Shenyu: How can the mining industry survive in the dark night?

Author: Game Master Show

On January 3, F2Pool founder Shenyu delivered a speech at the annual thank-you dinner for major customers of F2Pool.

As a veteran miner and the helmsman of the world's leading mining pool, Shenyu analyzed the upcoming two major cycles of mining industry, generational change and halving, from multiple dimensions.

Shenyu believes that with the combination of these two cycles and the uncertainty of currency prices, the mining industry will be in a relatively confused period between now and the next three months, but there is no need to be afraid in the medium and long term.

The mining industry has always been committed to doing valuable things and maintaining rapid iteration, and we should not be afraid of change. Moreover, previous history has also proved that difficulties also make us successful. For example, the mining trough from the end of 2015 to 2016 also forced everyone to shift from the earliest industrial parks or family-style mining to the era of large-scale mining of hydropower, and the entire mining industry was able to achieve a major upgrade.

In the short term, with the limited supply of mining machine chips this year, as long as the market can go up, we may still be able to obtain excess returns.

The following is the full text of the speech, enjoy:

Today is the 11th anniversary of the Bitcoin block. Before we know it, our industry has spanned 11 years from the earliest white paper to now.

Looking back, we made a graph with a relatively large amount of data.

The time period presented in the chart is from January 2015 to today. There are several curves. The first blue curve is the magnificent price trend of the currency.

The curves at the bottom describe the iterative process of mining production tools - mining machines. The orange line in the first cycle represents the earliest machine Antminer S7, the purple line represents the longest life cycle of the generation of mining machines S9, which is still mining today, the yellow line is the Innosilicon T2T, which was the best one for a short period of time, and the next one is Shenma M20. These mining machines represent the most cost-effective mining machines at the time, and the electricity cost of mining is the most ideal state at the time.

Looking up, the dotted lines fluctuate greatly. They are the mining pain index we defined, which is also a mining profit index. We can see that the period from the end of 2015 to 2016 was a very difficult period, with the index around 4. However, after that difficult period, everyone was forced to shift from the earliest industrial parks or family-style mining to the era of large-scale hydropower mining. Everyone moved from the Northeast to Sichuan to explore lower electricity costs, and the entire mining industry underwent a major upgrade.

The second very low period is the green line, which appeared from the end of 2018 to 2019. At that time, many mining machines were sold by kilograms, and mining machines that cost several hundred yuan each were sold off on a large scale. Fortunately, the market has recovered rapidly this year, and mining machines have also undergone major iterations, from the past 16nm to the current 7 or 8nm. So first of all, we have to thank these past difficulties, which have led to the prosperity of our industry today, especially the round in 2015, which gave rise to all of you here, and led to us having so many large-scale mining farms.

But now, we can also see from the picture that the current situation is worse than in 2015. The brothers here may also be experiencing inner torment and confusion.

This year, we have basically experienced a complete mining cycle, from the disillusionment period at the beginning of the year to the rapid rise period, and now we have entered a period of confusion. Everyone should be wondering what we can do in the future, especially how to survive this year's very important halving node.

Speaking of halving, let me first say one thing, that is, this year's halving is somewhat different from the halving we just saw in 2016. In 2016, the entire industry was still very small, and there was no serious need for replacement between new and old mining machines like this year. Therefore, this year is the overlap of two major cycles, and the life and death decision of 7nm and 16nm mining machines may occur. At present, there are about 100E computing power in the entire network, of which about 35~40E are mining machines from the S9 era, so at the moment of halving or before and after, this batch of mining machines will basically enter its final stage.

Under such expectations, we will be in a relatively confused stage between now and the next three months. So can we break through the darkness before dawn?

In fact, I don't think you need to worry too much. What is the mining industry? We are the process of finding random numbers for the entire Bitcoin blockchain, maintaining the consistency of the entire network block, and finally submitting and packaging these transactions. In 2019, our entire industry mined 700,000 bitcoins and packaged thousands of transactions. In fact, we have been insisting on doing valuable things and maintaining rapid iteration, so from a longer-term perspective, we should not be afraid of the entire industry iteration cycle.

Moreover, I think this year may be a year of surprises for us. Why?

Because from the perspective of the chip industry this year, the replacement of 5G chips is bound to happen this year, which will lead to a sharp reduction in the number of mining machine chip production lines. When mining machines become scarce, once the market changes, the market of 2017 is likely to appear, so in the end I think this year will be a year of surprises. If you make good use of these tools in your hands, it may bring some excess returns.

OK, the above is my sharing, thank you everyone.