Is it a false proposition that mining cloud computing power can break through with the help of NFT?

Today I saw some articles describing that after computing power is NFTized, it can be traded in the secondary market, which can greatly stimulate the computing power market. I think this may be a false proposition, and today I will briefly describe the relevant logic.

Cloud computing power overview: similar to asset securitization

Take Bitcoin mining, the largest mining project on the market, as an example. Mining is essentially a manufacturing industry that uses computing power equipment, consumes electricity, and produces Bitcoin. Currently, the total global output of Bitcoin is about 900 per day, all of which are obtained through mining. If you want to invest in Bitcoin mining, you need to purchase mining machines. Due to the scale effect of the manufacturing industry and the fact that mining farms currently prefer large customers, 50 or even 100 machines are enough to meet the threshold of hosting - this is the basic experience in the mining industry. According to the Ant S19 mining machine (95Thash computing power) or S19 pro (110T computing power), according to the 100T estimate, 100 machines are 10P computing power.

Note: T and P are both Bitcoin mining SHA256 algorithm computing power units

The cost of purchasing 50 units is more than 1 million yuan, and 100 units is more than 2 million yuan. The picture above is the official website of Bitmain. The futures have reached August 2021 (next year). Now you need to pay more to have the opportunity to purchase spot mining. Such an investment amount makes many people discouraged. The threshold of several million is originally a game that is difficult to participate in. So there is cloud computing power.

Continuing with the example, I now have 100P hashing power equipment for mining (100Phash is approximately equal to 100,000Thash), which is about 1,000 S19 mining machines. Of course, I am a big investor. Now I need to quickly recover funds. What should I do? Cut the hashing power into 100,000 parts, each with a T hashing power, and give a cycle, such as one year. Then the coins mined within a year are deposited into the account of the buyer of the hashing power every day. Retail investors can participate in mining with small funds, and large investors (or institutions) can quickly recover funds, which is a win-win situation. This is basically similar to a kind of asset securitization. The industry knows it, but it is not called that in the industry.

Computing power seems to be a win-win situation, but there are many problems. For example, there must be a centralized platform for computing power sales. We are not afraid of the platform taking a commission, but we are afraid that the platform will run away. Imagine that I say I have computing power, but I don’t actually purchase enough equipment (or I don’t purchase equipment). Can I still send coins to customers normally every day? Yes. I just need to take out the money from the sales later to buy coins and send them to customers. Cloud computing power business is a hotbed for Ponzi schemes.

If there are indeed mining machines, the cloud computing company's operating model is likely to be fine, and it will be a virtuous cycle. If there are not enough mining machines, the above situation will occur, so when purchasing cloud computing power, you must be well-known in the industry and have the opportunity to check the number of its computing power equipment, mining farms, and operating conditions.

The current mining cost of S19 for Bitcoin is about 25%, fluctuating around 30%. That is, for every 1 Bitcoin mined, only 0.3 Bitcoins can be sold to pay for electricity, and the rest is basically profit (there are also a small amount of hosting fees, maintenance fees, etc., which can be ignored compared to the electricity bill).

Cloud computing power NFT

NFT (non fungible token) is a non-fungible token. The reason why it is NFT instead of ordinary token is that the computing power, time period and selected manufacturers of cloud computing power owners may be different. Pledge cloud computing power to mint NFT, and then NFT enters the secondary market for trading. It looks good, but it may not work in reality.

First, it is difficult to carry out cooperation among miners.

Such an NFT platform needs partners from major mining machine computing power manufacturers. My mining machine computing power is selling well, why should I cooperate with you? Miners have sufficient funds and can build a platform to sell computing power. There is no need to create an NFT.

Large miners will not cooperate with this new NFT platform, but small miners (computing power providers) may cooperate. However, as mentioned above, computing power products from non-famous institutions are prone to failure, so it is not recommended to purchase such computing power, let alone such computing power NFT.

Second, there is a bug in the hype logic of computing power NFT

Cloud computing power assets have been securitized, but the securitization is not thorough enough. Now that it has been NFTized, it is not thorough enough. Because this "securities" (computing power after cutting) are not very easy to circulate, but it is easier to sell. The transaction of computing power NFT is more like the delivery of computing power. After the delivery, it is necessary to agree on the duration of computing power. Generally, NFT is bought to buy low and sell high, and this computing power NFT is bought just for contract delivery. Mining income can be obtained during the time of holding. Most people who invest in mining are long-termists (want to make money and hoard coins), otherwise they can directly invest in spot or futures transactions to make quick profits (or losses).

Third, mining computing power has after-sales service. How to provide after-sales service after NFT trading? The trading platform that publishes NFT does not have this capability, and the equipment does not belong to this platform.

Fourth, if a platform wants to do computing power NFT, it is of course an innovation, and it is right to be inclusive of innovation, but it needs to start with BTC or ETH computing power, which have large business volumes, simple mining models, and mature businesses. It cannot start with new types of pledge storage mining such as Filecoin, otherwise it will easily become a mess.

Mining machines have a secondary market, and computing power may also have a secondary market. However, it is debatable whether the secondary market for computing power can and should be conducted through NFTization.