Will Bitcoin increase 10 times? Mining or a blue ocean market? Let's listen to the mining giant explain the evolution of mining | Babbitt Cloud Summit

On April 7, the fifth forum of the 8btc Global Partner Cloud Summit - Evolution of Mining Enterprises kicked off. Lu Lei, founder of Caiyunbit, Li Kuang (real name Li Yingfei), co-founder of Bitmain, and Bo He, founder of Qimiao Capital, were invited to attend.

Regarding the mining industry, three senior practitioners shared many exciting views, such as:

1. The capital flow of mining is stable, which facilitates compliant operations, and the mining yield is very high compared to traditional industries. This is a "blue ocean outside the circle".

2. Bitcoin should have a 10-fold increase this time, which may be the last time interval for a large-scale increase.

3. Miners no longer blindly pursue low electricity prices. Stability becomes a more important consideration and the industry is gradually maturing.

4. The mining industry is evolving, and the boundaries between different fields will become increasingly blurred, integrated competition will intensify, and refinement and specialization will be strengthened.

5. The importance of mining machine manufacturers in the market will decline, and they will transform, firstly, to develop in the direction of various software services, and secondly, to enter the altcoin mining machine market.

The following content was compiled by Babbitt.

Is mining a red ocean or a blue ocean market?

Li Kuang: Bitcoin mining is a cycle from red ocean to blue ocean and then back to red ocean. For example, a bear market can be understood as a red ocean, with new computing power decreasing and even miners being forced to shut down.

But every adjustment is an opportunity for mining machine manufacturers and miners. Whoever has advanced technology, smooth mine operation and maintenance, and cheaper electricity costs will be able to find the blue ocean.

Lu Lei: Mining is a red ocean within the industry, but a blue ocean outside the industry.

The insider Honghai pointed out that mining has always been a niche industry, but today, exchanges, mining machine manufacturers, platforms, and other cryptocurrency players are all planning to mine, and competition is intensifying. There are two reasons for this: first, the cash flow of mining is relatively healthy, and second, the mining industry is relatively relaxed at the policy level, which is convenient for corporatization and standardized operations.

Circle Blue Ocean said that in the eyes of veteran miners, a year to recover the investment seems too long, but this rate of return is very high for traditional industries. Some customers contacted by Caiyun Bit were surprised and satisfied with the high rate of return of mining.

This also shows that mining is still relatively unpopular and scarce outside the industry, and they don’t know how to participate in mining. Therefore, I think there are still many opportunities in mining.

What will happen to Bitcoin after the halving? What measures have you taken to prepare for the halving?

Li Kuang: Mr. Han (Wu Jihan) recently said in a live broadcast that he is no longer particularly enthusiastic about Bitcoin. This does not mean that he is not optimistic about the market, nor does it mean that he thinks Bitcoin is not good. Rather, it means that he has gradually thought about this matter from many dimensions.

This is a more rational and mature way of understanding Bitcoin, Bitmain, and the entire industry.

Bohe: As a mining farm, we must ensure sufficient cash flow to cope with the risk of halving this time. Secondly, I entered the mining circle in November 2019, and I chose mining machines with high computing power and low power consumption, which are less risky than mining machines with low computing power and high power consumption. We are still optimistic about the entire mining industry.

We expect that the price of Bitcoin will definitely rise in the long run, but we have no way to predict in the short term.

Lv Lei: We are an enterprise, and we pursue profits and the development of the company. From this perspective, we are prepared for the sharp rise and fall of the currency price every day.

When the industry is hot, it is beyond imagination. When it is cold, it can be very miserable. We have encountered people who are too optimistic about the market and want to sell their houses, take out loans, and go all in. Generally, we advise them to calm down.

The volatility of this industry is greater than that of any other industry. Practitioners should first consider this volatility and how to survive, rather than staring at high profits.

Halving is not the core reason for the rise in the market, it is more of an inducement. Bitcoin has already produced more than 80%, and halving does not have a big impact on the supply and demand relationship.

I think the core logic of the price increase is that it is accepted by more people and more capital markets. When people no longer discuss it with strange eyes, it will have great room for growth.

I think Bitcoin should have a 10-fold increase this time, and it may be the last period of massive increase.

With the upgrading of mining machines, which mining machine of Caiyun Bit sells the best?

Lv Lei: Caiyun Bit entered the mining machine sales track in 2013 and sold tens of thousands of mining machines in 6 years. Our mall mainly sells new mining machines. The sales of new machines such as Antminer S17 and Shenma M20S are quite large. The sales of Avalon A1066 and Xindong T2T series are also good.

Several domestic manufacturers can find a very suitable entry point based on their own product features and launch a highly efficient product at a certain point in time.

In general, the lower the power consumption and the more advanced the mining machines are, the greater their sales volume, the better their sustainability and the stronger their vitality.

▲From left to right, from top to bottom: Jun Yao, Bo He, Li Kuang, Lv Lei

How does Bitmain maintain its technological leadership? How long can the new generation S19 mining machine last?

Li Kuang: The longer you work in mining machine design, the more you will benefit from making mistakes. At least you can find out that this path is not feasible! Bitmain's advantages are all gained through trial and error in technology.

I think S19 can lead for at least half a year. How long it can mine is not particularly related to the price of the currency. If the price of the currency rises quickly, it can mine for a long time. If the price of the currency does not rise much, it can mine for even longer, because new models will not be released. I think S19 will be able to mine for more than three years.

Mint asked: When chips enter the 5-nanometer era, it will become increasingly difficult to update them. Everyone generally sees the advantages of electricity resources in the mining track. What do you think of the development trend of the domestic mining industry?

Li Kuang: We say that China has cheap electricity resources, but in fact every country has very cheap electricity. But it is still difficult for Chinese miners to go abroad.

The culture, policies and tariffs of different countries are different. If you don’t have experience, you will miss the opportunity by the time you figure out all these things. For example, you go to investigate resources in the spring, and when you think it’s almost ready, it snows.

We also found that some countries have stable policies and cheap resources, but the construction period of a mine is long and the investment is huge, so you need to be well prepared. If you are optimistic about mining in the next five years, you can go abroad and build slowly. If you want to seize the market, it is recommended to do it in China.

You need to make an estimate of the opportunity cost of your time.

Lv Lei: People in the industry think that the profit level of mining has been declining, but it is still very attractive to people outside the industry. In addition, as the mining industry becomes more and more standardized and the chip manufacturing process gradually enters the limit stage, more people may plan and layout the mining industry from a longer-term perspective. This is a new feature of the development of this industry.

Let me interrupt for an advertisement. I am now on the train going to Caiyun Bit's new 100,000-kilowatt grid-powered mining farm. Investors who are in need of a compliant and stable mining farm can contact me.

There are newly launched mining machines and second-hand mining machines in Caiyun Bit Mall. What do you think of the second-hand mining machine market?

Lv Lei: Second-hand mining machines are a huge market. We analyzed the website traffic of Caiyunbit and found that many people are looking at the second-hand mining machine section. We don’t sell many second-hand mining machines, but this supply and demand information channel allows everyone to freely publish information about second-hand machines.

The supply channels of second-hand mining machines are very complex and diverse. There are retail players who play by themselves, those from small mines, those from large mines, those who replace machines at large mines, those who replace machines at manufacturers, and so on.

Second-hand mining machines generally have high power consumption and are cheap. Their core use is mainly in mining farms with competitive electricity prices.

It is not recommended for newcomers to participate in the second-hand mining machine market. The risks lie in the quality of the machines and the delivery risks.

Li Kuang: Second-hand mining machines are very popular recently. After the sharp drop, many hydropower mining farms are under great pressure to attract investment. If the mining farms are not fully filled, the owners of the mining farms cannot explain to the power plants, so they simply buy second-hand mining machines, such as Antminer S9 plus power supply, which only costs more than 100 yuan, to fill the load of the mining farms. Of course, some people come here to buy at the bottom at this time. They are basically people with cheap electricity resources.

Bohe Question: What do you think of the competition between thermal power mines and hydropower mines? Will there be a surplus of resources after the mining boom?

Li Kuang: Bohe mentioned the difficulty of mine survival this year. This is a problem faced by both hydropower and thermal power. It should be said that the cost of thermal power is relatively high. With the sharp drop in the price of coins, the operation difficulty is indeed a little greater. But the advantage of thermal power is stability.

In addition, from last year's flood season to this year, there are more and more participants in the mining industry, and mine resources are no longer as scarce as before, so this is also a process of sifting through the sand.

Today, machines with high computing power and low power consumption are generally very expensive, and people still hope to put them in stable mining farms. Thermal power mining farms have entered an era of competing for services. If the mining farm is well built and the operation and maintenance quality is good, there will be an advantage.

Lv Lei: I would like to add that people are no longer blindly pursuing low electricity prices, and stability has become an important reference factor. This is the process of the industry gradually maturing. We are now focusing on the layout of mines that are also powered by the grid.

What do you think about exchanges setting up mining pools?

Lu Lei: I think this is a relatively important strategic layout for exchanges, because coins are mined by miners. Whoever "seizes" the miner group will have a lot of coins coming into their exchange, and will have a mining pool and computing power, which will promote the brand of the exchange.

If exchanges provide some fee subsidies to mining pools, they will still be very attractive to users.

Moreover, exchanges can provide many services and have strong financial resources. However, mining pools are relatively mature in technology accumulation and understand miners. It can be said that exchanges operating mining pools have made the mining pool industry enter a red ocean stage.

Li Kuang: I dare say that exchanges must have thought about it for a long time before they could set up mining pools. The integration of exchanges and mining, the integration of mining and financial products, and the exchange providing users with a full range of services are definitely the trend.

As the industry develops, the boundaries will become increasingly blurred, and everyone will increasingly integrate and compete.

Lu Lei: From this we can also see that the evolution of mining companies is that, on the one hand, their businesses are becoming more and more integrated, and on the other hand, companies are also better able to find their own specialties, and the track will become more and more refined.

Why are everyone starting to deploy cloud computing power?

Li Kuang: The same principle applies to cloud computing and mining pools. They all want to increase their brand influence through strategic layout and horizontal expansion.

Cloud computing is a great opportunity for many small miners to get started. In the future, many manufacturers will get involved in this process to attract users. I don’t think it’s particularly important whether it makes money or not.

Lv Lei: The increasing cloud computing power is an inevitable direction for the development of the industry. Mining machines and mining farms are becoming more and more professional. In the future, mining enthusiasts or investors will definitely enter this industry through a service provider. The simple and convenient characteristics of cloud computing power will definitely be an important entry point for mining investors to participate in this industry in the future.

Caiyun sells and hosts mining machines, so why not cloud computing? We must make cloud computing a success, a product that is timely, appropriate, compliant, long-term, and suitable for ordinary investors.

Currently, a small number of Caiyun BitCloud's clients are B-end clients, and most are C-end clients. I also mine and am a miner, so we have always hoped to make mining as simple as a game and as reliable as a century-old store, so that more people can participate.

Caiyunbit's cloud computing power is based on a perpetual contract, which means that it will continue to mine until the output cannot cover the electricity cost for a long time. Why choose to launch this form of cloud computing power instead of short-term computing power?

Lv Lei: The greatest value of mining lies in its time value. Mining can use time to mitigate risks and gain greater benefits. Mining is a business with controllable losses and a large profit ceiling. In other words, on the basis of optimizing computing power and low power consumption, mining while earning, waiting for the huge benefits brought by the surge in the price of coins, this is the core value of mining. And no one can tell when the price of coins will rise sharply, so perpetual contracts are very important, so that miners have sufficient time rights to enjoy the maximum benefits brought by the surge in the price of coins.

Why don’t small currencies have cloud computing products?

Li Kuang: The speed (computing power growth) of small currency mining machines is not that fast, the user base is also very small, and the cloud computing power platform needs to stock up first, and the stockpiling process is very risky.

In general, mining farms and mining machines can mine stably and continuously for a long time, and only these coins are suitable for cloud computing platforms.

Mint: Bitcoin is not particularly stable at present, and the stability of small currencies is even weaker. If a currency has high returns, its high returns will only last for a short time, because high returns will attract many people to come in and lower the returns. If the returns are low, it will not be very attractive.

The current market education cost for cloud computing power is relatively high. In the future, whether in the short or long term, it will experience explosive growth.

How can ordinary investors enter the mining industry? How can they avoid risks?

Lu Lei: Mining machine hosting can be likened to cloud computing power that is more suitable for professional players. Mining machine hosting requires users to understand the performance, parameters, brand, and use of mining pools. We welcome everyone to choose freely for both hosting and computing power.

But for ordinary investors, I suggest you choose Caiyun standard computing power, because the mining machine corresponding to this computing power is carefully selected by us. The team has 6 years of experience in the industry and is more familiar with various mining machines on the market than ordinary users. We are a perpetual contract. Our value comes from the service to customers, and customers are willing to choose us based on their trust in us and our ability to create profits for users. We must select the optimal computing power for all our resources from a subjective and objective point of view.

Ordinary investors can save themselves the trouble and risk of choosing mining machines by choosing Caiyun standard computing power.

What new plans do you have for 2020? What is your judgment on future trends?

Lu Lei: With the halving, we see more and more participants in the mining circle, and users are increasingly demanding the comprehensive service capabilities of mining companies. But this does not mean that mining companies must do everything and be strong in everything. In fact, companies in the circle should be becoming more and more professional.

In the future, Caiyun will provide one-stop services for mining enthusiasts and investors with cloud computing power as the core. In fact, cloud computing power is a combination of mining machine purchase + hosting + access to mining pools. It can be said that Caiyun has been doing cloud computing power for so many years, allowing more people to participate in mining conveniently and enjoy the dividends brought by industry growth.

In the future, I hope that the price of the currency will increase by more than 10 times, and people will talk about Bitcoin after dinner as common as talking about a certain stock, and no longer look at people who play with the currency with strange eyes.

Li Kuang: I am still very optimistic about this industry in the next 10 years. I think Bitcoin and the entire industry will be popular among a wider range of people, and the convenience brought by using digital currency will increase.

Existing companies should seize this opportunity to serve more users, and the value carried by the entire industry will increase.

In this round of plunge, many people found that the contract risk is very high and began to consider low-risk investment. Then, Matrixport will provide customers with some low-risk and stable income tools, such as double financial management.

Mint: Let me talk about this in a few points:

Mining machine manufacturers: The importance of mining machine manufacturers in the market will decline, because mining machine chips have reached the technical bottleneck of the entire chip industry. Mining machine manufacturers may only be able to fine-tune the hardware iteration of some products, such as the optimization of power supply and energy consumption.

There are two directions for mining machine manufacturers to transform: one is the Bitcoin field, which will develop in the direction of various software services. The other is the altcoin mining machine. In fact, Bitmain has never relaxed in this regard, such as the Dash mining machine and the K5 mining machine.

Mining farms: The resource structure will undergo adjustments, and large mining owners will definitely be deeply tied to power resources. The future mining farm oligarchs will definitely emerge in the hands of institutions that have a say in the hydropower industry.

Policy dividends: In recent years, we have seen local policies continue to encourage the "big data and cloud computing" industry to move in in the form of industrial parks. For example, the Ganzi Prefecture government in Sichuan Province established an industrial park last year. However, the specific implementation policy has not yet been released. We should be able to see policies that actively promote the development of the industry in the next few years.

Derivatives industry: Mining financial derivatives actually developed very rapidly last year, with the total market lending exceeding US$1 billion. This trend will continue to rise.

Link to this article: https://www.8btc.com/article/579748
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