The controversial cloud computing market: a large-scale reshuffle is inevitable

Author: Hu Tao Original title: Cloud computing power in controversy

In the sluggish market, cloud computing platforms are likely to face a difficult period, and a large-scale market reshuffle is inevitable. Platforms with strong operational capabilities and high user trust have a better chance of passing the test of the market. Some scams are more likely to be "exposed" under the pressure of capital chain. However, overall, the purification of the industry still has a long way to go.

01

The impact of the 3.12 market

For a long time, cloud computing power has been a rather marginalized field in the blockchain industry. Some people believe that cloud computing power is a scam, while others believe that cloud computing power is the best way for blockchain beginners to participate in Bitcoin mining. The former view is dominant.

However, in the turbulent market, the cloud computing market has still ushered in a wave of climax since 2019. Many cloud computing operation platforms have appeared in the market for marketing, attracting a large number of investors to enter the cloud computing industry with their convenience, simplicity and low threshold. Among them, GenesisMining, BitDeer, NiuBit and other platforms have formed a greater influence. An industry insider estimated to Chain Catcher that the current proportion of Bitcoin cloud computing power in the total Bitcoin computing power has exceeded 10%, and its status cannot be underestimated.

This year is a famous year for Bitcoin production cuts, and a large number of investors and cloud computing platforms have high hopes for this year's market. In order to cope with the increased performance requirements of mining machines due to Bitcoin production cuts, many cloud computing platforms have purchased a large number of new mining machines and corresponding cloud computing packages, such as the cloud computing packages launched after the Bitcoin production of the new Ant S19 series mining machines was halved, in order to attract more purchasing users.

But what most people did not expect was that the prices of mainstream cryptocurrencies such as Bitcoin plummeted one after another between March 12 and 13, falling from nearly 8,000 to below 3,900 US dollars, which was equivalent to breaking the shutdown price of most mainstream mining machines. This not only caused huge losses to investors in mainstream currencies such as Bitcoin in the secondary market, but also had a serious impact on cloud computing investors in Bitcoin and other currencies, causing them to fall into a situation of "losses as soon as the machine is turned on."

"Since the computing power of the entire network has dropped but the difficulty has not dropped, the nearly half-month window period has been very difficult for many miners. Many Xiaolu users who have purchased T15 series Antminer computing power products are faced with the dilemma of not earning enough from mining to pay for electricity bills and are forced to shut down their miners." BitXiaolu CMO Shi Rui told Chain Catcher.

Niubit COO Yang Xiao also told Chain Catcher that due to the reduction in mining income, the payback period and net profit return ratio of most products are very poor, causing many new and old users to feel shaken.

To this end, a small number of cloud computing platforms have taken some subsidy measures, such as reducing electricity costs and extending contract periods. "We decided to open a green channel for users who purchased specific packages to suspend orders, and resume mining 10 days after the mining difficulty is expected to decrease, and postpone the original end date of the package by 10 days," said Shi Rui.

However, for most investors, the above measures are more of a way to stabilize their emotions, and are a drop in the bucket for their huge actual losses. Some cloud computing platforms even announced that they would terminate the cloud computing contracts signed with investors after 10 consecutive days of downtime and zero income, which may directly reduce the mining income of investors to zero.

02

Is cloud computing reliable?

Amid the chaos, we need to explore cloud computing power more deeply, such as whether the advantages described by the cloud computing power platform are reliable and what unavoidable defects it has.

For cloud computing platforms, the cloud computing model is certainly a good business. This is equivalent to transferring the price risk of the cryptocurrency assets obtained from mining to the buyers, and collecting management fees (2%-5%), electricity price differences, etc. from them. They generally enjoy the ownership of the mining machines after the cloud computing contract ends. If the external sales situation is poor, they can still enjoy the mining income. This business is almost a sure win.

Judging from the statements of major cloud computing platforms, the main advantage of cloud computing over traditional mining models is its simplicity and convenience. "Since cryptocurrency mining is highly professional, most of the people who started mining in the early days were technicians. Later, large funds began to enter the market to build mining farms, etc., but compared to ordinary people, mining still has many barriers. Whether it is the large amount of initial capital investment or the real and fake commission platforms, it makes novice miners who want to mine in a hurry." Yang Xiao told Chain Catcher.

The emergence of cloud computing platforms has solved this problem to a certain extent. Through the mining machine resources invested or integrated by the platform, a package with a specific computing power scale, time, and currency is formed. Investors can quickly purchase and join mining activities. The platform will regularly distribute corresponding settlement income to the investor's account without worrying about a series of issues such as mining machine selection and hosted mining site selection.

At the same time, the stronger ability to resist risks is also regarded as a major advantage of cloud computing power by industry insiders. "The biggest fear in the Bitcoin world is being washed out. If there is a fluctuation of more than 20% in a day, investors are likely to sell their coins and get out." Shi Rui told Chain Catcher, "Cloud computing power products can not only resist the risk of market fluctuations, but also prevent external risks such as exchanges running away and regional policies."

From the perspective of lowering the threshold and improving convenience, the cloud computing model does have inherent advantages. "Directly getting a mining machine requires investors to have a high ability to mobilize social resources. I don't think I can do it, so I have been using cloud computing for mining for a long time." A cloud computing investor told Chain Catcher.

However, according to Chain Catcher, the various conveniences of the aforementioned cloud computing model are actually the weak points of the cloud computing model.

At present, the cloud computing industry has spawned two types of operating mechanisms. One is the "self-owned" cloud computing platform, which means that the platform operator builds or invests in mining farms, deploys mining machines and sells computing power by itself; the other is the "platform-type" cloud computing platform, which means that the platform party recruits mining farm owners, injects computing power into the platform and then sells it to the outside world, but does not own mining machines itself.

Regardless of the mechanism, the purchase and operation of mining machines are entirely the responsibility of the platform or a third party, and the buyers of computing power know very little about their actual operation. This means that even if there are phenomena such as overselling of computing power and fake mining machines on the cloud computing power platform, it is difficult for investors to know the real situation before purchasing. Although some platforms will release many photos of mining sites on their official websites and claim that they allow investors to conduct on-site inspections, in fact, the inspections need to be paid by investors themselves, and few people will actually go to the site in person.

This leaves a lot of room for the dark operations of cloud computing platforms, especially fraudulent platforms. "For the entire cloud computing industry, the biggest doubts are about companies, that is, fraudulent funds, Ponzi schemes and other issues," said Shi Rui.

Such doubts are not groundless, but are supported by a large number of actual cases. For example, the "Bit Mine" which was quite popular in the second half of last year launched a number of short-term computing power products for Bitcoin, Ethereum and other currencies, claiming that a 20% return rate could be achieved in a few days. At the same time, these platforms also designed a multi-level commission mechanism to attract a large number of investors by using high returns and concept speculation. However, in fact, the project did not have actual mining machines, but simply packaged the common capital game into a cloud computing product.

In October last year, the project began to be unable to withdraw money, and it was eventually confirmed that the project owner had run away, and the investment of a large number of investors came to nothing. Industry insiders said that such Ponzi schemes may account for nearly 90% of the cloud computing market.

Yang Xiao divides unreliable cloud computing platforms into two categories: one is a pseudo cloud computing platform, which is a cloud computing shell but has no entity behind it, and the platform runs away after the subsequent capital chain breaks; the other is a platform with poor operation level and insufficient risk assessment of itself and the market, which eventually leads to the destruction or running away of the platform due to the outbreak of various risks and the break of the capital chain. "Recently, users of a computing platform have started to defend their rights because users who bought 20P-S9 suffered large losses." Yang Xiao said.

All these show that the cloud computing market is still in a period of wild development. As an investment method with unique characteristics and advantages, it is constantly distorted and destroyed due to the lack of supervision and the pursuit of human nature. Based on the above situation, for investors who have the need to purchase cloud computing power, this puts higher demands on their market judgment.

"Many people may worry about buying the wrong products or that the electricity bills are too high. But I think the most essential thing is to choose a reliable platform," Yang Xiao told Chain Catcher.

In other words, in addition to calculating the rate of return, cloud computing power investors need to comprehensively weigh factors such as the platform's external endorsement, transparency, and stability, and avoid ignoring the platform's own risks in pursuit of high returns.

Under the sluggish market conditions, cloud computing platforms will most likely face a difficult period, and a large-scale market reshuffle is inevitable. Platforms with strong operational capabilities and high user trust have a better chance of passing the test of the market. Some scams will more likely be exposed under the pressure of the capital chain, but overall, the industry still has a long way to go in its purification.