Jiang Zhuoer, founder of Litecoin Mining Pool: The future of digital currency mining

On December 20, the "2019 Digital Mining Summit Forum" hosted by Lieyun Finance was grandly held at the Shenzhen Marriott Hotel. During the meeting, Wabi.com had the honor to interview Jiang Zhuoer, the founder of Litecoin Mining Pool, together with many media reporters. The following is the full content of the conversation:

MiningCoin.com: Everyone says that mining is easy, but it is difficult to persist. Do you agree with this statement?

Jiang Zhuoer: I think mining is easier to stick to than hoarding coins, especially in a bull market. The daily income from mining can be seen by the miners themselves, so they will continue to invest to make money. If the market is not good, they can shut down the machine. The key is to believe in Bitcoin in the long term, for example, believe that the price of the currency will always go back up.

Milin Finance: What do you think of the current national policy towards blockchain?

Jiang Zhuoer: First of all, the central policy has changed. China will use blockchain technology to break through the financial blockade and sanctions that the United States may initiate. The central bank's DCEP (digital RMB) can be used for overseas settlement as long as you have a mobile phone, which can break the blockade. In addition, the government's attitude towards mining has also changed.

On April 8, the National Development and Reform Commission issued a guidance catalogue for industrial restructuring, and virtual currency "mining" is no longer included in the list of eliminated industries. Because mining is a real industry, it can promote the development of the chip industry, promote innovation in the electronics industry, and also drive a series of upstream and downstream industries including mine transportation and operation and maintenance, power station power grid, etc. This can be compared to the "gold mining" industry. First of all, the things dug out are valuable. At the same time, there are a lot of abandoned water and electricity in Sichuan, Xinjiang, and Inner Mongolia, which can be used to mine Bitcoin. The main market for Bitcoin is abroad, so in the long run, "Bitcoin" is a state of import and export, which is good for our foreign exchange reserves.

Milin Finance: What is the structure of a mature mining industry?

Jiang Zhuoer: From the upstream perspective, for example, chip manufacturing and chip design, there are Samsung, Bitmain, etc., and downstream, there is mining machine manufacturing and production, most of which are now in Shenzhen.

Further down is the daily maintenance and operation of the mining machines, as well as mining pools, downstream digital currency transactions, etc. This series of corresponding industrial chains will have professional companies to carry out corresponding layouts.

Milin Finance: What stage is the mining industry currently in?

Jiang Zhuoer: It is now relatively mature, with many professional companies working in niche areas, but in terms of scale, it is far from being large. Bitcoin is an asset that is more valuable than first-tier real estate. In the long run, I think it will increase by more than 100 times. In this way, the scale of the mining industry may expand by another 10 times, or even dozens of times.

Caijing.com: With the halving and the elimination of old models, will there be any changes in the market share of mining machine manufacturers?

Jiang Zhuoer: Low-power manufacturers are very popular. For example, if a miner mines 10 yuan, 3 yuan is used to pay electricity. Assuming the price of the currency remains unchanged, the output will increase from 10 yuan to 5 yuan, and its profit will decrease from 7 yuan to 2 yuan, and the net profit will decrease. At this time, the lower the power consumption of the mining machine, the more advantages it will have. Of course, at present, the largest proportion of mining machines is still Bitmain.

Mars Finance: What do you think of the overseas mining market?

Jiang Zhuoer: There is a saying in the mining industry, "East Wind Overwhelms West Wind", which means that China overwhelms the Western world in all aspects, especially in manufacturing. About 70% of the mining machines produced in China are mined in China, and new mining machines with higher output are generally not sold abroad first. This is because the Chinese energy market is relatively cheap, while the political situation in Central Asia, Iran, and Russia, where foreign energy is relatively cheap, is relatively unstable.

We have also placed machines overseas for testing, but the results have not been ideal. For example, we encountered problems such as local governments or partner organizations closing their doors. Therefore, the mining market is dominated by China. It makes sense for outsiders to say that the Chinese are smart and hardworking, but this is also determined by China's economic development speed and industrial strength.

Daily Planet: What are your predictions for the future?

Jiang Zhuoer: A more meaningful prediction may be the price of the currency. According to the same fluctuation cycle, it may reach a peak in September 2021, between 80,000 and 120,000 US dollars.

Others predict that blockchain may bring more economic freedom. For example, Bitcoin will bring monetary freedom, Ethereum will bring equity freedom, decentralized storage will bring storage freedom, and even information freedom.

Planet Daily: What do you think about the regulation of decentralized storage mining? Will decentralized storage be difficult to implement due to regulation?

Jiang Zhuoer: Through sharding encryption, miners do not know what is stored, but this project may also be classified as illegal by the government. After all, it is decentralized and the firewall may not be able to completely block it. But even if mining is not allowed in China, it is possible in Europe, the United States or other places.

Milin Finance: What do you think about Ethereum’s transition to PoS?

Jiang Zhuoer: Ethereum was designed based on the global computer, and its original intention was not to design currency. The production of currency has a certain cost, and no one is willing to use real money to exchange for something that is created out of thin air.

The reason why many people recognize Bitcoin is that a large part of its value is mapped to entities, and many people believe in Bitcoin because of mining machines.

Ethereum is designed to meet user needs, including its packaging fee, which it calls Gas. For a computer, the lower the power consumption, the better, so it makes sense for it to switch to PoS, but it is still difficult to judge whether it will lose trust.

Planet Daily: Can computing power keep up with the rise in coin prices?

Jiang Zhuoer: I am optimistic about this. This round of bull market should grow slower and may last longer.

I have mentioned the "60-day cumulative increase theory" before. A bull market breaks when it rises too fast, a bubble rises too fast and bursts quickly, and a small size also makes it easy to rise too fast. For example, at the beginning only 100,000 people knew about Bitcoin, and later 1 million people entered the market, and it would also rise rapidly.

The current size of Bitcoin is relatively large, and the speed of entry into the market is already very slow, so there may be a very long-term rising cycle, and the bull market may also last for a relatively long time.

Caijing.com: Will the current market conditions lead to more and more miners entering or leaving the market?

Jiang Zhuoer: Small miners will not leave the market for the time being, but they don’t make much. The percentage is decreasing, but the absolute value is increasing.

But this industry will become more and more professional, and now it has basically become a B2B market. Now the mining pools are all large-scale. If you add up all the retail investors, although there are a lot of people, the percentage is still very small.