DeFi is very popular, but almost all real miners are left empty-handed? | Yueqing Mining Forum Observation

In the past three months, DeFi has become completely popular. In addition to high-end players known as scientists, more ordinary investors have also flocked in and started their own mining journey.

DeFi mining gives people the illusion that Bitcoin is no longer popular, let alone Bitcoin mining. Compared with the annualized return of 20,000% from DeFi liquidity mining, using mining machines to mine Bitcoin in the mountains is simply something that ancient creatures do.

"Too low." This is probably how many "farmers" see miners.

Is Bitcoin mining attractive? What do traditional miners think of liquidity mining?

On September 14, the 2020 Wenzhou Golden Autumn Mining Summit Forum opened in Yueqing, Wenzhou. This is a mining conference co-organized by Miner Dad and Wabi.com. Yueqing, a county-level city on the southeast coast of Zhejiang, is likely to have gathered so many mining practitioners from across the country for the first time.

What do these real miners think about liquidity mining? I interviewed a few people and this is what they said.

Miners: Funds are not safe, so we will not participate in liquidity mining

Cao Jun, co-founder of Spider Mining Pool, said that traditional POW miners focus on machines, coin prices, and electricity costs. Liquidity mining still has some technical barriers, and its economic model has exceeded the understanding of many traditional miners, so miners are not too enthusiastic.

A more important factor is that the mining industry has encountered too many mining accidents, so their profit cycle will be prolonged. Miners are therefore very concerned about the safety of their funds, and they are not likely to make decisions to do something very risky.

Yao Binbin, the founder of Jiangyu Mine, also introduced it via WeChat voice. He thought that there were people around him who participated, but not many big miners participated, and he also thought that the risk was too high. "This may be a good way for retail investors to make a small profit with a big investment. I keep my coins in my wallet and I don't participate."

Zhu Yu, co-founder of Inbit, also told me that miners are long-term practitioners in the industry. They have to work for 3-5 years. In this process, they have seen too many short-lived projects and hot spots. Liquidity mining fits this temperament to some extent. Of course, the liquidity mining market is still hot at present, and many people are waiting and watching. "The enthusiasm is not high, and participation is limited." He said.

He also mentioned that today, many wallets have launched DeFi financial management, which is actually the platform performing liquidity mining on behalf of users. This gives miners a channel to participate, but this way of participation does not help deepen miners' understanding of liquidity mining and DeFi.

Many people believe that this wave of liquidity mining originated from Ethereum has eventually turned into an amusement park for capital giants. However, from my interviews in Yueqing, although traditional miners hold a large amount of cryptocurrencies, most of them do not participate in it. The position of paying attention but not participating is very consistent among the miner group.

Then again, as a guest of the conference, Wu Jianxin, founder and CEO of DeFiner, gave a speech titled "Is DeFi Liquidity Mining an Opportunity or a Trap?". As one of the rare science popularization sharing sessions on liquidity mining in the entire venue, the miners in the audience listened very carefully.

Wu Jianxin said that DeFi has existed for a long time, and it became popular mainly because of the DeFi mining farms, which is not much different from Bitcoin mining. Wu Jianxin also believes that apart from the premium brought by the hot secondary market in liquidity mining, many DeFi projects themselves will also contribute profits, so DeFi mining is still worth participating in. "Have your friends really participated in DeFi? I believe no, so the climax is far from coming." He said.

At the scene, I also heard a particularly interesting answer: Liquidity mining, that is your business in the cryptocurrency circle, we don’t understand it and don’t participate. What’s more interesting is that they often say “We big miners don’t participate.” The implication may also be: We don’t care about your little profit .

It can be clearly seen from the issue of liquidity mining that if we understand the mining industry from the perspective of the cryptocurrency circle, we will get very wrong results. The miner group and the cryptocurrency speculator group are still very different, just like men and women.

▲Miner Dad COO Cai Yongxu is sharing

Half a year of low water mining and half a year of high water mining may become the norm in the mining industry

Compared with liquidity mining, miners are more concerned about the fact that the flood season is about to end. What should they do during the dry season? At the 2020 Wenzhou Golden Autumn Mining Summit Forum, this is the core topic that miners care about very much.

There is a saying about high water and low water in Bitcoin mining in China, and the time point of this transition is around May and October every year. After October, it is the dry season in Sichuan, and the power supply in Sichuan will be reduced by about 80%, which means that there are only three options for mining machines in Sichuan. First, shut down the machine, let it gather dust in the mine, and wait until the high water season next year to start it up again. Second, go far away to areas such as Kazakhstan where electricity resources are cheaper. Third, migrate to thermal power mines in Xinjiang, Inner Mongolia and other places.

What new changes will the “flood-dry season” bring to the industry this year? I also asked some miners in Yueqing.

For example, Chen Lei, the founder of BitBlueWhale, said that this year we have to look at the situation in Inner Mongolia. This involves a big background. In September this year, Inner Mongolia issued a document to suspend 21 mining farms from participating in multilateral electricity trading, which means that during this year's dry season, these 21 mining farms may not be able to operate normally.

"It is suspended, but not closed. We have also seen that several mines have been able to resume operations. If too many mines are closed, it may cause systemic pressure on the Inner Mongolia mines. For miners, they may be worried and dare not go even to mines that are operating normally . But the information I have received is generally optimistic. " said Chen Lei.

A miner who did not want to be named told me that today, the machine space in Inner Mongolia is tight and the electricity price is rising. Some mines offer 0.42 yuan per kilowatt-hour. However, the situation in Xinjiang is relatively stable, and the electricity price is still around 0.32-0.33 yuan. According to Yao Binbin, not only has the electricity fee in Xinjiang not increased, but it may also decrease. The main reason is that the market conditions this year are not particularly good. He estimates that the electricity price is between 0.32-0.35 yuan.

So, the mass migration will still happen, but it seems that a lot of machines will be temporarily retired.

How will the Bitcoin network computing power change? In fact, the situation this year is quite special. First, the Bitcoin production has been halved. Second, the Bitcoin network computing power has increased from 100E to 136E compared with the same period last year, and the competition has intensified. Third, the old and new Bitcoin mining machines have been replaced. Fourth, the price of Bitcoin has increased from 50,000 to about 70,000 RMB. On this topic, because it is an estimate, different people have different answers.

For example, Wang Shenglin, sales director of Innosilicon Mining, predicts that a mining machine with a Bitcoin hashrate of less than 30T and a power consumption of 80W-90W per T will definitely not be able to operate. Therefore, the hashrate will definitely be reduced.

Zhu Yu, co-founder of Inbit, said that some machines will shut down, but the total computing power will not necessarily decrease. Machines like S9 will shut down, but more advanced machines will be online. Yao Binbin holds the same view as him. He believes that one new mining machine can be equivalent to ten old machines, so the computing power will not drop too much.

Some miners also said that S9 still occupies about 20-30E of the market today, and S9 will undoubtedly be retired during the dry season. However, new mining machines will be put online from December to January of the following year. Some miners also predict that the computing power of the entire Bitcoin network will be reduced by at least 20%-30%.

However, one thing that is clear is that Bitcoin mining may only be a half-year business in the future. In other words, high-computing mainstream mining machines are likely to mine in Fengshui mines in Yunnan, Guizhou and Sichuan for half a year, and in thermal power mines in the northwest for half a year. This seasonal migration is also the norm under the highly competitive Bitcoin market to some extent.