Jiang Zhuoer: The restart of mining brings new opportunities for mining

On May 11, Zhikuang University held a live broadcast event titled " BTC halving night, come and witness history together ". In the live broadcast, Jiang Zhuoer, founder of BTC.TOP, not only answered the question of "Is Bitcoin controlled by bankers?", he also shared his mining experience and his views on whether people with small capital should participate in mining and how to participate in mining.

The following is a transcript of the live broadcast:

01
Is there any dealer behind Bitcoin?

Host: Bitcoin has experienced an astonishing increase in history. The first halving increased the price by more than 500 times, and the second halving increased the price from 1,300 yuan to 130,000 yuan, an increase of more than 100 times. What is the reason behind the huge increase in Bitcoin? Is there any dealer manipulating it?

Jiang Zhuoer : Bitcoin is a global and decentralized market. Institutions or large funds can only influence the short-term trend of one month at most. No banker can influence the long-term trend , and no banker can pull out such a 500-fold or 100-fold increase.

If we really talk about the banker, or who is driving the price of Bitcoin up, Bitcoin actually has a banker, and the banker of Bitcoin is the central bank of each country . If the central bank did not print money crazily, let alone Bitcoin rising 100 times, Bitcoin would not even exist.

The Bitcoin white paper was published during the subprime mortgage crisis in 2008. At that time, central banks around the world were printing money frantically. The Bitcoin Genesis block recorded the news of money printing on January 3, 2009: "The British Chancellor of the Exchequer provided emergency assistance to banks for the second time."

What is emergency assistance? It is the central bank printing money out of thin air. Just like the recent COVID-19 crisis, the Federal Reserve doubled its balance sheet from $3 trillion to $6 trillion in a short period of time. Money can be printed out of thin air, but wealth cannot. The result of crazy money printing is that paper money depreciates and assets soar.

Since the Federal Reserve was established in 1913, the U.S. dollar has depreciated by 96% since then, not to mention other legal currencies.

Some people ask, Bitcoin has risen from a few cents to tens of thousands of yuan now, and everyone is making money, so who is losing money? The people who lose money are those who hold paper money. At this time, the flow of wealth is like this: the central bank prints money and plunders the wealth of all those who hold money. This is called seigniorage. The awesome US dollar, after the increase in issuance, is equivalent to collecting seigniorage from the whole world.

Then people who use banknotes are unhappy, but there is nothing they can do. Before, there was no competition for currency. The government had a monopoly and people could use it as they wish. Until the emergence of Bitcoin, people finally found a competitor. Now a small number of people voted with their feet for Bitcoin, which led to an increase in the number of Bitcoin users and total market value.

So, in reality, the central bank eats the cake and we get a little bit of the crumbs.

Therefore, we firmly believe that the fiat currency system of printing money without an anchor cannot be sustained. Bitcoin will have great development in the future. Bitcoin can develop to the same order of magnitude as fiat currency, or at least to the same market value as gold . The total market value of gold is now 7 trillion US dollars, divided by 21 million Bitcoins, which is 2 million RMB per coin.

02
From two mining machines to hundreds of thousands, can the path to success be replicated?

Host: Mr. Jiang started from scratch. He began mining with two graphics card mining machines in 2013, and now has grown to a scale of hundreds of thousands of mining machines. Can you tell us how ordinary people can replicate Mr. Jiang’s path to success?

Jiang Zhuoer : Just now we talked about the future of Bitcoin because of the increase in the issuance of legal tender. So, the easiest way to make money is to buy Bitcoin and hold it for appreciation. But for many people, the biggest problem is that the principal is too little. Many people say, I only have tens of thousands or hundreds of thousands of yuan. Even if Bitcoin rises from 10,000 US dollars to 100,000, it will only become hundreds of thousands or more than one million. It is still far from financial freedom. What should I do?

The small amount of capital is not a problem, because the capital I invested is also very small. I entered the market at the end of 2013, and at that time I spent only 30,000 yuan to buy two graphics card mining machines. I did not invest any more money afterwards , but of course I invested a lot of time and energy. Even in the most ideal situation, with only two mining machines, the return on investment can be doubled in 200 days, and there are only a few thousand mining machines now, not hundreds of thousands.

So how did I develop? By "borrowing money to mine". Theoretically, what we want in the end is coins, so borrowing money to buy coins is more direct, but because it is direct, there are problems:

a. If you borrow money from others to buy Bitcoin, they will not lend it to you. Most people do not know what Bitcoin is and will not lend you money to buy Bitcoin. Borrowing money for mining is different. Mining is a model that is easy for everyone to understand . Bitcoin mining is similar to gold mining. The mining machine you buy has an invoice and is a legal asset. Mining can generate cash flow every day and repay the funder, which is easy to gain the trust of the funder.

b. Of course, it is not just about borrowing money for mining. You can also cooperate with the funding party to mine, introduce funds for mining, and then divide the profits according to a certain ratio, and so on.

And the most important thing is to keep the coins after mining and wait for the price to rise. So the best loan is the one that pays the interest first and the principal later, even if the interest rate is higher. When the bull market comes, the difference in income may be several times. I did a lot of borrowing money for mining in early 2016, one of which was done on the Babbitt Forum. Friends in the forum should still remember it.

The final result was also very good. By borrowing money to mine, the coins were mined and hoarded. After the coin price increased by 10 times or dozens of times, the RMB debt was basically devalued to 0. As long as a small amount of coins was sold, the borrowed money could be repaid.

Therefore, this is actually a financial behavior, not a simple mining industrial behavior. Doing so has nothing to do with your capital. Even if you have no capital at all, you can still obtain Bitcoin out of thin air by borrowing money to mine or by mining in partnership with others.

In addition, compared with hoarding coins, mining has another advantage, which is that it can resist the sideways and bear market cycles. If you simply buy coins and the price does not rise or even falls, it will be very uncomfortable and painful.

There was a classic example in the last bull market, the 480,000 man. What happened to him? In 2014, when the price of Bitcoin fell from 8,000 to 4,800, he used the money he had prepared to buy a house to buy 100 Bitcoins, a total of 480,000, so he was called the 480,000 man. Later, he was very miserable. The price of Bitcoin fell all the way from 4,800 to 900, but he held on and did not sell. In 2015, it was sideways around 1,500 for a year, and he did not sell. But at the dawn of dawn, in early 2016, when the price of Bitcoin rose from 1,500 to 3,000 and sideways, he sold it at 3,600. It was a pity that he missed the subsequent 130,000 bull market.

Why did he finally give up and sell it? Because hoarding coins is very difficult, far from being as simple as everyone thinks. Hoarding coins is immovable and dead. When losing money, the psychological pressure is very high, and finally it leads to not being able to hoard coins . Even in a bear market, mining machines are constantly mining coins, and often because of the bear market, people don’t buy mining machines, and the computing power does not increase. Instead, mining machines are slowly mining, slowly recovering the cost, and accumulating more low-cost coins, so that when the bull market comes, they can earn more.

Mining is less risky than buying coins, but of course there are corresponding disadvantages, that is, the returns in the bull market are not as good as hoarding coins. In the last bull market, if someone could hoard coins from the beginning to the end, from 1,300 to 130,000, that would be a 100-fold return, while mining from the beginning to the end, plus the profit from repurchasing mining machines, would only be about 20 to 30 times. But the advantage of mining is that the risk is much lower than buying coins, especially buying S19, a mining machine that consumes the least power . Even if the price of the coin is cut in half again, other mining machines will shut down first to reduce the computing power, and S19 will definitely not shut down, and it will definitely be able to mine coins continuously and reduce costs. It only takes a few months to reduce the cost of S19 to below the production cost of the mining machine manufacturer, and you will be absolutely safe.

The purpose of borrowing money for mining is to increase leverage and make more money with low principal, so the rate of return is not important, what is important is low risk. Therefore, borrowing money for mining and then holding the coins for appreciation becomes a very good strategy . Since I entered the industry, I have relied on this strategy to rapidly expand the scale, from the initial 2 mining machines to the current hundreds of thousands of mining machines.

03
How much capital does a user need to configure mining?

Host: Many people think that only people with a lot of money and assets can participate in mining, and ordinary small investors are better off speculating in cryptocurrencies. Mr. Jiang, what do you think about this? How much money do you think people need to consider buying mining machines and configuring mining?

Jiang Zhuoer : Mining requires a relatively high amount of capital. If you want to directly participate in mining , you must buy at least 1,000 to 2,000 mining machines to have the scale advantage of operation. According to the current cheaper machines, one machine costs about 5,000 to 10,000 yuan, so at least 10 million yuan is required to directly participate in mining . This does not take into account other investments such as mining pool construction. A 50,000 kw mining farm requires an investment of about 20 million yuan, so mining still requires a relatively large amount of capital.

Mining has become very professional now. Ordinary people want to buy a few mining machines with tens of thousands of yuan, but there is no big customer price. It is expensive and slow to send a few mining machines by express delivery, which is much slower than our air transportation + special car directly to the mining farm. Most mining farms are unwilling to host a few mining machines because it is too troublesome. Therefore, for ordinary people, the threshold for directly participating in mining is very high.

Some people may buy some cloud computing products. Cloud computing products have relatively more problems. One is that they are relatively expensive . In terms of the price per T, cloud computing products are basically 30% to 60% higher than bare mining machines. For example, the price of S19 for Ant’s large customers is 161 yuan/T, while the cloud computing mall basically sells it for 200 to 250 yuan/T, or it is only sold to you for a short period of time. S19 is expected to mine for 3-5 years. If you multiply the price of this short period of time by several times, it will be more expensive. Another thing is that there are many pitfalls in cloud computing, and there are many unreliable merchants , so I won’t elaborate on this point.

Theoretically, the highest efficiency in mining is achieved by large miners like us who buy thousands of machines at a time and operate and maintain them in our own mines . This is efficient and safe, and can avoid many pitfalls in mining farms. There are many pitfalls in retail managed mining machines, and large miners have very obvious scale advantages.

04
How can people with small capital participate in mining?

Host: How can people with small capital participate in mining?

Jiang Zhuoer : Our joint mining product, B.TOP, is the best choice for small miners. B.TOP is actually a "mining machine group purchase" where everyone works together to share the scale advantage of large miners.

For example, we originally wanted to buy 1,000 mining machines, and we have 100 small miners, each of whom wants to buy 10. If they buy by themselves, there will be the problems I just mentioned. But if we organize and package, we buy 1,000 by ourselves, and bring small miners to buy another 1,000, and everyone buys 2,000 together, there will be scale advantages.

Moreover, we sell mining machines at cost price. We give miners the same price as the big customer price given to us by the mining machine manufacturers, without any markup . The electricity fee we provide is also the market trusteeship price, so in essence, miners are not our customers, but partners. We do business with miners in partnership .

So when do we start making money? After mining, if the miners make money, we will share 20% of the net profit as dividends . For example, if a miner invests 1 million in mining and finally makes 1 million in net profit and takes 2 million back, we will receive 20% of the 1 million deposited profit as dividends. If the miner does not make money in the end, we will not share dividends. In essence, it is based on the principle of doing business in partnership. The miners pay the money and we work hard. If there is any profit, the miners get the majority and we get the smaller share.

The benefit of the joint mining model for miners is that it greatly reduces costs and risks . If you buy cloud computing power, for example, cloud computing power is 50% more expensive than the price of bare metal mining machines, then when our big miners make a profit of 50%, the cloud computing power has just recovered. If the big miners just break even, then the cloud computing power will be a blood loss. We only collect dividends after we recover our costs. We only share a little when everyone makes money. If we don’t recover our costs, we won’t collect dividends. It’s free service. So from the perspective of the model, joint mining is the most suitable mining model for retail investors on the market.

Through joint mining, you can use your own credit funds or absorb funds from people around you to mine. You know about Bitcoin and mining, and you have a cognitive advantage over people around you. At this time , you can absorb external funds for mining through borrowing or investment, which is the best way to make money.

Finally, you get the mined bitcoins out of thin air, and then hoard these bitcoins, thus completing a process of "creating something out of nothing" . In this way, even if your capital is small, like me, who only invested in two mining machines at the beginning, you can also achieve rapid development.

Risk warning : The content of this article is only the personal opinion of the guest and does not constitute any investment opinion or advice.