Should you participate? What you can’t see behind the tokenization of computing power BTCST

A new project called BTCST has been launched on Binance Launchpad. This is a project that standardizes and tokenizes Bitcoin mining computing power. Because BTCST is backed by assets of certain value, it has also attracted the attention of many cryptocurrency and mining investors.

For this project, I locked up BNB on the first day of launchpad and got involved. After a few days of mining, I had a deeper understanding of the project. Today, I would like to talk to you about the standardization and tokenization of computing power.

BTCST has two mechanisms. The first is to standardize what we call mining power, that is, a unified 60W/T power, and the second is tokenization, that is, we can trade power at will. When I first saw the introduction of this project, I thought of Baked Cat.

On August 7, 2012, BBK conducted an IPO on the then GLBSE exchange. BBK's total share capital was 400,000 shares, 163,962 shares were issued at a price of 0.1 bitcoin per share, and the rest were held by the issuer as issuance reserves. Among them, shareholders enjoyed all profit dividends from mining and mining machine sales, etc., and the shareholders who held the shares later received several bitcoin dividends. In this way, the case of using bitcoin for IPO and then using bitcoin for share dividends actually existed in the BBK era, but the name here has changed. It used to be called Bitcoin dividends, and now it is called computing power token mining, but the core is the same. You buy something that can be hyped, and it can give you bitcoins.

BTCST actually borrowed from BakeCat’s Bitcoin dividend plan to a certain extent, but converted it into a mining profit distribution plan. Of course, completing this is only the first step. Next, it is necessary to standardize and tokenize computing power.

In recent years, mining has been regarded by investors as a game of big capital, and what is left for ordinary people is basically cloud computing power. One feature of cloud computing power is that the computing power quotes, parameters and costs of different platforms are different. Ordinary users have to calculate the static payback rate before purchasing. Different platforms have different cloud computing power sales strategies due to differences in mining machine brands, batches, electricity costs, site fees, labor costs, etc., and these make it difficult to unify computing power.

Generally speaking, the same computing power platform may have its own computing power standardization, but if it is cross-platform, it is more difficult, and because of the geographical distribution of mining farms, that is to say, standardization itself is very difficult. But if they are to be standardized, then there is only one way, which is to work backwards based on profits.

In the rice fields, some rice is taller, and some is shorter. So how do we make them the same? In fact, it is a selection process. Set a height, pick out those that do not meet the requirements, and the remaining ones meet the requirements. The same is true for mining machines, but people cannot use them just because one mining machine has a large computing power and the other has a small computing power. Instead, they are all unified mathematically, that is, they are counted according to the daily income, and finally a weighted average is taken. If this weighted average has decimal points or is insufficient, generally speaking, it must be processed. For example, if it is actually 59W/T, then the price must be increased to make it equivalent to the profit margin of 60W/T computing power. Or if it is 59W/T, then it is directly calculated as 60W/T. In this way, at least the integer level computing power is easier for ordinary users to accept and understand.

If you really think this is 60W/T, then for the mining farm, there are not so many mining machines that meet the requirements. The current mainstream Bitcoin mining machines are still S19Pro and Shenma's M30S mining machines. If you really want to use 60W/T of computing power, it is basically impossible.

In this way, there may be more tricks here sometimes, but these are basically small tricks, not the main dish, so we can ignore them, because the tricks here are actually most directly linked to the price of computing power. If the pricing is reasonable, it can be said that there is no trick. If the pricing is unreasonable, then of course there is.

Next, let’s talk about the price after tokenization. We can think of this as a guaranteed price. If the actual price is below the guaranteed price, then it is equivalent to buying a mining machine at a price lower than the market price. In this way, it is naturally easy to understand.

We break down the pricing process into smaller parts. The first step is to calculate the cost price of computing power, which is the initial price.

The second step is to add the costs of the mining site, manpower, electricity, etc. to the initial price, so that the subsequent price is a reasonable price.

So, what is the reasonable price of BTCST of 60W/T? According to the current payback period of cloud computing power on cybtc.com, which is about 13 months, then 60W/T computing power will also take 13 months to pay back.

Below is the Bitcoin computing power quotation of Caiyun Bit

We calculated the computing power of 60W/T and finally found that the current daily income of 1T is 1.02 yuan, and the daily income of 0.1T computing power is 0.102 yuan. If the return on investment is 13 months, the price of 0.1T computing power should be 39.78 yuan.

Below is the daily income of 60W/T computing power

At this point, the conclusion comes out. The reasonable price of BTCST is less than 40 yuan, which should be 6.25 US dollars in US dollars. Another point is that if you directly host the mining machine instead of buying cloud computing power, the price may be even lower, but basically close to 6.25 US dollars.

If we calculate three years of mining with this computing power, the value of the coins mined during its life cycle should be equal to the current Bitcoin price of 111 yuan. This is already an ideal price assuming that this computing power is not pledged for mining and the difficulty of Bitcoin will not decrease in the next three years. The actual price will only be smaller, which is also the ultimate value of this computing power.

At the time of writing, the price of BTCST has reached US$69. In terms of mining, it can be said that it has skyrocketed tenfold. In terms of the total value over its life cycle, it has also been over four times the premium. The price is extremely unreasonable.

After talking about the price, let’s talk about the speculation on computing power. After all, the essence of speculation on this coin is speculation on computing power. Many people may not understand the speculation on computing power. To be honest, I don’t understand it either, but price fluctuations and transactions themselves are a kind of speculation.

In addition, the official said that if these computing power tokens want to obtain mining income, they need to be staked on the chain, and then they can obtain Bitcoin income. In other words, if your computing power is not staked on the chain, then you cannot obtain Bitcoin income, but the computing power still exists. In this case, for example, an investor holds 10,000 BTCST computing power tokens, which is 1,000t. In theory, he can get 1,569 yuan of Bitcoin for holding it for one day. However, because he did not stake it, he cannot get this money.

In this way, can we regard the circulating computing power tokens as a kind of currency-containing behavior (similar to the stocks with dividend rights that distribute dividends at the end of the year in the stock market)? At this time, the price of computing power tokens may show market overflow behavior. Is this equivalent?

It sounds like that at first glance, but there are some differences, because the computing power tokens here are divided into new and old. The new ones are equivalent to diluting the old coin rights. In this way, it is actually unfair to those who hold computing power tokens in exchange accounts for a long time.

To give a simple example, I held a computing power token on the Binance exchange for one month, but not a single bitcoin was transferred to my account in that month. However, the official team unlocked a new batch of computing power tokens because they just launched a new mining machine. In this way, although the token price is still the same, there has been a quiet change. The new tokens have diluted the value of my tokens. In this way, it seems that we are speculating on coins, the number of tokens in the market has increased, and the price has fallen.

Obviously this is unreasonable. In the end, the only explanation I can give is that there are no pledged computing power tokens in circulation in the market, and the computing power income behind them has been used for project operations and for maintaining the price of computing power tokens. This makes it easy for tricks to occur. After all, for users, I buy computing power tokens to ensure profits, not to support the project party.

Finally, how can we view this new thing?

In fact, it is quite simple. If you regard the computing power and mining farm as a company, and the standardized computing power token as a company's shares, then it is easy to understand. At present, the shares and assets of listed companies are theoretically one-to-one corresponding, but there is always a premium rate. We all know that the actual asset value contained in a 100-yuan share of a listed company is often less than 100 yuan, which seems reasonable. In this way, it can actually be considered that the team behind the operation of the computing power token intends to sell each mining machine to retail investors at a premium in the form of stocks!

The last question is, the reason why listed companies have a premium rate between stock prices and assets is that listed companies are constantly operating, and investors expect them to innovate in order to adapt to social development. The computing power must always be updated and eliminated. Your 60W/T is 60W/T this year, 60W/T next year, and the year after. Eventually, one day it will be eliminated due to the increase in difficulty. At this time, the computing power value is 0, which is a mining accident. Then who will bear the loss of the token value returning to zero? I believe many people have already figured it out!