What are the first generation of miners and mining communities like? Listen to Shenyu talk about mining

From a completely new thing to today's industrialization, the scale of Bitcoin mining has achieved exponential growth from its inception to today. In just a few years, how did the first generation of mining communities emerge and how did they evolve? How did "classical miners" explore the path of mining? Let us learn more about the mining community and industry through early stories.

Shenyu, one of the first players in China to get in touch with Bitcoin, co-founded F2Pool with Wang Chun in 2013. Currently, F2Pool's Bitcoin mining pool is the world's leading computing power. In 2017, in order to solve the pain points of the industry, he started a business again, focusing on wallet products and founded Cobo.

This time, we had a chat with Shenyu, the “number one” in the domestic mining pool, about the past and latest features of mining, and presented the entrepreneurial journey of domestic miners to everyone.

The first generation of mining community: 50,000 “native” miners

The first batch of Bitcoin miners in China came from the traditional hardware industry. Before joining the mining industry, they already had a natural computing power advantage. At that time, high-end graphics cards were out of stock in the national market, and those who were able to participate in mining were a group of players who had access to industry resources.

Some participants who cracked "parallel imported" Nokia phones became the earliest "native" miners. Since graphics card hardware was needed for decoding, they had a large number of high-end "5850" graphics cards at the time. Whether it was because of gaming or cracking business, this group of people with the infrastructure in place seamlessly switched to the mining field.

When Shenyu first entered the mining industry in 2011, it was still the era of GPU mining for Bitcoin. Many parameters in the mining software needed to be adjusted manually, and the hardware was all DIY mining machines using desktop computer accessories. Techniques such as GPU overclocking were relatively unfamiliar to the mining community. In addition, there was no Chinese information at the time. Shenyu first began to explore in foreign Bitcoin forums such as BitcoinTalk, and began to write tutorials to share mining experience with miners.

Initially, people lacked basic knowledge and operational settings for mining, and the need for popular science and mining education was urgent. The tutorials written by Shenyu were very popular in the mining community, with over 10 million readers. The mining QQ group he established had a total of 50,000 members by 2012. In this atmosphere, a group of original mining enthusiasts gathered in the community to communicate with each other.

With the rise of the mining community, mining pools have also received more widespread attention. While Shenyu was "hand in hand" leading the first batch of domestic native miners to mine, the private pool, the predecessor of F2Pool, also began to operate from 2011 to 2013. In April 2013, F2Pool was officially established and became the earliest Bitcoin mining pool in China.

China’s first mining pool: computing power supporting exponential growth

The establishment of F2Pool, the first mining pool in China, is in the process of Bitcoin's transition from graphics card mining to ASIC mining.

The mining community was quite divided at the time regarding ASIC mining machines. Some miners believed that ASIC mining machines were "evil" and would never appear, while others believed that ASIC would appear. Due to different opinions, many mining pools did not upgrade the early mining protocols at the time and were not fully prepared to support ASIC-scale computing power.

"We did see ASIC at that time, and ASIC was also produced in China." Shenyu said that this also prompted him and Wang Chun to consider making relevant technical preparations for equipment upgrades as soon as possible.

In addition to the opportunity of hardware replacement, the emergence of the first public mining pool was also due to the urgent technical needs of miners.

Mining not only requires high performance of equipment, but also real-time communication of the network is very critical. However, due to network reasons, it is difficult for Chinese miners to access foreign mining pools for mining, which in turn causes a large loss of revenue. Therefore, Chinese miners are in great need of a local mining pool.

Being the first mining pool in China is full of challenges.

First, there were almost no full Bitcoin nodes in China at that time, the network performance was also low, and most of the "block production rights" were overseas. Under such conditions, F2Pool tried to build a mining pool that connected domestic and foreign mining services.

Secondly, the early mining community was still unclear about the profit distribution model and the profit calculation was still relatively rough. F2Pool set out to solve these problems, making the profit distribution and calculation clearer, and set up a 24-hour mandatory payment of mining profits. This daily settlement model largely avoids losses caused by extreme situations or uncertainties.

"Because we also come from mining backgrounds, we understand the pain points of miners very well." Shenyu said. F2Pool was welcomed by miners as soon as it was launched and has grown rapidly.

Mining and Entrepreneurship: Discovering Early Opportunities for Projects

In 2014, the computing power of the F2Pool Bitcoin mining pool accounted for one-third of the entire network, becoming the world's largest Bitcoin mining pool. In 2016, the F2Pool Ethereum mining pool was launched, accounting for a quarter of the total computing power of the network, and the number of mining pool connections reached one million. Over the years, the currencies supported by F2Pool have continued to be "updated", and there are now more than 40 currencies that can be connected to the mining pool.

F2Pool co-founder Wang Chun shared his early entrepreneurial story and talked about the experience of working day and night in the office until dawn when he and Shenyu started in Wenzhou. "Shenyu would go downstairs to buy me a hand-pulled pancake and bring it upstairs to eat. I still remember the hand-pulled pancake downstairs in the Wenzhou office." Wang Chun said when recalling the scene of the intensive preparation of the mining pool in the first two months.

Two months later, they left Wenzhou. Wang Chun went to Beijing, and Shenyu went to Lin'an to found Yibit and Yinyu Mining Machine. At that time, Wang Chun was mainly responsible for technology and operation and maintenance, while Shenyu was responsible for customers, until 2015. That year, Yinyu went bankrupt, and Shenyu also came to Beijing, in the Guanghua Road Sunshine 100 Apartment in Chaoyang District, with offices downstairs and living upstairs. By the end of 2016, there were only Shenyu and Wang Chun in the entire fish pond.

In the early days of the mining industry and the scale of the cryptocurrency market, practitioners at the time felt different opportunities than they do now. Now it seems that there are both foresight of trends and "missed" wealth.

In an interview with Tencent, Shenyu once talked about "selling away" more than 100,000 Ethereum at 20 yuan, and now it seems that "several hundred million have been missed". Many friends in the circle have made exclusive emoticons with the interview of Shenyu boss. At the same time, many early opportunities were firmly seized. F2Pool first supported Ethereum and Litecoin. The potential projects at that time have grown into the top projects in the PoW industry.

As an early and continuous participant in the industry, how does Shenyu view gains and losses, and how does it maintain insight into new opportunities?

"I've suffered too many losses." Shenyu said. He was able to seize the opportunity because he was sensitive to new things and because he had stepped into the pits before. He said that in fact, Ethereum had many bugs and instability in its early days, and the biggest experience at that time was to look at emerging things with an open mind.

In fact, when the concept of DeFi first emerged in 2017, Shenyu tried CryptoKitties and a series of other derivatives, but the experience was not good and he "stepped into many pitfalls". However, in just a few years, DeFi has developed modularly and iterated, and the industry has already had some room for application. He continued to participate with the same mentality and became a "DeFi master" in this year's "liquidity mining" craze.

Shenyu values ​​the potential of rapid development and iteration of new things. Recalling the beginning of 2016, when Ethereum just showed a certain trend, F2Pool invested in development and established the first Ethereum mining pool in China. At that time, apart from transactions on P Network and Yunbi, no major exchanges had listed Ethereum. Today, Ethereum has become the blockchain network with the largest developer community in the world.

Mining Industrialization: What are the Necessary Conditions for Miners in the New Era?

The first batch of domestic miners around 2012 have now "got off the train" for various reasons. Only a few are still active in the mining circle, and a considerable number of them have grown into large miners with considerable computing power.

Several rounds of reshuffles in the mining industry have also made industry participants very different from seven or eight years ago. The risks faced by miners today are different from those in the past, the profits from mining have been diluted, and the degree of industrialization has further deepened.

Shenyu believes that today’s “new generation” of miners need the following necessary conditions to participate in mining:

The first is mining resources. Being able to find a mining farm with electricity rates lower than the average market price, whether it is self-built, leased, or managed, requires the ability to identify reliable mining farms and find low electricity rates.

The second is the timing of equipment purchase. "Purchase the right mining machine at the right time. " When it is a bull market, it is basically impossible to buy a mining machine; and if you buy a mining machine in a bear market, the payback period is too long and the uncertainty is large, which may cause a large loss. It is very important to understand mining machines and have the ability to judge the entire market cycle.

The third is operation and maintenance resources. Currently, many miners have chosen third-party outsourcing services or outsourcing services provided by the mine. In any case, having reliable operation and maintenance resources can ensure that the mining machine runs at a stable mining efficiency above the social average level to ensure mining profitability.

" With the refinement of the industry's division of labor and more sophisticated software, mining will become simpler in the future. Making good investment judgments will become the focus of miners' participation in mining, and the rest can be left to professional teams. " Shenyu said.

Financial instruments have also been gradually paid attention to and adopted by more miners in recent years. Among the two main risks faced by mining, network difficulty and price changes, there are no perfect financial instruments for the former, but miners with larger mining scales can use some financial instruments to avoid price risks, hedge, and lock in a part of the profit margin.

As mining profit margins become increasingly thin, some miners will also use some leverage to expand their profit scale and choose financial tools such as mortgage lending. They pledge bitcoins and mining machines to obtain more liquidity, increase production capacity, and thus hoard more bitcoins.

At the same time, as the scale of mining and the market value of digital currencies increase, the most important thing for those of us involved in the field of digital currencies is to be able to protect the security of our assets. Shenyu shared that there are many potential attack risks, and some hackers and some programmed and automated phishing software are security risks. Once digital currency is lost, it is difficult to recover. While raising security awareness, people are bound to need some safe and easy-to-use tools as a security guarantee, which is also an important reason for Shenyu's second venture and the establishment of Cobo.