Global miners under the epidemic: Iranian miners flee, US mines close, and Chinese mines compete to reduce prices

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With the outbreak of the new coronavirus, Bitcoin miners around the world have also been deeply affected.

In Iran, the global supply chain has been cut off by the epidemic and mining machines cannot enter.

In the United States, a large mining farm called "Digital Farm" covering an area of ​​570,000 square meters announced its closure.

In Russia, mining has become a safe haven for wealthy Russians, but it is difficult for Chinese miners to join in.

In China, the flood season in Sichuan arrived as expected, but the booming scene of previous years did not reappear. Mine owners started a price war, but the actual number of investors was pitifully small.

Miners around the world are waiting for the Bitcoin halving to happen. Perhaps only then will the answer to the future of the mining industry be revealed.

01 Iran and Russia

Iran has always been a "mining paradise" in the minds of Chinese miners, but this time Iran is also one of the first countries to be affected by the epidemic.

Iran reported its first two confirmed cases on February 19. So far, the number of confirmed cases of COVID-19 in Iran has exceeded 40,000.

Chinese miners remaining in Iran are facing a difficult choice - to stay or to evacuate as soon as possible?

"For overseas miners in Iran and other places, the biggest impact of the epidemic is that it has cut off the supply chain of mining machines and other equipment." Miner Lao Hu told Yiben Blockchain.

He said that the mining machines in Iran are mainly Antminer S9, which were eliminated in China. After the price of the currency fell, these mining machines began to shut down.

Now, new mining machines cannot be shipped into Iran, and Iranian miners are faced with the embarrassment of having no mines to mine.

"Since the end of 2017, Iranian customs has stopped clearing mining machines, so they cannot be cleared by normal customs clearance," Lao Hu said, "unless the miners have their own 'grey customs clearance channels'."

Affected by the epidemic, the transportation costs of mining machines have also increased significantly. "The freight rate has increased by 10 yuan per kilogram," Wang Ji, who does logistics business in Iran, told Yiben Blockchain.

Take Bitmain's latest mining machine S19 as an example. Its bare machine weighs 14.4kg. With the packaging and power supply, the shipping cost of a mining machine will increase by at least 150 yuan.

To make matters worse, the Iranian government began to tax miners.

"In Iran's free trade zone, the electricity price has risen to 0.25 yuan per kilowatt-hour. There will never be an electricity price of 1 cent again," said Lao Hu.

Many miners therefore speculate that if the market does not improve significantly after the Bitcoin production is halved, many miners will flee Iran.

Unlike Iran, miners in Russia, another major "mining paradise", have been almost unaffected by the epidemic.

"We are still mining in our mine in Russia," miner Du Yaobo told Yiben Blockchain.

In his opinion, Russia's mining industry is stable for two reasons: first, electricity is cheap in Russia; second, most people who run mines in Russia have both money and connections, and can do both black and white business.

In recent years, affected by the international situation, the Russian economy has not been prosperous, and the ruble exchange rate has been falling. Many Russians with connections have begun to pay attention to the mining industry.

"One of my clients in St. Petersburg is mainly engaged in the import and export of steel. He told me that Putin's new round of economic plan has a great impact on traditional industries, so he has also laid out 'emerging industries' such as Bitcoin mining," said Du Yaobo.

"For these Russians, mining is more of a risk-averse strategy," he said.

Energy revenue has always been the bulk of Russia's foreign exchange earnings, but excessive reliance on energy revenues such as oil and natural gas is a major weakness of Russia.

For example, many Russian businessmen have suffered heavy losses due to the recent plunge in international oil prices.

Therefore, many businessmen in Russia are studying Bitcoin mining, because the mining industry can directly convert energy into money, eliminating the need for logistics and trade, and will not be affected by international sanctions.

"In Russia, many people who do foreign exchange have also entered the mining industry." Du Yaobo told Yiben Blockchain.

He believes that even if the price of the currency falls and the mining machines approach the shutdown price, it will not stop the Russians from mining.

02 United States

Since late March, the United States has also become a hard-hit area by the new coronavirus.

As of 11:00 a.m. Beijing time on April 3, there were more than 245,000 confirmed cases of COVID-19 in the United States. In the past 24 hours, there were 27,800 new confirmed cases in the United States.

Amid the epidemic, Bitcoin miners in the United States are also unable to remain immune.

"Some large mining farms in the United States have closed down because of this." Mark, a Chinese miner who mines in the United States, told Yiben Blockchain.

The bankrupt mining company is called Digital Farms and is located in California.

It is one of the largest mines in the United States, covering an area of ​​570,000 square meters and having a power load of up to 28 megawatts, which is equivalent to the electricity consumption of 20,000 ordinary American households.

On March 18, Digital Farm’s parent company DPW Holdings issued a statement saying that the company’s mining operations would be suspended indefinitely.

It is speculated that the reason why Digital Farm went bankrupt was, firstly, due to the epidemic, and secondly, due to the sharp drop in Bitcoin.

Not only Digital Farm, but Bitmain's mining farm in Texas, USA is also stuck in the quagmire.

The mine is called Dory Creek, which means "marching ants" in Chinese. It was jointly built by Bitmain, the local government and Canadian technology company DMG Blockchain Solutions. DMG is the actual operator of the mine.

Dory Creek is located in an aluminum smelter and covers an area of ​​1.33 million square meters. When the mine was established, Bitmain claimed that it would become the largest mine in the world.

The mine was launched in October last year, and 15,000 mining machines were installed in the first phase.

However, recently, the mining farm operator DMG announced that DMG and Bitmain terminated the existing management agreement because costs and operational efficiency were not achieved as planned.

Although large American mines are having a hard time, Mark believes that most American mines are not greatly affected by the epidemic.

"Compared with Iran and Russia, the United States has its own mining machine manufacturers, and not all mining machines need to be shipped from China," he said.

The mine where he currently works belongs to a certain mining machine manufacturer in the United States, and all the mining machines used are developed by this manufacturer itself.

Mark said that compared with China, the scale of the mining industry in the United States is still small, but in the past year, more and more domestic miners have been moving to the United States.

“Next to our mine, there is a self-operated mine of a domestic mining machine company,” he told Yiben Blockchain.

In the eyes of miners, mining in the United States has two major advantages: cheap electricity prices and clear laws.

In the United States, the marketization level of the power industry is relatively high, and the electricity prices in different regions vary greatly. In general, the residential electricity bills in the United States are relatively high, but the industrial electricity prices in some parts of the United States are very low.

"The annual electricity price for our mine is 0.25 cents per kilowatt-hour, which is less than 0.2 yuan in RMB, which is similar to the electricity price in Sichuan during the flood season," Mark revealed.

But he also pointed out that there are many scams in the mining circle under the banner of "going to the United States to mine", which specifically target Chinese miners.

He has seen domestic companies go to the United States, announce the construction of mining farms, sell computing power to domestic miners, and then announce the closure of the mining farms and run away with the money.

03 China

In March, the epidemic situation in China has improved significantly. However, due to the sharp drop in the price of coins, domestic miners are still struggling to survive.

As the flood season approaches, a new round of price war is underway in China's mining industry.

Every April, Sichuan welcomes the flood season, when the electricity cost of local mines is generally around 0.25 yuan per kilowatt-hour. Compared with the thermal power costs of around 0.35 yuan per kilowatt-hour in Xinjiang and Inner Mongolia, Sichuan hydropower is obviously more attractive.

Therefore, before the flood season in Sichuan in previous years, 80% of the miners would move their mining machines from Xinjiang and Inner Mongolia to Sichuan, Guizhou and other places.

However, this year's flood season has lost the popularity of previous years.

"The mining industry is in a state of 'dumping' right now," mine owner Wang Zhi told Yiben Blockchain.

What he meant by "dumping the market" was not the plummeting price of currency, but the plummeting electricity prices.

Electricity is the most important infrastructure in the mining industry. The logic of mining farm owners to make money is to buy electricity from power plants, then package the power supply service with site, operation and maintenance services, and finally sell it to miners in the name of "electricity fees".

"Miners can engage in price wars," Wang Zhi said. "Last year, the price for attracting investors during the flood season was about 0.25 yuan per kWh, but now it has been reduced to 0.2 yuan per kWh, and the profits of the mines have shrunk by 20%."

Recently, in a mining circle, mine owners started a price war, and the atmosphere was full of gunpowder.

The first mine owner who posted an advertisement offered an electricity price of 0.295 yuan per kilowatt-hour. In just half an hour, multiple mine owners continued to lower the price, bringing it down to 0.2 yuan.

This shows how fierce the competition among mines is.

Screenshot of a mining farm quotation from a miner group

In previous years, it was difficult to get a slot during the flood season, but this did not happen this year. The supply and demand relationship between mines and miners has become unbalanced.

"Now the miners are still waiting and watching. Many mines have machine positions but no mining machines, but they cannot recruit merchants," said Wang Zhi.

However, the mine owner and the power station have signed a contract that stipulates the minimum power load. Even if there are no mining machines, the mine owner still has to pay.

Therefore, price wars between mining farms are inevitable.

On the other hand, even though the mining farms have reduced electricity prices to the lowest level, miners are still having a hard time.

The data from the FishPool shows that at the current coin price, calculated based on an electricity price of 0.2 yuan per kilowatt-hour, the daily income of Bitmain's latest mining machine Ant S19 Pro is 73 yuan. The price of Ant S19 Pro on Bitmain's official website is 20,770 yuan, and the payback period is 285 days.

However, the production of Bitcoin will be halved in May this year. Based on this calculation, if the price of Bitcoin does not rise sharply, the payback period of S19 Pro will be extended to two years.

"It is not cost-effective to buy high-computing-power mining machines now. Old mining machines like S9 have been shut down again, and there are fewer and fewer mining machines in the mines." said miner Chen Hanping.

Many mining industry practitioners pointed out that in the past year, mine owners and miners have been generally optimistic about the halving trend and have been expanding blindly.

“Last year, it was difficult to find a camera position in a mine, so many mine owners took a gamble and built new mines, most of which had nearly 10,000 camera positions,” Wang Zhi revealed.

After the price of the currency plummeted, these seats were empty.

The new coronavirus pandemic, the circuit breaker of the U.S. stock market, the plummeting currency prices... In these few months of 2020, it seems that all the bad news has come at the same time.

Miners around the world are therefore in a passive position. "For now we can only wait and see, hoping that the price of Bitcoin will rise after the halving," said a miner.

The era of wild growth is gone forever. In the future, all miners must learn to weigh risks and make decisions after careful consideration.

*Some of the interviewees in this article are pseudonyms.