What are the pitfalls in the mining industry? —— Tempting futures

In the previous article "What are the pitfalls in buying mining machines? A comprehensive inventory of pitfalls", we introduced the various pitfalls that you may encounter when buying mining machines, such as dealers running away, mining machines being inferior and "pie in the sky" turning into "trap", etc.

Today, let’s continue to talk about the possible pitfalls of “ futures mining machines ”.

01
Why buy futures mining machines?

According to the delivery time of mining machines, we can divide mining machines into spot mining machines and futures mining machines.

Spot mining machines refer to mining machines that have been produced and can be delivered upon payment, or shipped within a few days after receiving payment. Futures mining machines refer to mining machines that have not yet been completed and need to wait until a certain period of time in the future to be delivered. At present, futures mining machines on the market usually take 2 to 3 months to deliver.

"A day in the cryptocurrency world is like a year in the real world." There are many uncertainties in the cryptocurrency industry. Why would anyone be willing to buy futures mining machines?

From a miner’s perspective, there are three main reasons:

First, miners are optimistic about the future price of coins and the difficulty of mining. This is the primary condition. The essence of a mining machine is a call option, and mining is the process of continuous exercise of the option. Before purchasing a futures mining machine, miners will estimate the future price trend of coins and the changes in the computing power of the entire network based on their own experience and the current market conditions. The purchase of futures mining machines is largely based on an optimistic judgment of the future market.

Second, it is not possible to buy spot mining machines, which is a direct reason for buying futures. After years of development, the competition among mining machine manufacturers has long been very fierce, but mining machines are still in a seller's market and are often in short supply. In March this year, Bitmain's official website launched the Ant S19 mining machine May futures, which sold out in 2 minutes. Now you can only order October futures.

In order to recover funds and arrange production capacity reasonably, mining machine manufacturers will ask large miners and mining machine dealers to pre-order quantities before formulating production plans. The mining machine quota released on the official website is only a small part of it. For ordinary retail miners , it is very difficult to buy mining machines from the official website of mining machine manufacturers.

Third, futures mining machines are "cheap". Take the Antminer S19-95T mining machine as an example. Spot goods can only be purchased from mining machine dealers . The market price is 18,400 yuan/unit, while the September futures on Bitmain's official website is 14,260 yuan/unit, a difference of 4,140 yuan. Some novice miners may be tempted to place orders directly when they see that futures are so much cheaper.

Experienced miners will first calculate an economic account to see if the futures mining machine is really cheap. Taking the Ant S19-95T mining machine as an example, according to the market managed electricity price of 0.23 yuan/kWh during the flood season, the S19-95T mining machine has a net profit of about 36 yuan per day. There are still 4 months until the end of October. It is roughly estimated that an Ant S19-95T mining machine can generate about 4,320 yuan in revenue. In this comparison, the Ant S19-95T October futures mining machine is not really cheap, because futures mining machines also need to bear additional uncertainty risks.

Of course, there will be times when it is more cost-effective to purchase futures mining machines, and at this time, experienced miners will take action.

02
The pitfalls of buying futures mining machines: Mining machine manufacturers

There are many pitfalls in purchasing futures mining machines. Let’s start from the source - the mining machine manufacturers.

In the early days of the industry, due to the immaturity of technology and lack of experience, chip abortions and R&D failures were commonplace, and many mining machine manufacturers went bankrupt or simply ran away. A more famous example is the FriedCat mining machine. In 2012, FriedCat posted a crowdfunding post online to manufacture mining machines. He divided the company's shares into 400,000 shares, 0.1 bitcoin per share, and publicly issued 16,392 shares. A year later, the stock price of FriedCat rose from 0.1 bitcoin per share to 5 bitcoins per share, an increase of more than 50 times. Later, due to the unsuccessful iteration of mining machine chips and some other unknown reasons, FriedCat disappeared at the end of 2014, causing heavy losses to many investors including Wu Jihan.

After years of capital accumulation and technological accumulation, today's mining machine manufacturers are much better. They usually start selling futures after developing new mining machines, and the delivery time is generally within half a year, rather than just drawing a big pie and then directly charging customers money.

Although there are fewer mining machine manufacturers running away or going bankrupt, it is common for futures mining machines to be delayed in delivery. In the early days of the industry, there were even cases where the delivery was delayed for more than a year, such as the Butterfly Miner, which was delayed for nearly a year. During this year, the Butterfly Miner went from being a top-notch mining machine at the time of design to "scrap metal" at the time of delivery, because Roasted Cat, Pumpkin Zhang and others launched mining machines with higher computing power, and the computing power of the entire Bitcoin network skyrocketed.

Now the delivery delay of futures mining machines will not be that long, a few months at most, and the customer’s loss is mainly due to the loss of mining output caused by delayed delivery.

Some leading mining machine manufacturers will provide corresponding compensation for this loss. For example, Bitmain will give coupons to customers after the mining machine is delayed. If customers do not want these coupons, they can also sell them on the market at 80% to 90% off. Some small mining machine manufacturers often do not have such strength and will not make relevant compensation for delayed delivery.

Therefore, when purchasing futures mining machines, it is best to add relevant clauses on delayed delivery of mining machines to the purchase agreement to maximize the protection of your own legitimate interests.

03
The pitfalls of buying futures mining machines: Mining machine dealers

1. Why is it difficult for retail miners to bypass mining machine dealers?

It is actually very difficult for retail miners to bypass mining machine dealers when purchasing mining machines . This is related to the sales strategies of mining machine manufacturers.

Before producing mining machines, mining machine manufacturers often ask dealers to pre-order quantities and pay advance payments, which can help mining machine manufacturers recover funds and reasonably arrange production capacity; on the other hand, mining machine manufacturers do not have so much energy to serve C-end users with different needs . Therefore, it is difficult for retail miners to bypass mining machine dealers and buy mining machines directly .

2. What are the pitfalls of purchasing futures mining machines from mining machine dealers?

1. Run away

The biggest pitfall of buying mining machines through dealers is undoubtedly running away. Unlike the basic structure of mining machine manufacturers, mining machine dealers are a mixed bag with uneven personnel. Many people who buy and sell computer parts in Huaqiangbei have also joined the ranks of reselling mining machines. Futures mining machines require payment first and delivery later, and delivery is basically 2 to 3 months later, which greatly increases the possibility of dealers running away.

It is actually very simple to prevent this pitfall. Just find a mining machine dealer with strength and good reputation, instead of buying from mining machine dealers in WeChat groups or friend circles. When paying for mining machines, be sure to use a public account, not a smuggling account, and do not transfer money privately directly through WeChat or Alipay.

2. After the price of mining machines increases, they are not shipped

Mining machines are not only industrial products, but also have financial attributes. Their prices will rise with the rise in currency prices.

When the mining machine manufacturer delivers the futures mining machine, if the market conditions are good and the price of the mining machine has increased, some unscrupulous mining machine dealers will privately withhold the mining machine and require the customer to pay an additional price before shipping it, or directly refund the user, and then turn around and sell the mining machine to other customers in the market at a high price. In the previous article "What are the pitfalls of buying mining machines? A comprehensive inventory of pitfalls", a real case was mentioned:

A mining pool sold cloud computing power. Because the mining farm it chose was not compliant, it was prosecuted and then closed down. When the cloud computing power was sold, the price of S9 was 13,500 yuan. When the mining farm was closed down, the price was around 30,000 yuan. The mining pool "followed the trend" and refunded all users at the original price and compensated 2% interest. This batch of mining machines was transferred to other mining farms within a week to continue operating, but at this time, all the mining machines and computing power became the mining pool's.

The market is sometimes good and sometimes bad, and the price of mining machines can go up and down. If the market gets worse and the price of the delivered futures mining machine drops, the loss will still be borne by the customer.

3. Taking the compensation/coupon for yourself

In addition, if the mining machine manufacturers delay delivery, the leading ones will give coupons as compensation. B.TOP, a subsidiary of Litecoin, will distribute these coupons to customers and can also help customers sell them at market prices for cash, but there are very few such conscientious platforms, and most dealers will directly take the compensation coupons for themselves.

The existence of mining machine dealers makes it more convenient for retail miners to purchase futures mining machines, but at the same time the process becomes longer, the links become more, and the corresponding risks also increase. Choosing dealers with strong financial strength and good reputation is crucial to avoiding related pitfalls.

04
Other risks of purchasing futures mining machines

In addition to the many pitfalls faced by mining machine manufacturers and dealers, there are also other risks in purchasing futures mining machines. For example, when the futures mining machine is delivered, the computing power of the entire network increases beyond expectations, or the price of the currency drops a lot, making the mining income less than expected or even directly in a loss state, and the mining machine cannot be turned on.

The cryptocurrency market is unpredictable. For ordinary users, if you want to buy futures mining machines, try to choose futures that are delivered within 3 months. The longer the delivery time of the mining machine, the more uncertain factors there are, and the greater the risk.

05
Conclusion

Whether to buy futures mining machines is a systematic decision that requires miners to have a basic judgment of the future market, consider time risks, and calculate economic accounts. When we make up our minds to buy futures mining machines, we also need to avoid the pitfalls of mining machine manufacturers and dealers.