). Coindesk says hiccups in the supply chain could have stalled BTC’s hash rate last month.
The delivery time for the 7-nanometer chips from the Taiwanese manufacturer TSMC was independent, but also problematic. The strong demand from Apple and Huawei pushed the chip maker to postpone its delivery from 2019 to the beginning of 2020. The new chips are denser, more powerful and require less power, and are in great demand by miners.
The elephant in the waiting room
But as things resume their normal course, the miners face a larger elephant that persists in the waiting room: the so-called “mining disaster catastrophe”. The term refers to a scenario that many believe will lead to the massive closure of many small-scale mining operations in China.
If the price of bitcoin remains stable or continues to fall, mining becomes less profitable, putting unbearable pressure on independent miners and small operations. This comes at a time – the “halving” scheduled for May 2020 – when miners will want to switch to these 7nm chips to handle the more complex and demanding computational proof of work.
It sounds like a perfect storm for everyone except major mining operations. The virus and its consequences surprised many miners by surprise. Those who haven’t upgraded enough earlier are now facing dire consequences. Some observers say that this collective upgrade will lead to a mining disaster for many farms, which are still recovering capital costs from the purchase of their old mining platforms. Worse still: the block’s new chips also increase hashrate, which makes it more energy-consuming for the old ones to exploit BTC.
Oldie but goldie: AntMiner S9
Naturally, some observers say that a mining disaster can be avoided.
“Even if the price goes down, the miners won’t lose everything,” said Dan Li, co-founder of XSJ Mining, a mining farm in northwest China. He estimates that sophisticated miners have recovered their infrastructure costs over the past 3 years, the effective life of the 16nm chips. They should therefore be able to afford to remove obsolete equipment.
Li thinks that mining is like any other energy storage business. While miners are affected by short-term price fluctuations, the more experienced understand that to be truly profitable, you have to be there for the long term.
“If you look at most energy projects, they have a 20 to 30 year horizon. The reason is that, compared to token trading, mining provides a stable cash flow, as long as the risks are properly mitigated, “said Li.
Likewise, new financial instruments, such as Bitmain and Canaan derivatives, protect sophisticated miners from complete disaster. The digital investment bank DAG Global offers miners innovative ways to cover fluctuations in the hashrate. (Although the miners’ derivatives market is still immature and no one yet knows if there is enough cash.)
The essential
So what should we do with it?
I’m still pessimistic that little guys can survive. It’s analogous to the way whales control crypto markets, with small retail investors playing. Likewise, the miners react to the market rather than control it. Their fate is often determined by the price of electricity they have successfully negotiated. Meanwhile, large mining operations and machine manufacturers are moving the market. Bitmain, for example, sells not only platforms but also token mines using its latest machines before placing them on the market.
By the time retail miners enter the field, it may only be fresh leeks waiting to be cut by the big miners.
Top 3 of the other events which occurred last week:
# 1. FTX Seeks Strategic Investors As It Rises To Be The Next Unicorn
There are 451 unicorns in the world, according to CBInsight. But I think there could be 452 now, if you count one from the crypto world: FTX. It is a Hong Kong-based (and apparently registered in Antigua) crypto derivatives exchange that has grown exponentially since its launch last May.
Last week, FTX announced that it would raise capital through the sale of “FTX_Equity” tokens. Some 500 million tokens will be sold at $ 2 per token, to investors with a minimum buy-in of $ 250,000. So there you go, $ 1 billion!
Constance Wang, COO of FTX, told me that the exchange is looking for “long-term strategic investors” and that the supply of coins will allow FTX to find global partners to support its expansion. Many Chinese investors, including the Beijing-based Sino Global Capital blockchain Liquid Value, participated in the token sale, which was scheduled to end yesterday.
Wang told me that “40% of our trading volume comes from Chinese traders. We have found that Chinese traders are more curious and accept trading in derivatives and innovative products. For example, our leveraged token was a huge success in China. “
FTX has paved the way for new methods of trading crypto, including its hilarious shitcoin index. But its success cannot be separated from the way it positions itself in the crypto ecosystem. In particular, Binance invested in it in December and FTX exploited vast amounts of resources provided by the stock giant. Its leveraged tokens are listed by Binance, which benefit from registration fees of $ 0.
Wang said the next wave of FTX expansion in China will focus on strengthening the community, educating traders, integrating new users, and reducing the time spent learning from. new commercial products. The rise of FTX is proof that trading, especially when it is closer to games of chance and betting, is a good way to breed a unicorn.
# 2: Nervos and Huobi: 1 + 1> 2?
Exchanges dominate the world of cryptography not only because they literally hold the keys to commerce, but also because they extend their footprint outside the commercial world.
Binance announced its own public blockchain platform, Binance Chain, in 2019. OKEx, another crypto exchange focused on Chinese consumers, ad his protocol layer project, OKChain, February 24. Binance and OKEx have marketed their channels as platforms for decentralized exchanges (DEX), which can be considered as complementary to their existing activities.
Last week, Huobi, the last of the top 3 Chinese crypto exchanges, also released the public beta version of its own public blockchain: Huobi Chain. Rather than developing the chain in-house, Huobi has established a partnership with Nervos CKB (Common Knowledge Base) in China, to create a PoW protocol.
The protocol will strictly focus on financial services such as asset tokenization, identity verification and loan services. Contrary to the obsession of its competitors for DEX, Huobi focuses its own DEX rhetoric on decentralized finance and repeats on several occasions its “framework favorable to regulators”. The focus on compliance should come as no surprise. As we all know, Huobi is the darling crypto child of the Chinese government. But focusing the entire chain on financial services rather than on its core business, trading, remains a huge gamble.
Yet Huobi’s movement is intelligent. Since the company operates largely in China, it has learned to adapt to the appetite of government, which is essential to compete with tech giants such as Alibaba or Tencent.
In recent years, the Chinese government has increasingly focused on financial inclusion 普惠 金融, which includes services such as loans to SMEs (especially farmers), instant account settlement and credit rating. credit. With China’s digital currency under development, the government could use its centralized blockchain as the underlying infrastructure to implement part of its financial inclusion policy. If so, Huobi Chain will be well placed to share a piece of the pie, as it is also designed to implement similar use cases.
# 3: FCoin Nirvana?
Jian Zhang, the founder of the famous Fcoin, publishes weekly updates on his plan to restart the insolvent stock market. Many have stopped paying attention and think the whole thing is a scam on the way out. However, Zhang continues to communicate.
On Friday, Zhang posted a blog post revealing the financial details of the platform and the steps he believes will pave the way for the reopening of FCoin.
According to the blog, 70% of the assets of FCoin users are contaminated (read here to understand what this means.) The real difference in assets is around 90 million USDT, which is much less than the 150 million estimated when the news broke.
Zhang plans to reopen Fcoin in a week, and users will be able to view their wallets and withdraw up to 50% of their assets. The rest of the 50% can only be withdrawn on request (e-mail only!).
Zhang said that FCoin will be regulated and governed by the community, for the greatest transparency. Even its own locked tokens will be determined by community vote.
This should be interesting to see, given his recent experiences with the “Fcoin community”. As we all know, managing communities is easier said than done, especially when heavy managers play a role (like the case of Justin Sun who takes control of Steemit).
Never mind. FCoin users should hope that part of their lost investment will be recovered. At least until we hear Zhang again.
Do you know
“打 酱油” is a widely used slang expression. It literally means “picking up soy sauce” and describes kids who are old enough to run errands like picking up soy sauce at the store.
In recent years, the term has evolved (especially on the Internet) after a widely broadcast television interview in which a reporter attempted to interview someone about a scandal. The person fired the reporter saying, “I have nothing to do with this – I just picked up some soy sauce.” Nowadays, people use the term to describe a scenario in which they have little interest in participating.
