Li Kuang: Bitcoin halving is imminent, how to seize the last opportunity to enter the market?

Qiao Yi: Hello everyone, I am Qiao Yi, the host of this live broadcast room.

Let me introduce myself briefly. I am Qiao Yi, CMO of Seal SC, which is committed to the development and innovation of blockchain + field. It is a middleware cloud platform that connects the Internet and blockchain network, and provides Oracle services with its own public chain. It aims to enable users/enterprises to build DApps without barriers, interconnect the current major public chains, and realize cross-chain integration, value circulation, data exchange and other business scenarios.

Today, our live broadcast guests are Huang Fangyu, the co-founder of Wanyou Computing Power @hfy, and Li Kuang, the CEO of Matrixport @李矿. The two bosses, please say hello to everyone!

Li Kuang: Hello everyone, I am Li Kuang from Matrixport. In 2013, I was in charge of the mining machine market and sales at Bitmain.

Huang Fangyu: Hello everyone, I am Huang Fangyu from Universal Computing Power. I am very happy to meet you all in the 499 live broadcast room today.

Qiao Yi: Now let's start today's Q&A session! We have two guests this time. Please take turns to answer our questions. Q2 Is it a cold winter for the mining industry or a time for flowers to bloom?

Huang Fangyu: How should I answer this question? I think the bitter cold winter is a sign that all flowers are about to bloom, and spring will come after the cold winter. The past month has been a difficult time for most miners. The price of the currency plummeted after the computing power soared, and the direct impact was that many 1 million machines were shut down.

In fact, for most industries, there is a common point, which is to build positions in a bear market, so that they can get higher alpha in the bull market, which is what we commonly call excess returns. Take mining as an example. Due to the decline in currency prices and the relative increase in computing power, the entire market now seems to be in a not very ideal profit range. However, in Q2, it is actually the time to increase investment, provided that you are already ready to enter this industry or are a player who has been deeply involved in this industry.

Why? From a fundamental perspective, the price of coins and difficulty are two factors that miners cannot control. What we can control, apart from our own operation and maintenance capabilities and understanding of the industry, is the most important factor that we should control, which is cost. First, in fact, for many mining machines, they are already close to the production cost line, which is a relatively cost-effective price for our own procurement costs. Second, for the current electricity price, it will enter the flood season in May. From the current situation, it seems that this year's water will not come as late as last year. In addition, affected by the bear market and the possibility that 80w-100w machines may be completely shut down after the halving, now whether it is self-built sites or hosting prices will be relatively cheaper, which is another cost control, equivalent to a higher safety factor. So, at least in Q2, it can help us save as much as possible on cost expenditures, and then the rest is to dig firmly and wait for the arrival of the bull market.

Qiao Yi: OK, thank you Mr. Huang for your answer. Next, please welcome Mr. Li @李矿,

Li Kuang: I personally think that Q2 is the spring of the industry. After Bitcoin has gone through a round of deleveraging, some people will be washed out, and the halving of Bitcoin mining will also eliminate a small part of the computing power. It is a good time to enter the market now. Compared with entering the market before the big drop, the safety factor is higher. Now is the time for the industry to turn from the red ocean to the blue ocean, and there will be a lot of opportunities. Whether it is many people engaged in cloud computing power or exchanges doing mining pools, they are actively laying out.

Qiao Yi: Thank you Mr. Li for your answer. Question 2: What do you think of the upcoming halving? If the price of the currency remains low after the halving, will mining accidents occur?

Li Kuang: I don’t think that the halving will cause mining accidents. Bitcoin mining is a dynamic equilibrium process. The current price of the currency is not low. After the halving, the flood season will come and the mining cost will be reduced, so the proportion of eliminated computing power will not be large. If the flood season ends and the currency price remains at the current price, the old models will be eliminated. However, these models have been running for a long time and have already paid back. The elimination of old models is a normal metabolic process and is not a mining accident. It is also a good thing for machines that purchase new computing power, and mining income will increase. If, if, when the Bitcoin production is halved, the price is halved again, then it will be considered a mining accident. The sign of a mining accident is that a large number of people in various groups are shouting that the mining machine should be replaced with a stainless steel basin.

Huang Fangyu: I think the probability of a mining accident is very small. In fact, just like what Mr. Li said, mining has always been a dynamic balance process. For example, the safety cushion of the machine is Bitmain's 17 series and Shenma's 30 series. There will also be Bitmain's 19 series at the beginning of the flood season. With the arrival of the flood season on May 25, the electricity price cost will drop by 40%-50%. The only machines that will be directly eliminated are the 80w-100w machines, provided that the coin price remains sideways in this range. Take 100w as an example. In fact, it has completed its historical mission in the last halving cycle, spanning a full four years. This is a normal dynamic balance. What we call a mining accident should be when the latest generation of machines have no profit. The mining machine is shut down, that is, the electricity cost is higher than the cost of buying coins, that is, the profit of all machine mining is not as cost-effective as buying coins directly. This is called a mining accident.

But in theory, this is not likely to happen. The total computing power of this level of mining machines now accounts for about 20%-30% of the total computing power of the market. Even after the halving, this level of machines is still very safe, and with the decline in computing power, this level of machines will have the feasibility of earning higher returns. Moreover, with the continuous adjustment of difficulty, as long as the price of the currency does not fall to a very low price, I have done my own calculations. For example, the s17 series of machines will not shut down even if the price of the currency drops to 10,000 yuan. The decline in computing power and the decline in the price of the currency can be almost hedged, so the probability of a mining accident after the halving is very small.

Qiao Yi: I would like to ask @李矿李总: As a senior miner, can you share with us how miners can survive the recent drop in coin prices? What does the 312 incident mean to the mining industry? How did you deal with it?

Li Kuang: Let me talk to you. There have been several such callbacks in history, but the rebound speed is also quite fast. Miners should master a set of scientific methods to estimate mining income. These callback opportunities are actually opportunities to get on board. If the mining machine is not available in time to buy mining machines as the price of the currency drops sharply, it is also a good configuration to buy some cloud computing power at the bottom. When the price fell sharply last month, I "bottomed out" at Wanyou Computing Power. If you buy a mining machine, it will take a lot of time to inspect the goods and trust it, and you will miss the opportunity. The 3.12 incident is for the mining circle to let everyone know that risks can occur at any time. When the mining profit is high, you can't blindly pursue higher returns. You must use tools to hedge appropriately. Keep money for future development, don't rush to get rich, mining is a marathon.

Qiao Yi: Mr. Huang Fangyu, in which direction will the computing power of the entire network develop after the Bitcoin halving?

Huang Fangyu: In the long run, there is no doubt that computing power will increase, but after the halving, as the old generation of machines are shut down, computing power will decline for a period of time. It is estimated that it will fall to the range of 80e-90e. Then, due to the production capacity limitations of the new generation of supercomputer server chips, the amount should not be too large. After the halving, I expect it to smoothly go through several computing power cycles, and then there will be a steady increase.

The price of the currency is unpredictable. If we assume that the price of the currency has been hovering in the range of 6000-8000, as we said just now, it will still be in a dynamic equilibrium. The increase in computing power of new machines will reduce the revenue per t, and then the machines with high power consumption ratios will be shut down one after another. For example, after the 80w/t machine is shut down, the next risky machine will be 70w, then 60w, and so on. However, this time will be relatively long.

But on the contrary, machines with high power consumption ratio are the safety cushion of machines with low power consumption ratio. In summary, assuming that the price of the currency remains unchanged, the computing power will first fall after the halving, and then rise steadily. This is what I think may happen this year.

Qiao Yi: Mr. Li, the mining industry has been expanding overseas mines recently. Can you analyze the advantages and disadvantages of establishing mines in different countries?

Li Kuang: Okay, if you don’t have overseas work and life experience, it is still difficult to expand your mine overseas, so I suggest you be cautious. Many people who have gone overseas still find that China is reliable. The electricity cost of finding the right resources in Northern Europe, Canada, and North America is about 0.2 cents, but the construction and operation and maintenance costs are more expensive, and there are some hidden customs clearance costs, which must be calculated in advance. It is very worry-free for small and medium-sized miners to dig in China, with thermal power in winter and flood season in summer. The advantage of overseas is stable policies, and the disadvantage is that the construction period budget is uncertain. If you are determined and have the financial resources to make a long-term layout, you must find reliable resources, make investment budgets and time forecasts, and if these are all OK, you can invest.

The Middle East is pretty good, but the locals have to be reliable. If you are in an unfamiliar place, you have to be cautious and consider not only the investment cost but also the opportunity cost.

Qiao Yi: Well, thank you Mr. Li for your professional analysis. It is better to choose according to the actual situation. Mr. Huang Fangyu: Do you think the transition from POW to POS is an inevitable trend? I have seen a survey data showing that 300,000 miners have poured into the cloud computing market. What do you think of this phenomenon? Does Wanyou Computing have any plans for the flood season and Bitcoin halving?

Huang Fangyu: Actually, I always think that POW has the advantages of POW, and POS has the advantages of POS. It is not to say that switching to POS is an inevitable trend. Moreover, compared with many old miners and old players in many circles, POW has been a belief that they have adhered to for a long time. Their consensus on POW is that it is difficult for everyone to unanimously accept POS in a short period of time. Some miners even firmly believe that only POW can truly achieve decentralization. Of course, POS also has the advantages of POS. It skips some of the slightly cumbersome proof of work in the early stage. I don’t think there is any best consensus algorithm, or simply put, consensus, each algorithm has its own pros and cons and trade-offs. It can only be said that there will be more suitable ones in comparison.

As for the cloud computing market, it is still in a relatively chaotic stage, so it is difficult to have many speculators in it. Of course, the starting point of cloud computing is actually a very good thing, because the digital currency mining industry, the group, the scale effect is already quite obvious, from the perspective of cost and management, it is relatively easier to control, professionals do professional things, cloud computing provides a lot of retail investors with an entry channel, let more professional people to manage on their behalf, can also improve the rate of return, customers need to identify some strong strength endorsement and transparent platforms for selective investment, such as our two cooperative computing platforms of Wanyou Computing, 1tmine and Bit Kangaroo, are transparent management systems, but also designed for different customer groups, 1tmine will design customized mining investment products for some high net worth customers, Bit Kangaroo will be suitable for customers with limited funds who want to enter this industry. Of course, these customer portraits are all customer groups that target hoarding coins as part of asset allocation.

In fact, we have been continuously planning for the flood season and the BTC halving since last year, and have purchased a large number of new-generation 7nm and 8nm machines. In order to maintain our continued competitiveness in the industry, as I mentioned earlier, machines with low power consumption ratios will be more secure in terms of usage cycle and yield, and more resistant to risks. The essence of any business is always risk control. We have always regarded mining as our own career. For the flood season, we have also been looking for some compliant, high-quality, and cheaper electricity resources. This is what we have been insisting on for so many years to adapt to the changes of the times.

Qiao Yi: May I ask the two bosses @李矿 @hfy: Currently, exchanges are "invading" the mining industry and Binance Mining Pool is about to be launched. What do you think about the future landscape of mining pools?

Li Kuang: Exchanges are suitable for mining pools, which can achieve the effect of 1+1 greater than 2. Mining pools input users and deposits for exchanges, and can also package transactions to enhance the brand. If exchanges subsidize mining pools in terms of fees, the advantage will be even greater. (I feel that the major mining pools are a little panicked) On the other hand, mining pools are also suitable for exchanges. It is more convenient for miners to sell coins. However, exchanges are more complicated than mining pools. It is easier for exchanges to build mining pools upstream. For example, sister Alina's mining pool is the largest mining pool in the exchange. When exchanges build mining pools, it is essentially a process of horizontal expansion, building a full industrial chain, and competing with competitors in a differentiated way. I think there will be exchanges doing cloud computing power soon.

Huang Fangyu: Just like Mr. Li said, exchanges are suitable for mining pools. It can even be said that it is a more significant direction for exchanges to attract traffic, which can be regarded as the second leg. Mining pools and exchanges complement each other, and the effect of 1+1 being greater than two is obvious. The liquidity of users and funds has also brought new customer groups to the transaction, even large groups. There are also some new transaction drainage models, which are all good things for exchanges, and will also bring greater exposure and attention to the brand. For example, OKexpool has done a good job. I hope that all parties will cooperate and win together in the future!

Qiao Yi: Thank you for your hard work, Mr. Huang. I would like to ask you two: most of the veteran miners in the industry have a history of blood and tears. Can you share your own experiences or the pitfalls of mining and prospecting in recent years? Do you have any suggestions and advice for new miners who have just entered the industry?

Li Kuang: In 2016, I took a bunch of big clients to Xinjiang to build the world's largest mining farm. During the construction, the electricity fee was agreed to be 0.22. At that time, everyone made a great determination, took a great risk, and invested. As a result, the construction period was delayed again and again, and then the construction was carried out in winter, which was extremely painful. After the construction was completed in the spring, there was no electricity again. It would have been better not to build in winter. In June, after the electricity was turned on, the electricity fee rose to 0.42. Fortunately, it was a bull market, and the custody fee received 80 cents, which finally paid back. (Also made a lot of money) After the bull market, there was no electricity again.

Huang Fangyu: Let me talk about the original overseas layout of mining plants. It just so happens that Mr. Li also mentioned it earlier. Of course, I can’t say it’s a pit now. The need for layout was in early 2017. Because of some uncertainties in China at that time and the desire to diversify risks, I stayed in North America for seven years. I was familiar with that place, so I built a mining plant in North America. Compared with the same period, it was a very large mining plant in North America. Although there were some advantages in terms of electricity prices, the construction period was long and it took more than half a year to build. In terms of construction cost, the electrical UL certification had not been passed at that time and it was not applicable to containers. Therefore, it was much higher than that in China, several times the construction cost, and the opportunity cost was too high.

In addition, during the early days of domestic hosting, we also encountered some unprofessional operation and maintenance, problems with the stability of the site power supply, and issues with the electricity deposit. However, these cannot be called bad things. The learning curve for everyone after entering the market is roughly the same. The pitfalls encountered in the past may be good for the future, and you can avoid stepping into the same pit again. In fact, every old miner has encountered this kind of thing more or less. Everyone has stepped into various pitfalls to slowly get to where they are today. Only with a deeper understanding of the industry can you be more professional and avoid many potential risks for yourself and your customers.

Qiao Yi: Finally, let us thank both bosses for their wonderful sharing!