I talked with eight overseas mining industry leaders in the "New Mining Capital" about the future of mining

Author: Hao Fangzhou

Produced by Odaily Planet Daily

Last weekend, MinerUpdate, a crypto mining industry media founded in April this year, held its first "Global Mining Leaders Summit" in Chengdu, known as the "New Mining Capital".

The speakers and roundtable guests included not only the familiar Canaan Creative, Innosilicon, BTC.com, Biyin, OKEx Mining Pool, etc., but also many guests from far away: "Mining Tyrant" Bitfury, "Cloud Computing Big Brother" Genesis Mining, "Bitcoin Mining Pool Veteran" Slush Pool, Polish mine construction company MineBest, American mining pool Luxor, GSR, FalconX and other financial service providers, as well as Blockware Solutions, Cambridge University CCAF, Fidelity FCAT and other research institutions.

Companies that play different roles in the mining ecosystem shared interesting views on topics such as the differences between "East and West" mining, the impact of halving and computing power difficulty prediction, industry gaps and new opportunities. Odaily Planet Daily also took this opportunity to interview eight overseas mining industry leaders, and summarized the highlights of their speeches and interviews as follows, enjoy~

The "Mine Tyrant" stretches its body, and its inspiration to domestic mining machine manufacturers

Founded in Russia in 2011, Bitfury once focused on the research and development of ASIC mining chips. In the early years, it was nicknamed "Mining Tyrant" because of its strong capital and powerful computing power. As one of the most enduring companies in the mining circle, Bitfury took 8 and a half years to transform into a comprehensive blockchain technology group. According to Greg Li, head of its Asia-Pacific region, in addition to its original business (hardware-related chip research and development, cooling technology), Bitfury is also continuously generating to B software and solutions, including:

1. Exonum, an enterprise blockchain framework, provides private chains for governments;

2. Crystal Blokchian, an address tracking tool serving governments, exchanges, hedge funds and other institutions, helps check the risks, KYC, and AML of crypto transfers between different institutions;

3. Bitcoin Lightning Network Peach, which increases the speed of digital currency transfers and reduces fees through Layer 2 payment channels;

4. Industry solution Surround uses blockchain technology to enhance transparency in the music industry.

We are a little worried that the expansion of business and the different competitive environment from the early stage of the industry will make the "mining tyrants" lose their original advantages. In this regard, Greg explained to me the principles of the company's expansion of lines and the relationship between businesses.

The Bitfury team of about 350 people is scattered across countries and comes from different backgrounds. For new businesses, the company first proposes ideas internally, then jointly decides on the direction and formulates strategies (including independent research and development or investment and mergers and acquisitions). Mining has always been Bitfury's main business and a business with good cash flow. The basis for developing other businesses is that Bitfury believes in the future of blockchain and its potential to make the business environment more transparent, which will be further combined with AI in the future.

AI seems to be a vision story that other mining giants like to describe. What the industry is more concerned about may be the capital route progress of large companies. After the three major domestic mining machine manufacturers stopped ringing the bell in recent years, last week there was news that Canaan Creative would go public in the United States. We reported last year that Bitfury's valuation may be between 3 billion and 5 billion US dollars, and it is expected to become the first large-scale European IPO in the industry. But Greg did not comment on its listing plan.

By the way, I asked Greg for his advice on "going overseas" on behalf of domestic miners, as well as his predictions on currency prices and computing power.

Greg said that the mining market outside of China is huge, organic, and diverse. We should not only pay attention to electricity prices, but also look at factors such as the geographical environment, whether long-term agreements can be reached with related infrastructure (preferably more than 5 years), transparency, and whether the energy is green. In addition, when we talk about blockchain, we still discuss Bitcoin most of the time. Indeed, Bitcoin is the backbone of digital currency. But the impact of price fluctuations and halving are all short-term investment perspectives. As a comprehensive company, Bitfury must have a long-term perspective, that is, to build blockchain infrastructure and introduce blockchain technology into government and public services. As for the difficulty of computing power, due to the advance preparations of miners, it will increase by another 5-10% by the end of the year.

Cloud computing leader: Mining is a cruel world. We have had many competitors, but they did not survive.

In the early years, Marco Streng found that the return rate was amazing when he was mining alone, so he went to Eastern Europe to expand the mine. Many of his friends also wanted to invest, so Marco came up with an idea that everyone could participate in, that is, cloud computing mining. Now, Genesis Group, a cloud computing company with Marco as CEO, has gone through its sixth year, serving more than 2.8 million users (mainly in the Western market), and has data centers in Iceland, Norway, Fenlan, Sweden and other places.

In the interview, Marco repeatedly emphasized that the mining market is a cruel world, and only by being very clear about your position in which market stage can you survive. Genesis has always had competitors, but not many can survive the bear market. Marco believes that in recent years, industrial upgrading has gradually squeezed out "small and scattered" miners. The same thing will happen again due to the halving next year. Therefore, the advantages of cloud computing power to C are highlighted. Genesis also hopes to enter the huge Chinese market to find service opportunities. Before that, it will strive to make the cost of cloud mining lower than that of Chinese users mining by themselves.

Marco said that looking abroad, there is cheaper, greener and more sustainable electricity, and China's mining profits have been squeezed very thin by all links. Therefore, in addition to electricity prices, Chinese miners can also learn more about how overseas countries use technology to replace labor costs. Of course, what China is very worthy of learning from the West is business efficiency, such as being able to build mines and transport equipment in a very short time.

Genesis currently has a team of 500 people. In addition to the main mining and cloud computing power, it also has AI, funds, wallets, mining finance and other businesses. Taking finance as an example, Marco believes that predicting profit margins is the premise of hedging, and financial instruments that bet on computing power difficulty (computing power futures) may become more popular in the future. Another prediction is that the imagination space of cloud computing power is not only in mining, but can also meet other high-performance computing needs.

The rapid rise of new mines, using the principle of diversification to reduce various risks

Founded in 2017, MineBest is a Polish mine construction and mining service company with a team of nearly 200 people.

CEO Eyal Avramovich said that MineBest's advantages lie in sustainable mining capacity, low electricity prices and low hosting fees (5-6 cents/kWh), efficient and low-maintenance methods, experience and professionals for building mining farms. According to the official website, MineBest currently has a power capacity of 200MW.

The focus of Eyal's communication with me always revolved around one question, "What's outside China?" What is it like to mine abroad?

Eyal said that mining is still very fragmented geographically. Foreigners cannot learn about the real situation in China through Google, because of language barriers, cultural and policy differences. Therefore, only by actually living in China and communicating more with Chinese partners can we understand each other. MineBest's team in China is based in Shenzhen, mainly responsible for data, management and cooperation with local companies. The reason for not mining in China, in Eyal's opinion, is that mining in China has not been truly approved, and many activities are still "underwater", while there is a safer and more diverse mining environment abroad.

MineBest especially hopes to use its international perspective to make mining more decentralized, efficient and risk-resistant. For example, electricity prices in North America are cheap and mining farms in China are built quickly, so if you want to get started quickly, it will be more efficient to assemble equipment in different regions and choose suitable logistics.

Image from MineBest official website

Eyal also mentioned in his speech that the biggest change in the market in recent years is that people have become more and more adept at learning, so MineBest has also kept up with the pace in terms of logistics, financing, and logistics, and has developed faster than in 2017.

Regarding the cloud computing business that I personally care about, Eyal believes that btc.com's partner Mining City has a lot to learn from. When designing packages of different durations, market strategies can be formulated according to the conditions of different regions.

Competition among mining pools is fierce. How can the “Western mining pools” that have no say break through?

The only "Western mining pool" in the top ten, Slush Pool, can be said to be a real "old player". According to co-CEO Pavel Moravec, the world's first team to do mining pool business is seeking change.

Image from btc.com

Pavel’s point of view is that since mining is mainly a technical job, new technologies will be an opportunity for “Western mining pools” to introduce new computing power. The mining industry has a huge amount of funds and faces two major problems: centralization and opacity. Therefore, Slush Pool’s breakthrough tool is the second-generation Stratum mining protocol.

Through this protocol, mining machine owners or mine operators can select blocks. While enhancing the transparency of mining pools, the protocol can also better disclose data and let the outside world understand miners' behavior and work.

In response to the issue of industry competition that we particularly like to ask, Pavel said that China has a lot of high-quality mining pools concentrated in it, which is partly related to the location of mining activities, and this will not change much.

Luxor Mining has a unique approach. This US mining pool, which started in 2017, first supported 15 currencies including Zcash, Grin, Monero, Veil, Siacoin, Decred, etc., and only announced the addition of Bitcoin mining pool business last weekend.

According to Luxor Technologies co-founder and CFO Ethan Vera, the market competition is too fierce, and many strong brands have already occupied the front row. Therefore, the team will first focus on the potential of other currencies, introduce them to users, and solicit opinions. For example, at the beginning of this year, the MimbleWimble protocol was very popular. Luxor found in research and user feedback that Grin was more attractive than Beam, so it began to support Grin mining.

Once Luxor decides to support a certain currency, it will choose to strongly bind with the project, such as providing financial support and building a global community. According to its official website, the computing power of Luxor's mining pool is currently about 2.2Ph/s, and there are more than 2,600 active miners.

I am curious about how Luxor attracts new miners in the highly competitive mining pool market. Ethan said that technically, the cost for miners to switch mining pools is extremely low. Price is certainly one of the competitive advantages of mining pools, but miners are not as price sensitive as I thought. They also care about whether customer service is timely and powerful, user experience and UI, community interaction, etc. Although the Luxor team is streamlined with only 7 people, everyone participates in user interaction. CEO Nick Hansen chats with 10-15 miners every day to understand their needs.

Currently, Luxor's users are distributed in North America (70%) and other regions (mainly Asia) (30%). Seeing the huge size of the Chinese market, the team has recently started the corresponding BD work. Ethan believes that the differences between China and the West are not only in the mining industry. China's relationship-based business environment requires time to build strong trust, while the United States places more emphasis on market and brand.

When asked whether Staking can help Luxor "overtake", Ethan said that the team is already using its own funds for Staking, but the mining pool is still focusing on POW, which has been proven to be safe for a long time, and has not yet expanded the POS mining pool business.

Financial service providers in the secondary market are waving to the mining industry

During the event, we found that financial service providers that previously focused on the secondary market are also working hard to reach out to the upstream mining circle and provide financial strategies and tools for miners.

FalconX is a North American cryptocurrency broker, backed by VCs such as Accel, Flybridge, and Lightspeed. The company mainly builds trading engines for institutional clients such as hedge funds, and connects to top exchanges such as Coinbase and Bitmex through FalconX's account system to obtain global liquidity.

Austin Reid, who is responsible for BD and trading, told Planet Daily that due to the high fragmentation of the brokerage market (the same is true in North America) and the rapid growth in the participation of US institutions in crypto investment, there is still a large gap in the market.

FalconX's team genes are mixed, coming from Google, MakerDAO, etc. After fully understanding the market demand, it will provide liquidity assistance to the miner group.

Founded in 2013, GSR is headquartered in Hong Kong, with approximately 40 employees spread across Asia, Europe, America and the United States.

According to Song Zhengxin, the head of business in Asia, GSR has been focusing on transactions in the secondary market of cryptocurrencies. Its main business is to provide liquidity for leading projects and exchanges, including brokerage business (such as splitting large orders to different exchanges), options and other derivatives, and hedging services. Its long-term goal is to become a professional broker in the crypto field.

During the discussion, we found that Chinese exchanges prefer to take on "peripheral businesses"; while in mature markets, each player will focus more on the areas they are good at. GSR hopes to do a good job in back-end services and hand over front-end affairs to partners.

In addition, GSR also has its own quantitative investment business that targets mainstream currencies and executes low-risk strategies, but has not yet raised funds externally.

Research institutions are optimistic about the mining industry and Bitcoin market forecast

At the summit, several analysts who were “looking at the mountain from outside the mountain” shared their research results.

John Lee Quigley, head of research at MinerUpdate, said that the two mining machines, the Innosilicon T3-43T and the Whatsminer M20S, are worth investing in.

Apolline Blandin, head of blockchain research at CCAF at the University of Cambridge, said that CCAF researches and publishes the electricity consumption index for mining, and people can view real-time data on the website https://www.cbeci.org.

Amanda Fabiano, senior project manager at Fidelity (FCAT), said that Bitcoin accounts for about 37% of electricity consumption, which is similar to other industries. From a numerical point of view, computer games consume more electricity, so should we stop playing games? FCAT is more of an observational rather than a predictive study. Compared with discussing whether Bitcoin wastes electricity, it hopes to focus on whether alternative energy can support Bitcoin mining.

Blockware Solutions CEO Matt D'Souza gave more "digital conclusions". For example, from the perspective of the mutual feedback of "mining machine price-Bitcoin price", the Ant S17 series of mining machines are replacing the S9 series and becoming a more reliable hardware asset before and after the halving of production next year. Under the assumption that the coin price is $8,000, the electricity cost is $0.045 per 10 million hours, and the computing power difficulty maintains a monthly growth rate of 10%, the shutdown coin price of S9 in May next year is $15,247.46 , which also means that each S9 will cause miners to lose $23.6 every month.

Image via Blockware Solutions

In addition, 2019 is a year driven by institutions, with Bitcoin futures trading volume up 132% year-on-year. We are in the first third of the bull market, and there is a 50% chance that the peak of this bull market will fall in the $60,000-90,000 range. There is also a chance that the price will return to zero (this probability is decreasing), such as a large-scale hacking incident, or a strong policy to shut down transactions and kill liquidity.

Image via Blockware Solutions

Matt is also the co-founder of the hedge fund Blockchain Opportunity Fund LLC. He believes that Bitcoin has achieved the basic functions of digital gold and has liquidity in its early stages of development, just like when Jeff Bezos started Amazon in his garage in 1995, people could already buy and sell Amazon stocks. But the reality is that Amazon in the 1990s was too early and not ready for the public. What ordinary investors can do is to keep up with the pace of institutions. In the case of the Bitcoin market, it means paying more attention to the actions of smart money such as CME.

In addition to Bitcoin, Blockware Solutions is also conducting research in DeFi, POS and other areas, and is also one of the largest verification nodes for LOOM and other currencies. However, Matt believes that currencies after Ethereum tend to be application platform properties, and still have to face many problems such as high gas rates and non-scalability.