From Bitcoin computing power to hard drive capacity, has the trend of mining changed?

Early Bitcoin mining enabled many ordinary people to achieve rapid wealth growth, but with the upgrade of mining equipment and the increase in mining difficulty, it is no longer suitable for ordinary miners. In the past two years, with the emergence of star projects such as Filecoin, the scale of hard disks invested in capacity mining has been very large. Hard disk capacity mining has the advantages of low threshold, energy saving, and decentralization. So after Bitcoin, will hard disk capacity mining become a new outlet?

On July 27, the MASS Chinese community invited two veteran guests from the mining circle: Zhu Yu, co-founder of Biyin and Yinbit, and Alex, founder of HPool, to give an in-depth interpretation of the trend of hard disk capacity mining.

The following is the content of this live broadcast, Enjoy~

Question: First, let me ask a question about the motivation for mining. There is a saying that "buying coins is not as good as mining", what is the difference between the two? Why are people willing to continue to participate in mining, and what is its appeal?

Alex: Mining or buying coins is actually a game between risk preference and strategy.

Buying coins (not considering futures) will only bring benefits when the coin price rises. Mining can hedge the secondary market, and arbitrage can be continuously carried out during the mining process. As long as the computing power does not rise sharply, the coin price rises or remains stable for a period of time, or even falls slowly, it can be profitable. Therefore, people with low risk appetite will tend to mine.

People with a high risk appetite will think that "mining is not as good as buying coins." Take Bitcoin as an example. In 2011, if the same 1 million yuan cost was used to purchase graphics cards for mining and directly buy coins, the final return would definitely be higher.

The logic of buying coins is faith, or value investment, and the logic of mining is to achieve long-term stable returns through arbitrage. In addition, from the perspective of large institutions, when allocating digital currency assets, directly depositing large amounts of legal currency is blocked, and mining is a good tool.

Mr. Zhu: First of all, the pricing strategy of mining machines is to ensure that the income from mining is not lower than that from buying coins. Then, considering the operating expenses, taking Bitcoin as an example, if the electricity price is low, mining will be more profitable than buying coins, and if the electricity price is high, buying coins will be more profitable than mining. If you have not yet experienced the difference between buying coins and mining, then buying coins is definitely more appropriate.

Question: Everyone says that this year is a half-year reduction. As the payback period of PoW mining represented by BTC becomes longer, is this an opportunity for PoC to rise? What do you think of the field of hard disk mining?

Mr. Zhu: The recent halving of Bitcoin and other currencies has caused some awkwardness in the pricing model of mining machine manufacturers. According to the original pricing, mining is not very profitable now, which has led to a general wait-and-see attitude among mining machine buyers. The second reason is that there have been some fluctuations in the internal governance of mining machine manufacturers, which has led to users' distrust of mining machine manufacturers. These two reasons have caused some PoW funds to begin to migrate to the hard disk field. Recently, many of my PoW clients are looking at opportunities in IPFS and PoC. So recently, I have also begun to tend to invest resources in related fields.

Alex: From a microscopic perspective, in PoW mining, whether it is early graphics cards or later Asic, mining machine manufacturers are the largest miners. Mining machine manufacturers treat mining machine buyers as hedging objects. When they expect the mining machine to bring them greater profits, they will keep the mining machine for themselves. When they expect the profits brought by the mining machine are lower than the selling price of the mining machine, they will sell the mining machine. This is the contradiction of PoW mining-suppliers are the biggest competitors of miners. For example, when S9 came out, the price was 8,000. If you can buy it in stock, it will only take 10 days to get your money back based on static income, but you will definitely not be able to buy it because the mining machine manufacturer will choose to mine by itself.

In addition, from the perspective of power structure, the monopoly of mining machine production and electricity poses challenges to the security of PoW. In theory, Bitcoin is decentralized, but in the real world, the computing power of Bitcoin is becoming more and more concentrated, and the risks of human nature will become more and more prominent.

Then if the equipment is made universal, the monopoly of mining machine manufacturers can be reduced. If the dependence on electricity is reduced, the degree of resource monopoly can be reduced, which will be more friendly to ordinary miners. This mechanism does not go to large households, but makes resources and opportunities equal. Assuming that the resource input of two miners is in a 100:1 relationship, then their opportunities are also close to 100:1, not 1000:1. At this time, the security of the network will return to the early days of Bitcoin, and this is PoC. The significance of PoC is more like fixing the engineering problems of PoW. Although it is not perfect, no mechanism has been found that is closer to the original concept of PoW than PoC (PoS cannot replace the fundamentals and structure of PoW).

We at HPool have always believed that PoC will be part of the future development path. PoC technology is also constantly iterating, from the initial Burstcoin, to BHD, and now MASS. Including Filecoin, the more we study, the more we find that Filecoin and PoC projects are highly unified at the mining level: I think a more accurate definition of projects like Filecoin is custom storage for storage proof, while PoC projects like MASS are non-custom storage for storage proof, and they are essentially providing storage proof mining.

Question: Many people confuse Filecoin and PoC mining. In fact, they both require hard disks, but their mechanisms are very different. So when it comes to mining, what are the advantages and disadvantages of mining Filecoin and mining PoC? Which one do you prefer?

Mr. Zhu: For Filecoin, if the operation and maintenance is not good, or the hardware assembly is not reasonable, the system will punish you, and this punishment may be quite severe. Relatively speaking, the threshold of PoC is lower. The advantage of Filecoin is its high popularity, but considering the price of the currency and the price of the machine, I am not sure yet.

Alex: Bitcoin realizes private ledgers, and Filecoin aims to realize private data. The data we have on the Internet now does not belong to me. It may belong to a company or an IDC operator. On Filecoin, the data completely belongs to the person who has the private key, and it has its own application scenarios. Filecoin wants to be a distributed IDC based on blockchain, which is much more technically difficult.

PoC is more of a supplement to PoW. It is a public chain facility. For example, MASS aims to be a public chain infrastructure.

Specifically for miners, PoC will be easier to popularize and scale up than Filecoin.

Whether it is MASS, BHD, or Filecoin, they are essentially mining with effective capacity. When participating in mining, you must first P the disk, that is, fill the hard disk with data, and after the system verifies that it is a proof of effective capacity, you can participate in block generation (mining).

If the P-disk difficulty of BHD is defined as 1 and the P-disk difficulty of MASS is defined as 10 (like Filecoin, it also requires some calculations), then the writing difficulty of Filecoin is as high as 400.

We only need 10-20% of the equipment to do calculations when mining BHD and MASS. For example, if the cost is 1 million, only 200,000 of it needs to be spent on calculations to quickly fill up the 800,000 hard disk. Most of the Filecoin devices on the market now only give capacity parameters, but if there are not enough computing devices, it may take 5 or 10 years to turn a 1T hard disk into effective capacity. If you want to complete the P disk within 40 days, every 50,000 yuan hard disk will require 950,000 yuan of computing equipment. Therefore, Filecoin is more like PoW in the disk writing stage, which requires the use of a large number of computing devices - CPU and graphics card.

In addition to the equipment threshold, Filecoin's economic model is the most complex ever, and its operation and maintenance difficulty is also very high, requiring a professional level close to that of Alibaba Cloud.

In addition, Filecoin will also face many difficulties when storing data. Filecoin wants to store data that is valuable to humans, but "whether the data is valuable to humans" cannot be judged by algorithms, so the only way to specify the storage content is in a centralized way, such as maps, museum data, Wikipedia data, etc. This leads to a new contradiction. The original purpose was to give the control of the network to consensus, but now it is equivalent to taking the control back to the project party, becoming semi-centralized. However, if this is not done, it will lead to another paradox. Miners will write a lot of garbage data for mining, which is no different from PoC, and even wastes a lot of computing resources and power resources.

Of course, we need to be tolerant of new technologies. Filecoin has brought huge traffic to the industry, which is good for the industry.

Question: MASS is a newcomer in the PoC field and has attracted a lot of attention. In addition to capacity consensus, it also adds binding and locking mechanisms. How do you understand this unique economic mechanism?

Alex: The advantage of PoC is that the market value of mining equipment and the market value of coins are basically 1:1. The market value of Bitcoin mining equipment is about 1 trillion, and the market value of coins is about tens of billions. This gap is quite large. The cost-benefit ratio of attacking PoC is close to 1, while the cost-benefit ratio of attacking PoW is much higher than 1. In theory, the PoC network is safer than PoW.

In addition, it is difficult to cold-start PoW projects. An increase in the computing power of one project means a decrease in the computing power of another project, which is a zero-sum game. Low computing power across the entire network will lead to network insecurity, which is unfriendly to new projects as a whole, and will lead to a lack of diversity.

The economic model is a catalyst. The key is that the underlying technology must be valuable and meaningful. A well-designed economic model can accelerate the development and operation of the ecosystem. The earliest PoC project, Burst, did not have an economic model, and did not develop well afterwards. When there is no cost to generate coins, it is difficult to price the storage. In MASS, mortgage mining can help lock in part of the incentives so that the model can operate better. In mining, the hardware and electricity costs saved are offset by mortgage and lock. In addition, if 100% of the block rewards are obtained through hard disk bare mining, the network will be easily attacked.

Questions from the audience

Question 1: Is MASS still suitable for investment?

HPool has also configured some MASS for mortgage mining, and we also hope that it will rise. From the perspective of the entire market, if Bitcoin enters a breakthrough period and starts a bull market, this market will be beneficial to the entire cryptocurrency, and the overall shape is in line with the pendulum. The larger the market value of the currency, the greater the amount of funds, and the more stable the rise, which is the two ends of the pendulum, while the bottom of the pendulum is the currency with a smaller market value, which has a small amount of funds and a greater market value fluctuation. This type of currency can be dispersed.

Question 2: There are many coins in the PoC ecosystem, such as FIL, BHD, and MASS. What are the advantages of MASS? Compared with PoW, the advantages of PoC are power saving and decentralization. What are the disadvantages?

Zhu Yu: Compared with PoW, the disadvantage of PoC is that it is not stable enough. PoC currencies are not mainstream, and BHD market value is not in the top 50. Therefore, the payback period that miners refer to when purchasing equipment is not meaningful. In addition, if too many hard drives are added, the capacity of the entire network will increase very quickly, resulting in very low returns. Of course, there are opportunities in this. In addition, if you can't mine one coin, you can mine other coins.

We can make an analogy with the field of graphics card mining. Compared with the profits of new graphics card machines, mining Ethereum seems insignificant. I believe that such an ecosystem will also appear in the field of hard disks. If you are an IT enthusiast, digital enthusiast or science fiction enthusiast, and have the energy to tinker with it, then you should not be disappointed if you configure a hard disk.

(Alex: BHD’s trading depth ranks in the top 10 on Huobi. This is also a feature of new currencies. The trading volume is not large at the beginning, but the price rises very quickly. After the first halving, it will settle down.)

BlockBeats reminds that according to the document "Risk Warning on Preventing Illegal Fund Raising in the Name of "Virtual Currency" and "Blockchain"" issued by the China Banking and Insurance Regulatory Commission and other five departments in August 2018, the general public is requested to look at blockchain rationally, not blindly believe in the exaggerated promises, establish correct monetary concepts and investment ideas, and effectively enhance risk awareness; any clues of illegal and criminal activities discovered can be actively reported to the relevant departments.