Miner's self-narration: How I successfully shipped the mining machine to South America and successfully put it on the shelf on the 28th

Narrator: Longwin Crypto, River Wang

Interview/Editing | Colin Wu, author of Wu Says Blockchain

Introduction: The times are so magical. With the order issued on May 19, Chinese miners began a great migration unprecedented in history: with Sichuan and Xinjiang as the center, they moved to Central Asia, Russia, North America and various places whose names they had never even heard of.

The Itaipu Dam in South America is the second largest hydroelectric power station in the world after the Three Gorges Dam, and the surrounding areas seem to be friendly to cryptocurrencies. River had never been there and did not know the contact person, but he set off from Xinjiang on July 8 and began an adventure of mining machines going overseas. Finally, the machines were officially put on the shelves and started on July 28. He told everyone about this experience through his own narration. We also welcome more friends to tell us your stories of going overseas.

The text is as follows:

We are a professional investment management institution, and we have always paid attention to the field of digital assets. However, due to some investment experience in the field of domestic Internet finance, we feel that whether it is mining or investing in digital assets, as a business, there is a lack of relevant laws and regulations in China, so we have not participated. In April and May last year, the local government of Sichuan began to build a consumption park. As a businessman, I felt that this industry had obtained some kind of tacit approval and endorsement from the government, so we considered entering this industry. We did it right away. It took us 6 months to run through Yunnan, Sichuan, and Xinjiang. After the run, we started. I remember that the first batch of machines was purchased in December last year. I remember that on the day of placing the order, the price of the currency exceeded 18,000, and then it continued to rise to more than 60,000. As the price of the currency continued to rise, there was no decent callback in the middle. Based on cautious considerations, we added positions twice in the middle, investing a total of tens of millions, and then ushered in 519 (the State Council required a crackdown on Bitcoin mining).

Like everyone else, we began to look around after May 19. Deep down, we still hoped that the policy authorities would be lenient and give the miners a buffer period after the flood season. However, everyone is clear about the final result.

As an investment, legality and compliance are the prerequisites. Whether it is to protect existing investments or to continue to develop in the future, we think we still have to go abroad. To be honest, we are not unfamiliar with going overseas. We went to the United States to invest in real estate in 2014. So far, we have invested in more than a dozen projects, with a total of more than 5,000 long-term rental apartments. We are relatively familiar with overseas laws and regulations. If we go abroad, I remember several hot spots at that time, one was Kazakhstan in Central Asia, one was Russia, and one was North America. South America is not within the consideration of most people.

However, even if we can go to Central Asia and Russia, we don’t really want to go there, because they are similar to China, the central government is relatively strong, and most of the power they use is thermal power, not clean energy. If we do it ourselves, it will take 3-5 years to invest, so we basically don’t consider it. As for the United States, we have invested in real estate for 8 years, and have experienced three presidents, without any policy problems. Recently, we have sold 2 projects to institutional investors. So North America is still our first choice.

However, I asked around in North America and found that many people still didn’t have a seat after signing the NDA with us. Because of the domestic policy adjustment this time, the world is rushing to respond. The construction period of mining farms in North America, especially the United States, is relatively long. Many have electricity but no factory buildings, so you have to wait very far in line to find a seat. In addition, there are many technical problems. The first is the customs clearance of second-hand machines, and the second is that the coins mined also need to be taxed. Based on our experience in real estate investment, if we don’t design it well, the profit will be greatly reduced.

When we were still doing preliminary work in North America, a friend from South America came up to us and asked if we were interested in placing some machines in South America. As luck would have it, we began to conduct a due diligence on some partners in South America. We talked to three potential partners in South America: the first one was a well-known person in the cryptocurrency circle in Paraguay, who mined himself and also did exchanges and OTC. The due diligence results showed that they were more trading than mining, but it also gave us a better understanding of Paraguay. The second due diligence was in Argentina, with a trade background and also invested in mining. It turned out that Argentina has a very good mass base for mining. Because of government subsidies, their electricity bills are very cheap, about less than 0.2 cents, so there are many people who mine at home. They put a few mining machines at home and make thousands of yuan a month, which is a bit like the pig farming of individual farmers in China in the past. However, Argentina has strict control over equipment imports based on the protection of domestic manufacturing. In addition, inflation is very severe. The third due diligence was a private miner who started mining in 2017 and mined in the border areas of Paraguay, Brazil and Argentina, a bit like the old miners in China. We evaluated the situation of our partners based on several indicators, and started our mining machine deployment plan in South America in batches according to the maturity of the cooperation conditions. In the end, we decided to start the third one first, and continue to investigate the second one.

After the partners were selected, the next step was to consider the transportation of the machines. Our machines were in Xinjiang, and in order to open up a new market as soon as possible, we considered airlifting the first batch of machines. Since most of the overseas logistics are in Guangdong, they were shipped from Xinjiang to Shenzhen, and then airlifted from Shenzhen to South America.

The next thing you will think of is tariffs. Different countries have different import management systems, so where you enter the customs has a big impact on taxes. For the first batch of machines, we chose Paraguay, between Brazil and Argentina, as the destination. After comprehensive calculation, the freight and tariff for one machine is about 3,500 to 3,700 RMB. Of course, we still declare this cost at 1,000 USD/machine (M31S). If it is a new machine, it is estimated that it will cost more.

The first batch of machines is of a exploratory nature, with a total of about 100 units, of which 30-40% are shipped by air and 60-70% by sea. We hope to make both routes work. Air transport takes about 10 days, so the air transport machines were put on the shelves and started running on July 28. The sea transport needs to wait for the ship's schedule, and after boarding the ship, it will take more than 40 days on the road. However, the cost of sea transport is about 10%-15% of air transport. If the quantity is large, it is recommended to go by sea transport.

The local mining farms in South America are relatively small in general, and cannot be compared with those in China. Most of them are in the scale of several hundred machines, and the larger ones are in the scale of several thousand machines. The electricity fee is paid at the cost price, which is about 25 to 30 cents, but a certain percentage of the mined coins is charged as the hosting service fee. According to the current coin price, the electricity fee + hosting fee is about 60 cents. In addition, due to the small overall scale, most mining machine manufacturers do not have local maintenance centers, so machine maintenance is also a problem. The power supply fan can be provided by yourself, and if the core components are broken, they can only be sent back to China, and it is estimated that it will take 1-2 months to repair. In comparison, the overall industrial chain in Central Asia, Russia, and North America will be better.

Due to the low electricity cost and the friendliness to digital currencies, many North American mining companies have also begun to gradually build large-scale mining farms in South America. For example, Bitfarms built a mining farm on the polar island near the Antarctic in Argentina. The local temperature is cold and the land is vast. Using natural gas may be a future direction.

From the 519 policy adjustment to the launch of the 728 machine in South America, it took more than two months in total. Of course, the actual operation of the South American project took more than a month. Looking back, within the company, we still define this project as a business adventure. On the one hand, we have never been to South America and are not familiar with the business environment. On the other hand, we have never met all the partners, including domestic and overseas partners, so we have made preparations for the worst. The project is currently progressing smoothly. If it can be successful in the end, I think one reason is the collaboration of Chinese people around the world, including domestic and overseas, including new overseas immigrants and second-generation immigrants. The common cultural genes can greatly reduce the cost of communication. Another thing that must be mentioned is the global consensus on Bitcoin. In cross-cultural communication, whether it is Chinese or Spanish, it can be very easy to collaborate, and there will be an indescribable sense of intimacy. Perhaps this is the power of consensus.

Looking back on the investment process for mining this year, I still feel a little dreamy. I went from the northern hemisphere to the southern hemisphere while digging. The adjustment of national policies cannot be influenced by individuals and enterprises, but there are still traces of many things. I think we should pay enough attention to it in future investments. It is especially worth mentioning that ESG includes the concept of being friendly to society and the environment.

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