Bitcoin halving, mining industry staged a "battle royale": 45 types of mining machines reached shutdown prices, S9 dropped to 100 yuan per unit

Text: Ratchet Pizza

Source: A Blockchain

In the early morning of May 12, Bitcoin experienced its third halving in history.

Overnight, 45 types of mining machines reached shutdown prices, and turning them on meant losing money. The price of the first-generation king, the Antminer S9, dropped to 100 yuan per unit.

After the halving, the mining industry is facing a life-or-death situation. Some mine owners are selling their mines and exiting the mining industry. Some miners are clearing out their machines. At the same time, some are buying at the bottom to fill up their mines.

For big players, they can still find some means of survival.

What about the small players? “After the halving, it’s time for small miners to say goodbye,” said a miner.

Halve, shut down.

In the early morning of May 12, Bitcoin completed its third halving. At the same time, Sichuan Bitcoin miner Wang Baoguo turned off a large number of his mining machines.

Most of these mining machines are Ant S9, which was launched in 2016.

In the mining circle, Ant S9 was once the king of its generation, accounting for 70% of the computing power of the entire network, but now S9 is withdrawing from the stage of history.

F2Pool data shows that at an electricity cost of 0.3 yuan per kWh, the electricity cost of S9 accounts for as much as 140%, which means that if the S9 is turned on for one day, miners will lose 2.67 yuan.

"Now, only when the price of the currency rises to 15,000 US dollars can we use S9 to mine without losing money," said Wang Baoguo.

A month ago, he started looking for buyers for the batch of S9s he had, but no one has taken over so far.

"In the past, even if there was a mining disaster and the price of mining machines plummeted, there were still people who would buy S9. Most of the buyers were owners of large mines. When the price of the currency recovered, they could mine it themselves or resell it to others and make a profit from the difference," said Wang Baoguo.

This time, S9 has almost no hope of recovery. "Unless the price of the coin can rise to $20,000 this year, hyping S9 is a dead end."

Also in Sichuan, mine owner Zhou Wenbo sold his mine.

In 2018, Zhou Wenbo entered the mining industry and built his own mine in Yibin, Sichuan. At its peak, his mine had 8,000 mining machines running day and night.

However, he sold the mine just one week before the Bitcoin halving. “I even sold the transformers, six of them, for a total of 600,000.”

The buyer who took over the mining farm was unwilling to purchase his second-hand mining machines, such as Ant S9, Avalon 852 and Innosilicon T2, etc.

These mining machines were the main models in the mining circle between 2016 and 2018, with a computing power of 13T-17T. However, in the current mining circle, they are outdated.

F2Pool data shows that even if calculated based on a low electricity price of 0.25 yuan per kilowatt-hour, the prices of these three models of mining machines have all reached the shutdown price.

“This is halving,” Wang Baoguo said. “The electricity cost remains the same, but the profit is cut in half. The mining machine that was profitable yesterday has become a money-loser today.”

After this Bitcoin halving, there are far more than just the three types of mining machines mentioned above that have reached the shutdown price.

F2Pool data shows that as of May 14, based on an electricity price of 0.35 yuan per kilowatt-hour, 45 types of mining machines have reached the shutdown price, accounting for 49% of the total number of mining machine models.

Among them are many star mining machines that have been newly launched in the past two years, such as Bitmain’s first-generation 7nm mining machine Ant T15 and Canaan’s main model in 2019, Avalon A1066.

Even the Antminer S19 Pro, which currently has the best energy consumption control and sells for 20,000 yuan, has electricity costs accounting for 48%. Based on this calculation, the payback period for this mining machine exceeds 600 days.

When mining becomes unprofitable, the computing power of the entire Bitcoin network will naturally fluctuate.

Bitcoin block data shows that the speed of Bitcoin block production has dropped significantly since 3 a.m. on May 12.

In the first 24 hours after the halving, the Bitcoin network produced 137 blocks; in the second 24 hours, the Bitcoin network produced 132 blocks. In the seven days before the halving, the Bitcoin network produced 180 blocks per day.

BTC.com data shows that if the Bitcoin block speed is used as a reverse calculation parameter, the estimated Bitcoin network computing power on May 14 was 95EH/s, a drop of 17% compared to 115EH/s on May 5.

The reduction of 20EH/s in the total network computing power is equivalent to the total computing power of 1.53 million Ant S9s.

“This halving is too cruel for the mining industry,” said Zhou Wenbo.

Faced with the halving, miners began to struggle to survive.

In the mining circle, there are buyers and sellers. Zhou Wenbo sold his mine, while Wang Baoguo is selling off his mining machines. So, who are the people who have taken over or may take over their business?

Wang Baoguo said that before the halving, the price of a second-hand S9 was around 200 yuan, but after the halving it dropped to around 100 yuan, a direct halving.

He revealed that although S9 is extremely difficult to sell, there are indeed people in the mining circle who are willing to take over S9.

Most of the buyers are large mine owners.

Their goal is to use the cheap S9 to fill the "base load".

In Sichuan, Yunnan and other places, many mines agree on a basic load when cooperating with power plants, that is, a certain number of kilowatt-hours of electricity must be used every day - even if it cannot be used up, the mine must pay according to the contract.

"It is extremely difficult to attract investment to mines this year. Many new mines can't find miners at all, and they can't even fill the basic load. In order to fill the load, some mines may take over a small number of S9s." said Wang Baoguo.

Another destination of S9 is miners who use "free electricity" to mine.

"Stealing electricity for mining uses 'free electricity', but now, 'free electricity' more often refers to using 'abandoned hydropower' for mining," Chen Hanping told Yiben Blockchain.

Water abandonment refers to letting water that should be used for generating electricity flow away in vain; electricity generated from abandoned water is called abandoned hydropower.

The reasons for water abandonment are very complex. In most cases, water abandonment is caused by an imbalance between electricity supply and demand, that is, too much electricity is generated and too little electricity is used, resulting in the waste of hydropower resources.

Obviously, Bitcoin mining can solve this problem.

"Some mines in Sichuan and Yunnan have hydropower backgrounds. For them, using abandoned hydropower for mining is equivalent to using free electricity," said Yu Ming, owner of a Yunnan mine.

Today, the difficulties brought about by the halving of Bitcoin production are making many miners walk on thin ice.

"I sold the mining farm before the halving, so I was lucky. After the halving, the situation of the mining farm will become even more difficult, and many mining farms will not be able to attract customers," said Zhou Wenbo.

He explained that in terms of computing power, the proportion of old mining machines such as S9 in the total network computing power is not high; but in terms of the number of mining machines, their ownership in the mining circle is still large. The elimination of old mining machines has caused the mining farm to lose nearly half of its customers.

However, even for miners using machines with high computing power, the current situation is very difficult.

"Our mining farm is almost entirely populated by machines with high computing power of more than 50T, but now they can only run in low-power mode," said Yu Ming.

In low-power mode, the computing power of the mining machine will decrease, but the power consumption of the mining machine will decrease more. "Miners earn less, but their electricity bills are even less." He explained, "This is also one of the ways for miners to survive the winter."

Compared with small and medium-sized miners, large miners and mine owners have a stronger ability to survive the winter: during the flood season, the managed electricity price obtained by small and medium-sized miners is mostly around 0.35 yuan per kilowatt-hour, while the electricity price obtained by large miners and mine owners from power plants is often below 0.25 yuan per kilowatt-hour.

If large miners can get an electricity price of 0.2 yuan per kilowatt-hour, it will still be profitable even if they use old S9 mining machines to mine.

In addition, big miners have more means of survival.

Recently, a mysterious "lubian mining pool" (lubian.com) appeared in the mining circle, and its computing power once reached the top five in the entire network. It is speculated that this mining pool is most likely jointly established by several large mines and large miners.

Roadside Mining Pool now ranks sixth Source: BTC.com

"Building your own mining pool can save about 3% of the mining pool commission, which may also be one of the self-rescue methods for large miners." Yu Ming said.

But at the same time, he also admitted that big miners are also inevitably anxious at the moment.

"Based on the current coin price, electricity price, and mining difficulty, even if you use the latest mining machines like S19, it will take at least 500 days to get your money back. What will happen in these 500 days? No one can say."

Faced with uncertainty, miners mostly choose to wait and see.

"We are continuing to attract external investment. We are not shutting down our own machines, nor are we selling them. We are just waiting and watching," said Yu Ming.

The mining circle is waiting for the first mining difficulty adjustment after the halving - after some mining machines are shut down, the difficulty of Bitcoin mining will most likely be reduced.

Only when the difficulty is lowered can miners' profits improve.

Several people in the mining circle told Yiben Blockchain that attention needs to be paid to the leverage issue in the mining circle.

"The mining industry has now been financialized. Many miners not only hedge, but also use various mortgage loans to expand their investments. Excessive leverage may cause some miners to go bankrupt and be eliminated," miner Zhang Heng told Yiben Blockchain.

In the mining industry, miners earn money in Bitcoin, but their costs are paid in fiat currency. Some miners are staunch coin hoarders who are reluctant to sell their coins and choose to mortgage Bitcoin to get loans to buy mining machines and pay electricity bills.

In other words, miners are overdrawing Bitcoin's future earnings to pay for today's expenses.

In this regard, the American blockchain media Decrypt put forward a view: after the Bitcoin production is halved, the United States may replace China and become the global mining center.

In recent years, North American mining has indeed been on the rise. In the past two years, blockchain companies Blockstream and Data AG have entered the United States to mine. The scale of their mines has reached 300MW, which is equivalent to the scale of a medium-sized thermal power unit.

"The two major advantages of mining in North America are cheap electricity and clear laws. Our mine's electricity price is 2.5 cents per kilowatt-hour all year round, which is less than 0.2 yuan in RMB, which is similar to the electricity price in Sichuan during the flood season." Mark, a Chinese miner mining in the United States, told Yiben Blockchain.

Decrypt pointed out that Chinese miners have a higher leverage ratio than the United States. After the Bitcoin halving, miners' income will be halved, but costs such as electricity bills will remain the same.

This means that one day, the money borrowed by miners by pledging Bitcoin will not be enough to pay for costs such as electricity.

In addition, if Bitcoin plummets, over-leveraged miners may "collapse."

However, some people do not agree with Decrypt's point of view.

Yu Ming pointed out that leverage is not a common phenomenon in China's mining industry. In recent years, some new miners with large amounts of capital and backgrounds in power and manufacturing have entered the mining industry. Compared with old miners, they are less likely to leverage.

The policy environment for China’s mining industry is also improving. Recently, governments in many parts of Sichuan have held seminars or issued documents, beginning to give mining farms “statuses” in the name of the blockchain industry and guiding mining farms to consume hydropower, especially abandoned hydropower resources.

There is no doubt that after the halving, the Bitcoin mining industry will inevitably fall into a period of downturn.

You can refer to the fate of BCH and BSV. On April 8 and 12 this year, BCH and BSV completed halving respectively, and their computing power flowed into Bitcoin in large quantities, causing the computing power of the entire network to plummet.

After Bitcoin completed the halving, the computing power of BCH and BSV rebounded, but still did not return to the level before the halving.

BCH recent computing power source: Tokenview

“With a few more halving cycles, there will be fewer and fewer BTC miners,” Liu Changyong, founder of Zhimi University, wrote on Weibo.

"This halving is a milestone for Bitcoin," said Mehmood, co-founder of Block Ledger, on Twitter. "The 'baby' has grown up and no longer needs to be raised by amateur players. Institutional mining will rise, and even the most die-hard small miners will be in danger. The future will be more interesting."

On January 3, 2009, in the genesis block of Bitcoin, Satoshi Nakamoto recorded the front-page headline of The Times that day: "Chancellor on brink of second round of emergency aid for banks."

Eleven years later, in the early morning of May 12, someone recorded the title of an article from The New York Times on April 9 in the last block before Bitcoin halving: "With $2.3 trillion in funding, the Fed's rescue effort far exceeds that of 2008."

This move is considered to be a tribute to Satoshi Nakamoto. In the past 11 years, digital currency has gone from nothing to something, with ups and downs.

Unlike the turbulent mining industry, the cryptocurrency industry was almost calm in the early morning of May 12. There were no major price fluctuations, no crazy discussions among players, and it seemed as if nothing had happened.

But everyone knows that a new era has begun for Bitcoin.

*Some of the interviewees in this article are pseudonyms.