Exclusive interview with Kong Meng, founder of VeryHash, at the 2020 Digital Mining Summit of Mining.com: Mining machine prices are volatile and speculative

Recently, Kong Meng, founder of VeryHash, attended the 2020 CoinWalker Digital Mining Summit and accepted a joint interview with reporters from Mars Finance, Babbitt, BoChain Finance, Star Media, Liandede and other media during the meeting. The following is the transcript of the interview:

1. Mr. Kong, please briefly introduce yourself and VeryHash

Kong Meng: My name is Kong Meng. The product we make is VeryHash, and its Chinese name is Very Hash. VeryHash is a mining machine (computing power) trading platform. Many people regard us as cloud computing power. In fact, we no longer have any cloud computing power-related business. We treat each mining machine as a trading pair, allowing users to buy and mine, and buy and sell mining machines in real time.

We started mining in 2017 and sold the mining machines in September 2017. At that time, we felt that speculating in cryptocurrencies would bring higher returns than speculating in mining machines. Then we continued to trade cryptocurrencies until the first half of 2018. In the second half of the year, there were basically no markets available, so we traced back the original trading data and found that the price of mining machines peaked after the price of Bitcoin, but bottomed out earlier than the price of Bitcoin. Based on this property, we used part of the funds to invest in mining machines, and then built an online trading platform to facilitate users' buying and selling. The project was launched in June 2018 and officially launched in April 2019.

Our company has three steps to do things. The first is to establish computing power standardization, the second is to improve the liquidity of computing power, and the third is to enhance the speculation of computing power.

2. We have all heard of cloud computing power before, so what is the difference between cloud computing power and computing power trading?

Kong Meng: Most of the cloud computing power on the market are rental products, and computing power trading is to trade mining machines as asset products. I have found since 2018 that people rarely pay attention to the changes in the asset prices of mining machines. Everyone pays attention to the price of coins, but no one actually knows the price of a random mining machine. Only mining machine manufacturers and mining machine dealers know the changes in the entire mining machine price. However, the volatility of mining machine prices is sometimes greater than the volatility of coin prices. For example, the price of S19 was about 14,000 in April, and this month the spot price is more than 19,000. The income during this period is higher than that of coin speculation. So when we discovered the volatility and speculation of mining machine prices, we hope that more people will understand the changes in mining machine asset prices through the VeryHash platform.

3. Who are the current users participating in computing power trading? How can new users participate in computing power trading?

Kong Meng: Most of our users are overseas now, and they all place orders in T. We cut it into 0.01T, and you can buy it with a few dollars and sell it whenever you want. For example, many customers may not know us, but they know that Ant Financial has released a new machine, and buying it on VeryHash is the lowest threshold. They buy a little bit on VeryHash and then sell it after it goes up, which meets their trading needs. We will also give users some suggestions at the appropriate stage to help users adjust their positions.

4: Hello Mr. Kong. We have been attending a conference in Chengdu these two days. We have learned from various sources that mining farms, mining pools, and miners have all said that mining is not profitable. Is this really the case? What is the current situation?

It is a fact that mining is not as profitable as before, and no asset can make you make a lot of money without doing anything.

“From 2017 to now, it has shown a very different feature from 2013 to 2017. The price of the currency has basically not fluctuated significantly between the rise and fall. But since 2017, it has risen from $3,000 last year to $14,000, and then up and down. In fact, there are two main reasons for the rise in the price of the currency this year. One reason is that more institutions have entered the market, and the second is the emergence of more futures exchanges.

Why institutions? I am optimistic about this bull market, and I see a market value of 1 trillion at most. Wall Street participates in the financial game as both a referee and a player, setting the rules and playing with you. The problem they are facing now is that they do not have enough chips.

Following this line of thought, many people think that GBTC (Grayscale) is a major factor driving this round of increases. In fact, it is not at all. Most of the funds raised by the Grayscale Fund are Bitcoin. The idea of ​​this product fully reflects the style of American institutions: it may not be able to control BTC now, but it can use its institutional advantages and the advantages of the financial product market to initiate a GBTC fund that allows you to trade in the stock market while manipulating the market value of GBTC, and then forming a premium to absorb BTC in the market, because BTC enters for arbitrage. Investors exchange one BTC for a GBTC share, hold it until it expires, and sell it to complete the arbitrage.

Now one BTC is worth 9,000 US dollars, but it is worth more than 10,000 US dollars when converted into GBTC. I use BTC to exchange for GBTC shares, which will be unlocked after half a year. After trading in the market, I can sell it to stock users. Then I can get back the difference and buy another BTC, thus forming an arbitrage.

For game designers, they can only control more than 330,000 bitcoins in the games they build, and most of the chips are locked. As long as the liquidity of GBTC is maintained, a large amount of BTC can come in, which completes the process of collecting chips.

The biggest feature of the initial entry of institutions is definitely high volatility. Low volatility means no profit, but the greater the volatility in a short period of time, the greater the risk of mining. From June last year to June this year, BTC has been repeatedly hitting the top and bottom of the 200-week line, which is a new situation. With such repeated washes, the mining yield of miners will definitely decrease slowly.

As long as the price of Bitcoin stabilizes in the second half of this year, new currencies will have opportunities. After ICO and IEO, many investors now choose mining coins as their entry point for capital operations. We are also looking at FPGA mining machines, Filecoin mining machines and some small mining coins. We also think that the opportunities in them will be greater than BTC at this stage. The Bitcoin bull market will have to wait until next year.

5: Mr. Kong, VeryHash is engaged in computing power trading. Do you have any plans before and after Filecoin goes online?

We have been studying Filecoin now because Filecoin mining meets my standards very well. Its mining farms are generally IDC computer rooms. Unlike BTC mining farms, which may suffer power outages, the delivery site is very stable. I think the biggest instability now is the mainnet launch time.

The second reason we are optimistic about it is that its sunk costs are already very high. Since 2017, a large amount of people, energy, time and money have been invested in the industry, resulting in a large amount of sunk costs. I think its contracting cost is the first criterion for valuation. I think RMB 2 billion is a good valuation for its circulation.

The third reason is that from the perspective of the economic model, Filecoin mining requires collateral. BHD has already demonstrated this in the early stages, and this model will definitely have a self-circulating upward trend.

We will cooperate with different mining machine manufacturers. For exchanges, the Filecoin project is to launch FIL trading pairs, and for VeryHash, it is to launch mining machines. Our focus is on researching different mining machines, so we hope that users can come to our platform when experiencing Filecoin mining machines. We will also introduce some mining manufacturers and market makers to provide liquidity for mining machines.

I think this is actually a kind of containment for the entire mining machine manufacturers. The original problem with the manufacturers selling mining machines is that if the mining machine manufacturers sell mining machines to customers, and the miners keep holding them and do not sell them, it is actually equivalent to stanking. The mining machine manufacturers are transferring the risk of volatility to downstream customers. Mining machine manufacturers are actually the big shorts of the entire mining industry. They are constantly shipping, but the funds downstream of the industry chain are locked up.

However, if there is a computing power exchange and secondary market liquidity, once circulation is formed, it will create pressure on the shipment of mining machine manufacturers in the primary market.