Text | Zheng Yi Editor | Bi Tongtong Source | PANews

Shihezi was very cold in November. Wen Ge took down the dusty S9 mining machines from the top shelf of the mine one by one on the wobbly escalator. Even though the machines had almost become a pile of "scrap metal" due to the drop in currency prices, this man from the northwest still moved very carefully.

"Maybe one day the price of the currency will go up and we can turn on the machine again!" Wen Ge said with a smile. Although as a mine owner who has been running a mine for several years, Wen Ge has long been accustomed to the "life and death" with the machines, in his heart, he does not want the story of the "king of machines" S9 to end here.

Some people say that the mining industry is crazy, and that the myth of getting rich quickly is played out here one after another; others say that the mining industry is mysterious, and that miners who "make a fortune in silence" are the backbone of the capital undercurrent. Many people envy those gold diggers who own mining machines. The humming sound of the machines when they are working is more pleasant than the sound of money falling, and the continuous output of Bitcoins stimulates every cell of their desire for wealth.

But in the mining circle, survival is not easy. Miners, mines, mining machine manufacturers and mining pools, the four important ecological roles in the circle, are all competing between production cycles, currency price fluctuations, and technological changes. This is not a shortcut to getting rich and reaching the peak of life. Here, the only ones who really make money are the capitalists and lucky people at the top of the food chain, while small miners are the "lambs to be slaughtered" at the bottom.

“If I could do it again, I would not choose mining”

In the winter of 2017, Liu Zhigang, who traveled from Beijing to Xinjiang, touched the Bitcoin mining machine that had been mining for him for more than half a year in Wen Ge's mine for the first time. Unlike the "bright, clean, and professional" photos of the mine that Wen Ge had taken for him, the dust flying around made him unable to open his eyes when he first entered the mine. The simple shelves were cluttered with red and green flashing mining machines, different models of machines were mixed together, the power cords were intertwined, and the shelves were even rotten.

"This is simply an abandoned warehouse," Liu Zhigang looked around in disappointment. In the corner of the warehouse, there were still many "strike" mining machines piled up. He originally thought that they were scrapped, but after asking Wen Ge, he learned that they were all faulty machines. "We haven't had time to send them out for repair yet," Wen Ge answered lightly.

Liu Zhigang couldn't help but think of his own experience of "machine failure and downtime for repairs for half a month", and wondered whether his mining machine had once been part of that corner.

Mining machines with red and green lights flashing in the mine

On that day, Liu Zhigang personally wiped the hundreds of mining machines he managed and affixed the prepared coding marks on each of them. Before leaving, he repeatedly asked the mine owner to help take care of his mining machine, and even gave him two Huanghelou 1916 cigarettes. "I don't mean anything else, I just hope he can treat my mining machine better." Liu Zhigang explained to PANews.

Although Wen Ge's attitude was enthusiastic, Liu Zhigang was still more disappointed than ever when he walked out of the mine. He didn't believe that his mining machine could be properly kept in such an environment, nor did he believe what the mine owner said, "The machine will run fine for two or three years."

"If I were given another chance, I would definitely not choose mining."

“Wouldn’t it be better to just buy the coins directly? Now I feel like I’m worse than the leeks who take over the air coins in the secondary market.” Liu Zhigang sighed. Apart from the lucrative mining profits during the bull market at the end of 2017, the mining output was basically used to pay electricity bills and miscellaneous expenses, leaving little surplus.

Liu Zhigang did not make a rash decision to host the machine in this mine thousands of miles away. The owner of the mine, Wen Ge, was Liu Zhigang's high school classmate's college roommate. It was because of this relationship that he dared to host the mining machine worth millions in the other party's mine. Although he knew that there would definitely be all kinds of tricks, "at least they won't run away with my mining machine." Liu Zhigang comforted himself in this way.

Perhaps because they are not yet compliant, many mines are sensitive and wary of visitors. Even though this mine is small and dilapidated, not everyone can see Wen Ge. In addition to local officials who come to inspect from time to time, only "big households and acquaintances" like Liu Zhigang are qualified to visit.

Xiao Hua, who graduated in 2017, also started his mining journey when Bitcoin was popular that year. Xiao Hua studied computer science in college, so he had an early understanding of digital currency technology and was obsessed with it, but his financial strength was limited. He scraped together more than 40,000 yuan, compared several service providers, and finally gritted his teeth and bought two S9 mining machine futures at a high price (prepay the full amount and wait for delivery in a few months). According to Xiao Hua, the official website machine is about 15,000, and the machine in the hands of the channel dealer has risen to more than 20,000 yuan. Xiao Hua also knows that the price he bought the machine is too high, but he said helplessly: "There is no way, I also went to the official website to grab it, and the machine was sold out in seconds as soon as it was put on sale. And I bought too few machines, and others would not host them if the price was low."

Xiao Hua said that in order to purchase these two futures mining machines, he added the WeChat accounts of dozens of channel dealers one after another. He thought that after careful comparison, it should be foolproof, but he did not expect to fall into a big pit.

"The machine was originally supposed to arrive in two months, but it was delayed by 15 days before it was put on the shelves."

"It started to shut down intermittently just a few days after it was put on the shelves."

"The official website clearly states that the computing power is 12.5T, but in reality it is only 11.5T. The mining farm explained that this is normal," Xiao Hua complained to PANews.

In addition to the operation problems of the mining machine, Xiao Hua was even more upset after receiving the bill for the first month. It turned out that the amount to be paid on the bill was far higher than his budget. Not only did he have to pay for the electricity for the normal operation of the mining machine, but he also had to pay for transportation fees, shelf fees, management fees and many other miscellaneous expenses. Before this, neither the channel dealer nor the person in charge of the mine had clearly informed Xiao Hua. In addition, the additional 3% electricity loss fee and the additional 500 yuan deposit for each machine made Xiao Hua extremely dissatisfied.

After gritting his teeth and paying a lot of fees, Xiao Hua found out that the mining income in the first month turned negative due to the drop in the price of coins. He wanted to give himself a chicken leg every day, but he didn't expect to lose even the money for steamed buns.

What made Xiao Hua even more upset was that only three months later, the mine unilaterally informed him that all mining machines would be relocated due to the arrival of the dry season. The whole process would take about 20 days, during which there would be no income, and all customers would need to pay a transportation fee of 200 yuan per unit. But when Xiao Hua asked if he could not relocate with the mine, the other party replied that he could choose not to relocate, but he could come to the mine to take away the mining machine himself. This completely broke the psychological defense of this newly graduated college student.

At this point, Xiao Hua fell silent and shook his head slowly: "If I could do it again, I would definitely not be a miner again."

Food chain ecology of the mining circle

In the mining ecosystem, miners, mining farms, mining machine manufacturers, and mining pools are four important ecological roles. Many people simply call them "miners", but in fact, if you compare them carefully, the business operation models of the four are completely different.

Miners are a group of people who invest money to buy machines and then make profits from the digital currencies they mine. Their payback period and profit expectations are actually difficult to predict. If the price of the currency soars, such as in the bull market of 2017, they may be able to get their money back in more than ten days, but if it is in a bear market, they may not be able to get their money back even if the machines are scrapped.

A mining farm is more like a physical industry. The biggest investment in building a mining farm lies in the civil engineering cost, pipeline cost, and labor costs such as security and operation and maintenance. Its source of income is the price difference of electricity sold to miners. Unlike many people's imagination that mining farm owners own a large number of mining machines, the reality is that many mining farm owners do not understand digital currency at all and have no interest in mining. Collecting electricity bills is a stable and high-profit business for them, and the so-called large number of machines actually belong to customers.

A huge advertisement for a mining industry in Shenzhen Huaqiangbei SEG Plaza

Mining machine manufacturers are the ecological roles with the highest technical level. They often invest a lot of money in chip research and development, and then use the technological advantages brought by scientific research to make profits.

The essence of a mining pool is actually similar to that of an exchange in the cryptocurrency world. Both are software service providers. Their main costs are research and development costs and network-related costs, and their profits are generated by charging commissions to users within the mining pool.

In addition, service providers such as Zhao Huanran and Wan Ping, who are also traders, are indispensable in the ecosystem. They are more like lubricants, increasing the mobility of market materials and personnel. Any identity role can allow you to get a ticket to enter the mining circle, but most people can only be an unknown miner who is at the mercy of others.

In fact, the mining tyrants at the top of the food chain often have multiple identities. Mining machine manufacturers have mining pools or their own mines. Retail miners lie at the bottom of the food chain and are at the mercy of others.

Retail miners are repeatedly "slaughtered"

"Stealing computing power and replacing machines are too common, and there are too few mining farms with conscience." Zhao Huanran sighed when talking about the chaos in mining farms. Compared with Liu Zhigang and Xiao Hua, who were extremely disappointed after entering the mining circle, Zhao Huanran was much calmer.

Since entering the mining circle at the end of 2015, Zhao Huanran has accumulated a lot of mining resources and customer relationships after years of ups and downs. Even so, he insists on not running a "heavy asset" mining model, but chooses to focus on the "service layer" that requires less asset pressure.

Zhao Huanran made profits by contracting the mine's warehouses, shelves, and machine positions, and then looking for scattered C-end customers downstream to sell them mining machines and electricity at premium prices.

"For retail investors who only buy a few mining machines, there is actually no difference between 0.4 electricity bills and 0.45 electricity bills. What's more, the mining farm does not accept individual machines, and it is actually very risky for me to contract the entire warehouse." Zhao Huanran said. Although the electricity bill for a single mining machine does not seem to make much money, the accumulated amount over a long period of time has brought him a considerable fixed income.

In the process of operating the mining machine hosting business, Zhao Huanran has also seen the "dirtiness" of the mining circle. The low cost of doing evil and the market environment of supply and demand make retail miners have almost no say. In his opinion, retail miners are actually like sheep waiting to be plucked, and many people can easily grab a handful of wool. The main reason is that "this market is too opaque." When asked in which links retail miners may be "plucked", Zhao Huanran smiled and replied: "You should ask which links will not be plucked."

Stealing computing power, replacing machines, and embezzling user assets are everywhere. In Zhao Huanran's description, the mining farm is like a demon that devours the blood of retail investors.

Zhao Huanran said that since most people ordered futures mining machines and the mining farms are extremely scattered across the country, it is impossible to predict when the mining machines will be put on the shelves. If the mining machines are shipped early, the mining farms will probably mine first and then choose a suitable time to return them to the miners, and the miners will not feel anything.

A small private mine in Yunnan

"After the launch, there is a lot of room for manipulation in the mining process. You can stop your machine for a few days every month with various excuses." Zhao Huanran explained that as for what excuses, the mines can always come up with them. Leader inspections, equipment maintenance, and power outages are all common excuses. He said that there must be truth in these excuses, but there are too many evil mines, and it is difficult to distinguish them. We can only hope for a quick recovery.

"I remember one time, a small mine said that the cooperative power plant caught fire and it was shut down for a whole month." At this point, Zhao Huanran could not help but curse a few words. It turned out that his own mining machine was hosted in that mine and was not spared.

In Zhao Huanran's opinion, stealing and replacing machines is also very common, because many retail miners do not pay attention to the serial numbers of their machines, and the mining farms will not specifically inform them after receiving the machines. Anyway, after connecting to the mining pool account, the miners will be so excited to see the continuous output of Bitcoin that they forget everything else.

"In fact, you need to be most vigilant at this time, because perhaps your mining machine has been replaced from the beginning," Zhao Huanran reminded.

Although the evils of the mining farms described by the custodian Zhao Huanran seem a bit horrifying and exaggerated, it is undeniable that digital currency mining has always been a typical high-threshold seller's market. Both funds and knowledge need to meet the standards to participate in this gold-digging feast, and whether to be a distinguished guest or a lamb to be slaughtered at the feast requires another round of competition.

But Zhao Huanran made it clear that as a retail miner, the chances of winning the competition are not great.

"Sometimes I feel sorry for them. They spend a lot of money, but every penny of profit seems like alms from others," said Zhao Huanran.

Nuggets are worse than shovel sellers

In the mid-19th century, during the gold rush in California, the real fortune was made not by the rush of gold diggers, but by the leisurely shovel sellers. The same story is also happening in the mining industry. This is the most "flexible" part of the mining ecosystem.

Wan Ping, born in 1985, is a real "smuggler". Before entering the mining field, Wan Ping made a lot of money by reselling Apple mobile phones and other electronic products. Later, he learned about digital currency and mining machines through a friend. When he first saw Bitcoin mining machines, Wan Ping felt that they were obscure and difficult to understand, and wanted to give up at one point, but as he got to know the market more and more, he became more and more excited, and even began to be ecstatic.

In his opinion, mining machines have higher volatility than traditional electronic products, low information transparency, and great room for speculation, making them a paradise for speculators. After months of in-depth study and multiple field trips to Huaqiangbei, Wan Ping felt the time had come in June 2017.

It's time to take action.

At that time, the official price of an S9 was just over 10,000 yuan, but Wan Ping spent millions of yuan to stock up on 500 S9 mining machines. As it turned out, Wan Ping's judgment was correct.

In the second half of 2017, Bitcoin continued to rise. Although the "9.4 incident" caused the price of the currency to fall briefly, it ushered in a super bull market after that. The continuous breakthrough of the price of the currency made the mining machine price rise. At the end of the year, when the price of a single S9 exceeded 20,000 yuan, Wan Ping chose to start selling in batches. When the price of a single S9 reached 30,000 yuan, he cleared all the previous stockpiles. He made a profit of nearly 10 million yuan.

Not only that, mining machine manufacturers also continue to distribute "big gift packages" to channels.

In order to stimulate consumption and improve its reputation, mining machine manufacturer Bitmain has been issuing vouchers worth hundreds to thousands of yuan per mining machine to channel dealers who have paid the full amount for the goods. According to Bitmain's official announcement, the vouchers can be deducted for an equal amount of cash when you buy a machine next time.

Like most speculators, Wan Ping did not choose to issue the vouchers to customers who bought mining machines. For him, whether he uses them to reduce the cost of stockpiling next time or sells them to other distributors at a discount, it is a good way to increase income. Word of mouth and personal connections do not exist in a seller's market like mining.

Mine workers are sorting out mining machines

In early 2018, Ebit released the new 10-nanometer chip mining machine E10 with a computing power of up to 18T, hoping to compete with the then king machine S9 and increase market share. In order to promote E10, Ebit gave away additional mining machines with a computing power of 10% of the total order volume of all channel dealers, model E9.1.

Although not all distributors will take these machines for themselves, if customers do not take the initiative to ask, they will definitely miss out on the free machines. Wan Ping paid about half of the E9.1 to old customers and sold the rest, making a profit of more than 100,000 yuan again.

“It’s crazy.” Wan Ping exclaimed. He himself did not expect that the profit from speculating on mining machines in half a year would exceed the accumulation of the previous few years.

From the beginning to the end, the "smuggler" Wan Ping did not choose to mine himself. In his opinion, mining is hard work with your back to the earth and your face to the sky, and both input and output depend on luck. Being a "shovel seller" is both safe and easy.

The struggle between the great waves and the cycle

In the spring of 2019, the Bitcoin market continued to decline to $3,000, and the flagship S9 was on the verge of shutting down.

Liu Zhigang, who was far away in Beijing, called Wen Ge and asked him to help shut down all his mining machines and then sell them at a low price. At the same time, the long bear market since 2018 also made him completely lose his vision for Bitcoin. After clearing all the Bitcoins he mined, he left the market with a loss of more than one million yuan, including the cost of the mining machines.

Xiao Hua no longer paid attention to mining. He just mechanically repeated the work of selling coins to pay electricity bills every month. When Bitcoin fell to the S9 shutdown price, Xiao Hua could no longer contact the hosting mining farm, and even the deposit of 1,000 yuan for the two mining machines was wasted.

Zhao Huanran terminated the contract with several mining farms. The plummeting currency prices and strict national policies caused a large number of his clients to leave, and he was unable to make ends meet.

Unlike them, Wan Ping made another move at this time and bought up S9 mining machines in the second-hand market at a price of 300 to 400 yuan.

Wan Ping's intuition told him that the mining story was not over yet.

In the summer of 2019, the digital currency market began to rebound, and Bitcoin soared from US$3,000 to US$14,000. During this process, Wan Ping sold all the mining machines he had bought at a price of 1,500 to 2,000 yuan, making a fortune. The speculator won again.

The door of a mining machine sales office in Shenzhen Huaqiangbei SEG Plaza is closed

Now, the price of the currency has fallen again. In December, PANews visited SEG Plaza in Huaqiangbei, Shenzhen. The mining machine stalls were deserted. Many stalls did not even have a salesperson. Some stores even had their doors closed with iron fences.

Wan Ping, who has indescribable complex feelings towards the S9 that has become scrap metal, hopes that this myth will not disappear.

The mining circle is like a besieged city. On the front stage are the lights, wine and women and the bizarreness, and behind the scenes are the decisions of everyone to leave sadly after making a huge investment.

(At the request of the interviewees, Wen Ge, Liu Zhigang, Xiao Hua, Zhao Huanran, and Wan Ping are all pseudonyms in this article)