"Mining Coins Simulcast" Episode 9 Details Review: Why Miners Should Establish a Currency-Based Mining Mindset

Zhang Yuan: Hello, fellow miners and coin lovers, I am Zhang Yuan, editor-in-chief of CoinWise. This issue of CoinWise is exclusively sponsored by Matrixport, a one-stop digital financial platform (a Singaporean financial services institution). The topic we are going to discuss today is: Why should miners establish a currency-based mindset? First of all, please introduce yourselves.

Li Yang: Hello everyone, I am Li Yang, the account manager of Matrixport. I am currently responsible for the product sales and customer service of Matrix. I have worked in the mining machine sales department of Bitmain (2017-2019). Matrixport (hereinafter referred to as "Matrix") is a one-stop financial service institution in Singapore. I am very happy to have an online discussion with you today and learn together. Thank you.

Aladdin: Hello everyone, I am Kevin Zhou, the head of Aladdin Research Institute

Aladdin Pow Labs is a vertical media and research institution focusing on digital mining and mining coin mining machines. It has the ability to operate the entire industry chain of digital mining and mining coin mining machines and has cooperative relationships with large mining pools, mining machine companies, and trading platforms. It specializes in providing one-stop solutions such as mining coin research and media, ASIC and FPGA mining machine R&D and sales, mine hosting, cloud computing power, mining pool services, etc., and works with partners to make mining more mainstream.

Changan: Good evening, friends of the mining network, and friends in the mining circle. Today I will speak in voice, and the text may not be as well prepared as the other guests. Let me first briefly introduce myself. I am Changan from Huobi. After graduating from the University of Hong Kong, I joined Siemens and Bank of China (Hong Kong). Later, I entered our cryptocurrency circle and participated in the establishment of an EOS exchange called Chainthink, which was later merged into Huobi.

Huobi is a comprehensive one-stop blockchain asset platform in the industry. We cover a variety of businesses including financial management, lending, trading and custody. Many miner friends, including some investment institutions, will use our relatively large loan services.

Lili: Hello everyone, I am Lei Lili. Foreign clients and friends all call me Lili. I joined the Blackminer team in 2017 and participated in market research and marketing. I am currently responsible for Blackminer's global sales.

Blackminer is currently the leading FPGA mining machine brand in the industry. Since its launch in 2018, the main iterations include Blackminer F1, F1+, F1-ultra and the single-chip entry-level Blackminer mini series.

Our Blackminer team not only has a strong algorithm team, but our chip R&D team and software team also come from world-renowned companies such as Google, Huawei, Sony, and Qualcomm.

It can be said that from the time the product was initially launched overseas to its entry into the domestic market this year, the product has stable performance and fast algorithm updates, meeting the needs of many altcoin enthusiasts and investors.

Zhang Yuan : The industry often discusses the topic of currency standard and gold standard. A few days ago, I saw that new and old miners had a dispute on this topic in the group. The old miners taught everyone that if you always use legal currency to calculate and evaluate whether your investment is correct, it means that you may not be suitable for investing in digital currency, while new miners think that this is a trick used by old people to cheat newcomers. As seniors in the industry, can you tell us why miners should establish a currency-based way of thinking?

Li Yang: I personally believe that the currency standard is relative to long-term investors. If it is a short-term transaction, it is natural to focus on the fiat currency standard and clear profits in a timely manner.

For miners, since mining has a certain payback period, and as the price of the currency stabilizes and the output is halved, the payback period will tend to be longer. Therefore, miners are long-term investors.

After the investment cycle is extended, only by holding Bitcoin for a long time and increasing the number of coins can greater returns be obtained. There are two reasons:

First, throughout the history of Bitcoin, its price has been on a continuous upward trend. As long as the cycle is long enough, the coin will definitely increase in value. Short-term selling of coins is equivalent to losing part of the future rising profits, but we do not encourage holding on to them. It is reasonable to sell or mortgage them appropriately to pay the electricity bill.

Secondly, using the currency standard thinking can more clearly understand the payback issue of mining. The short-term rise and fall of the currency price has a huge impact on the Yongfa currency standard to measure the payback of mining, but it is much simpler to use the currency standard. Assuming the total investment is 1 million yuan, it can be calculated how many BTC can be bought at the current market price; if a mining machine is purchased, how long it will take to mine back a considerable amount of BTC. Here, the future growth of computing power, machine power consumption, electricity prices, operating costs, etc., compared with the predicted currency price, the predicted payback period is clearer and can reduce errors.

Aladdin: The reason why miners establish a currency-based way of thinking is actually closely related to the formation of BTC consensus. We can discuss the details later. As a new miner, I can only borrow Li Kuang's words to share with you. After all, compared with him, my consensus is not firm. This morning, Lao Li told us a story: In the first half of 2017, the mining farm sent me an electricity bill for the whole year of last year. Yes, you read that right. My electricity bill model is post-paid, and it is paid one year later. The mining machine is a 370 graphics card. I bought it with Shenyu a year ago, and the custody was also placed together. I mined ETH for a year, about 40,000. During this period, ETH rose from 70 yuan to 140 yuan, and then fell to 70 yuan. After getting the bill, I took a calculator and pressed a few times. If I sold all the ETH at this time, I would still have a slight surplus after recovering the cost of the mining machine and paying the electricity bill. Since we bought the mining machine together and mined together, let's ask Shenyu how to deal with it first.

Then, Shenyu added, "Your 40,000 ETH is really not much. I sold 200,000 ETH when it was 20 yuan!"

I said thank you, and two other words came to my mind. So I started selling coins to pay for electricity and recover the cost. In a few months, the price of ETH exceeded 10,000 yuan, and I missed 400 million yuan. I made up my mind that I must hoard it in the future. Of course, there is a sequel to the story. I will share this part first. Since then, Lao Li, a miner with 17 years of experience, has formed the idea of ​​currency standard, and he is still preaching and working to promote the idea of ​​currency standard. Therefore, the idea of ​​currency standard is actually a kind of idea of ​​taking advantage of economic cycles to make profits, which is in line with Buffett's practice of holding stocks of companies that he is optimistic about for a long time. Therefore, miners like Li Kuang take currency standard as the correct posture. Why don't we stick to this way of thinking?

Changan: The story of Mr. Li missing out on 400 million today should be a popular article. I believe everyone in the group has read it. I can’t say what my opinion is, because I have never participated in mining. But I look at this issue from another angle. In fact, whether it is the currency standard or the holder, it is based on an implicit premise, that is, the price of BTC will be higher than it is now in the foreseeable future. This "foreseeable" is quite important, because it is too long and we can’t wait. Maybe everyone’s investment cycle is at most five to ten years. If it is too long, it may not matter to everyone.

What I want to talk about here is a positioning issue. Miners or friends in the circle, do you define yourself as a businessman? Or define yourself as a believer, or a religious person? Because this is quite obvious in the circle. Many friends approach these issues from a business perspective, and then they may correspond to the idea of ​​legal currency standard. To do business, you must clearly control the risks of legal currency, the time cycle, the return on investment, etc. But from another perspective, Bitcoin also has a large number of loyal believers, including many miners, who I also know are very firm holders. They may not care much about the rise and fall of legal currency. On the contrary, as long as Bitcoin or the believers or religions around Bitcoin become larger, they will feel happier or more fulfilled.

One point of view here is that the people who make the most money are not necessarily the ones with the strongest faith, because this is very closely related to the timing of your entry and exit. Of course, like Mr. Li, many early miners may have had the opportunity to successfully seize hundreds of millions of RMB in profits, but many friends may have entered the market at a very high point due to their overly firm faith and have been stuck until now.

Recently, the price of Bitcoin and US stocks has actually shown a very strong correlation. I think this has also, to some extent, punctured the fantasy of digital gold or safe-haven assets. Although Bitcoin was born against the backdrop of the financial crisis, but. However, in this financial wave sweeping the world, I personally feel that Bitcoin cannot completely remain immune. On the contrary, in the absence of regulation, the excessive use of derivatives or quantitative strategies has exacerbated this systemic risk. The 312 flash crash was actually only a few days ago. It also reminds us that if the market loses confidence further, including the confidence of miners, the death spiral of Bitcoin may turn. I think returning to the original intention and viewing Bitcoin as a social practice with rich financial significance may be a better mentality. Of course, at this moment, confidence is more important than gold. Whether it is me or Hu Fu, I am willing to help each other with all my friends and look forward to the long-term future.

Lili: First of all, I want to affirm that both the gold standard and the currency standard can be used as a consideration for investors. Take miners investing in FPGA mining machines as an example. When purchasing mining machines, they can combine the currency standard with the gold standard. Because FPGA mining machines can support multiple algorithms, it is necessary to anchor one or more potential algorithms, calculate the payback period, and then make a choice.

However, it is definitely inaccurate to view the payback period statically due to the multi-algorithm characteristics of FPGA. In the process of mining coins, new algorithms and altcoins will appear and the market will fluctuate greatly. Therefore, thinking from the perspective of coins, focusing on the algorithm itself and the coin project itself, seizing the vacuum period before the emergence of ASIC, accumulating chips, and establishing a coin-based trading strategy will often greatly increase profits.

To give a small example, one of our users was optimistic about the Bsha3 algorithm last year and concentrated on mining when the difficulty was very low. Later, the price rose sharply and the profits were very considerable.

Zhang Yuan: To sum up, the essence of the coin standard is to pay more attention to the number of coins, not the short-term price. After clarifying the idea, we should take action next. Several guests happened to represent different vertical fields. Please analyze and suggest from your own field. As a coin standard miner, how should you operate to keep your own coins, or even let the coins in your hands hatch more coins?

Li Yang: In my personal opinion, if you have sufficient knowledge of K-line trading, then buying low and selling high is naturally the best choice. However, under normal circumstances, we cannot analyze the market very well. Therefore, some safe ways of value-added are very necessary, such as some financial products.

For example, taking the matrix product as an example, the figure below is a product that expires on March 27. On the expiration day, the coin price is less than 8,000 USD. The coin standard can obtain a 1.05% return. According to the current market conditions, it is unlikely to rebound to 8,000 in less than 2 weeks. If it exceeds 8,000, the coin will be sold at 8,000, but an additional 1.02% USD return will be obtained.

Of course, if you have a higher risk appetite, you can also choose the following option, betting that the coin price on March 27 will not exceed 5,500. If it is lower than this price, you will get a coin-based return of 8.15%.

Aladdin: Of course, the fastest and easiest way to get more coins is to buy low and sell high, but it is easier said than done. In addition to long-term tracking and observation of the project, it is also necessary to understand the market's feedback and support for the project. For mainstream mining coins, the changes in the holdings of first-line funds such as Grayscale are actually very useful for reference, followed by major technological breakthroughs and changes in partners of the project. Following these incentives to adjust positions can basically achieve high selling and low buying. There are also mainstream projects with nodes such as DASH that can participate in nodes to obtain stable rewards through nodes. For small and medium-sized mining coins, I prefer to be a miner, because some small and medium-sized projects are still in the early stages of the project, and some have not even experienced a bull market, and few people pay special attention to them. Therefore, it is necessary to first conduct a comprehensive investigation of these projects to understand their technical characteristics and survivability. After completing the evaluation, you can obtain stable coins below the market price through mining, and then use node staking or high selling and low buying, or even hoard and wait for the bull market to obtain the maximum benefit. Just like the miners who were able to participate in TRB mining and HNS mining at the earliest time last year, it was already very easy. The mining electricity cost was originally lower than the market price, and the coin increased so much that it felt like digging up gold. In summary, it is to sell high and buy low on mainstream projects, mine small and medium-sized projects, and then obtain more coins by staking nodes and other methods.

Changan: Actually, Ah Shen has already introduced this question very comprehensively. I will briefly add a little bit. In fact, in a narrow sense, the increase in coins is staking, or financial management. There are many products and platforms in this circle that claim to be financial management. I personally divide financial management into three categories. The first category is called runaway financial management, which can be understood as financial management with the ultimate purpose and goal of running away. It may generally be some information gap, or capital disk, or some platforms with poor risk control; the second category is relatively high-risk type, generally behind which is quantitative running strategy. He has the idea to make this financial management platform well and make high returns, but he often faces high market fluctuations that no one can predict, just like the recent market situation, there may be many market makers or quantitative institutions that have suffered serious losses. Of course, they can also make a lot of money, but this is high risk and high return; the third category is to use endogenous income as a return on financial management. What does endogenous income mean? First, for example, staking nodes. We, Huobi, used to be a super node of EOS. We will receive the endogenous income of the EOS system every day. We will return part of it to users in the form of financial management. In addition, we have our own lending business, which we also want to recommend to everyone. The income from the lending business will also be returned to our users as a source of financial management income. So this is an endogenous income of the system, and its risk is completely controllable.

Besides, it is of course a good thing to have more coins. Everyone wants to have more coins and more money. But in fact, making money is very difficult, and so is pretending to be cool. In this market, if you can avoid losing money or lose less money, avoid losing coins, or don’t give up your chips easily, as long as you can survive a bull or bear market, or survive for a period of time, you have already outperformed 80% or even 90% of the people in the market. I think if making money is particularly difficult, it is also very important to keep your wealth.

Lili: I have two suggestions for FPGA mining:

1. Pay more attention to the project itself. Select high-quality projects from the many algorithms supported.

2. Convert the mined altcoins directly into stablecoins such as BTC and USDT. For example, many of our users have been mining CKB with Blackminer since November last year, and have been mining for 5 months, with daily income of more than 10 US dollars. The mined CKB is directly converted into BTC in the exchange, waiting for BTC to appreciate.

Our Blackminer is available for hosting from 1 unit onwards, which is not only suitable for retail investors to enter the mining field at a low cost, but also suitable for large investors. We also provide coin storage and selling services for large customers, so you don’t have to worry about it, just count the coins every day.  

Zhang Yuan: Some friends say that they have to care about the price of fiat currency because they need to use the money at any time. But if you have the pressure of gain and loss, you can't hold the currency through the bull and bear markets. Countless bloody experiences tell us that short-term investment may allow you to successfully escape the top or bottom on a certain opportunity, but in the long run, the result is that the number of coins is getting smaller and smaller, and you miss the next bull market. The recent plunge has terrified everyone and triggered a round of chasing ups and downs, so that major exchanges have experienced varying degrees of network congestion. I think Mr. Changan should have a deep understanding of this. I would like to ask several guests, can you plan some hedging plans for novices?

Li Yang: For miners or investors with low risk appetite, Matrix has also developed some products with guaranteed principal and fixed term

In my personal opinion, if you don’t want to face any risk at all, you can choose some fixed-term products with 100% principal protection. Depending on the market fluctuations, the returns generally range from 0% to 8%, and the principal currency is fully protected.

Of course, you can also choose a fixed-term product with a 99.5% principal protection rate. Depending on the market situation, the returns generally range from -0.5% to 40%. This can be understood as using 0.5% of the currency to leverage the fully principal-protected product to expand the returns.

For the above two products, the higher the coin price goes, the higher the yield will be. You can earn both coins and the price difference brought by the increase in coin prices. It is a financial management with double returns.

Aladdin: In fact, entering the market means choosing to face risks. According to the recent development of the international financial environment, almost all market indicators have become invalid, and even the original safe-haven assets such as gold have fallen sharply. So if you choose the currency circle, mining is actually the lowest-risk hedging solution. Because the cost of chips obtained from mining is lower than the market price for a long time, the return cycle is long enough to spread out the short-term volatility risk. For example, if you buy an S9 mining machine in mid-2017, some machines have been forced to shut down recently, and even the machines bought at the highest point have paid back. This clearly illustrates a fact that as long as you can buy a model that is ahead of the entire market in technology, it means that you will definitely make money. I am not advertising for S19 here, but at present, the 9 series machines in mainland China are indeed powerful. Mining is currently the most mature part of the entire blockchain market. Participating in a relatively mature industry is also a way to control risks, not to mention that related financial products such as mining can further offset the risks of miners. Recently, because of CKB, we have also noticed the most flexible FPGA mining machine among mining shovels. The feature of this machine is that the algorithm can be changed and many mining coins can be mined, and the computing power is higher than that of the graphics card mining machine, which can obtain high returns in the early window period of the project, and will not be shut down as long as there are new projects. In short, the circle recommends mining for hedging, the model is mature, and the financial plan is reasonable. Compared with the operation of buying high and selling low and being cut every day, mining will make you re-understand the entire industry.

Changan: This question mentioned the large fluctuations in the market of chasing ups and downs a while ago. In fact, for exchanges, whether the market is rising or falling, it is good for exchanges, because as long as users have ups and downs and fluctuations, the number of transactions, the number of people and the amount of funds will increase significantly compared to normal data. Unless the trading platform itself becomes the counterparty of the user or the market, it will accumulate very large risks. The introductions of several bosses just now are relatively specific. I will say something vague, that is, there are three main points to avoid risks: the first point is not to be credulous, especially as a novice, the currency circle is rich in KOLs or bigwigs, but I personally think that there are no bigwigs in the currency circle. Because especially in this circle, the speed of the collapse of bigwigs is very fast. This collapse may not be a collapse of wealth. It is very likely that he has completed the accumulation of wealth and then disappeared. But a general's success is the result of the death of thousands of bones. Just kidding, it may be the corpses or funds of many leeks that can fill the baggage of a bigwig. So keep your own independent thinking, don't trust big guys easily, read more research and analysis, such as articles on Wabi.com and Aladdin Research Institute, which may be a more suitable way to obtain information. The second point is not to gamble. Not gambling means avoiding ALL IN investment, because many people will never be able to turn over once ALL IN, which is also very scary. The second is to avoid streaking. What does streaking mean? It means that you don't understand a product at all, lack the necessary knowledge, and lack the necessary skills to play cards with others, and you run up, which is streaking. For example, many friends open 100 times leverage, or buy some options that they don't know what they are buying, or some special financial products, which is very dangerous. The third point is to learn more. It sounds like a three-good student, but this learning more is mainly about allowing us to flexibly use various tools. This tool may include some small currency mining machines, and of course many traditional financial tools. For example, many option combinations pushed by the matrix are actually very stable and helpful for everyone to control risks or to gain certain returns. If you don’t know the existence of these financial instruments or don’t know how they work, you may not be able to use them, and your risk factor will be much higher than others.

Lili: My main suggestion is to exchange into mainstream currencies or stable currencies.

As an aside, from the sinking of the Titanic to the 9/11 incident, from the financial crisis to the global outbreak of the new coronavirus, black swan events exist in all fields. But black swan events also have their own unique nature and laws.

I would like to recommend a book to you, The Black Swan, published by CITIC Press, written by Nassim Nicholas Taleb of the United States. I hope you can develop a black swan mindset and become indestructible.

Zhang Yuan: The last question will be left to the media observers. Welcome Pika Finance reporter Pippi.

Pipi: As many old models reach the shutdown price, a large amount of computing power withdraws from the competition, and the remaining mining machines are more likely to obtain Bitcoins by paying the equivalent electricity fee. Dear bosses, can we believe that the recent market crash has played a positive effect on the coin-based miners?

Li Yang: From my personal point of view, the sharp drop in the price of coins has caused a large number of high-power consumption ratio mining machines to shut down. In addition, the production will be halved in the next two months, and the demand for purchasing mining machines has also shrunk due to fear. At least in the next two or three months, holding mining machines that can generate positive returns is indeed advantageous.

During the short-term plunge and halving of production, the number of people participating in the mining competition decreased, the computing difficulty decreased, and with the daily output fixed, the number of coins miners received increased.

Second, when the market fluctuates violently, network transfers also increase, and handling fees (mining fees) become higher, which also increases the income of miners from another perspective.

In addition, the currency standard views investment returns in the long term. Therefore, this short-term plunge + production reduction is undoubtedly beneficial to currency standard miners. After all, prices can rise again, and the currency production is indeed decreasing and will not turn back.

Aladdin: I think from this score, the falling price of coins means that small and medium-sized miners will be forced to withdraw. If the price is already negative, they will naturally withdraw. Only the remaining miners who can survive until the market warms up can be considered to have a negative-negative positive effect. The current situation can only be said to be just enough to survive. This sharp drop in the market should also be a major cleansing of the industry. This kind of cleansing has also occurred before and after the halving. Take the Mentougou incident in 2016 as an example. Although this plunge has hit the industry hard, it has also completed the last wave of cleansing, allowing more determined miner investors to taste the sweetness of long-term holding. However, we still need to remain cautious and reduce our risks as much as possible.

Changan: I don’t know if this is a positive or negative, but our mining live broadcast event is very good, because from the start of our event at 8 o’clock to now, Bitcoin has risen by 200 dollars. So first of all, I hope that the mining live broadcast can be held more often to bring the price of the currency up. Back to the topic, today I saw an article published by the Planet Daily. Although everyone always talks about miners shutting down, shutting down the currency price and so on, in fact, half of the current computing power of the entire network is the old models that should be eliminated. Why? Everyone has different electricity costs, so it is meaningless to compare blindly. People often say that there are opportunities in crisis, but in fact, if the crisis is too big, people will die, and no one will seize this opportunity. Therefore, it is hard to say whether it is a positive or negative. I think it is more appropriate to regard it as a test of faith, or a test of the miners' ability to bear. Of course, under this market, miners have indeed endured a lot.

Last year, I heard many mining pool leaders say at many offline events that this year is expected to be a big test for miners and a very difficult year. Here is a small advertisement. We at Hoofu have actually been providing healthy lending services to miners or investment institutions. In this very large market fluctuation, as far as I know, many friends who borrow money have encountered the problem of being liquidated. Many times you don’t have time to add collateral. We at Hoofu have a dedicated person to follow up in time and perform a lock order operation, which is actually a process of shared risk. At the same time, we will also provide a part of the temporary risk quota. In this market, I can proudly say that we at Hoofu have avoided the loss of thousands of bitcoins for major customers, so we also welcome friends in the mining circle and friends in the mining coin broadcast to use our lending services at Hoofu.

Lili: My answer is that if you can keep the machines running, a sharp drop is good for miners. Looking at the current Blackminer mining machine revenue, there are more than a dozen algorithms, and it can be said that there are bright spots in the east and west. The algorithm with the best revenue may be different every day. On the one hand, it reflects the changes in the market, and on the other hand, it shows that the computing power is flowing. This flow is also an opportunity for users who hoard coins.

Free Q&A

Netizen: @lili雷, how can I buy Mr. Lei’s machine?

Mr. Lei : Blackminer official website: www.hashaltcoin.com

Netizen : @Aladdin, what new coins does the Genie recommend recently?

Aladdin : BCH is OK, TRB is also very good, Blackminer will also be able to mine soon

Netizen : @李洋, there is a detailed description of the loan service, I would like to know more

Li Yang : Download the app without going over the firewall (copy to browser and open)

Netizen : @Changan, where can I download the Hufu trading platform?

Changan : hoo.com is giving out some small benefits here. Group members can add @小脑斧hoo.com and report the code: Coin Mining Network 666. Each person will receive 5USDT contract money. It is limited to the first 100 people. It is not a trial money. You can open a real order. All the profits are yours. If it explodes, it will be given for free.