"The Wild History of Bitcoin" | The sudden wealth of grassroots characters (the battle between the three giants in the mining circle)

The article is from Uncle Yao’s “The Wild History of Bitcoin”. Please indicate the source when reprinting.

In the early days of Bitcoin, anyone could be a miner, because they could mine with a computer, and with a better graphics card, mining would be even faster. When Bitcoin had a price and could be exchanged for legal currency on exchanges, some people began to increase their computing power for rewards, and these people eventually gathered together to form a group of miners, and the mining industry gradually became prosperous.

The early Bitcoin mining process went through the PC CPU mining era in 2009, the GPU mining era in 2010, and the field programmable gate array (FPGA) era in 2011. Bitcoin mining took another step forward in 2012. A massive Bitcoin mining computing power competition began. In June 2012, a US Bitcoin mining machine development organization claimed that it was researching professional integrated circuit (ASIC) mining machines. As soon as the news was announced, a group of domestic Bitcoin enthusiasts began to get restless. Is this going to destroy the free world of Bitcoin? At that time, Pumpkin Zhang and Baked Cat stood up and represented China to fight, even though Pumpkin Zhang and Baked Cat were only students at the time, and Kuangba Wu Jihan was just a small Bitcoin investor. Fortunately, traditional chip manufacturers like Intel did not intervene because they still looked down on this business. This gave the industry a large window period. At that time, whoever could develop the latest chip and put it into production would win. Everyone officially entered the era of computing power competition.

The first ASIC mining machine

In 2011, Zhang Nangeng was a graduate student at Beihang University, studying integrated circuit design. He was a typical "deep otaku" who had plenty of time in college. To kill time, he often watched anime or lurked on various websites and forums all night. One day, he accidentally found the Bitcoin community and came into contact with Bitcoin. He learned that foreigners abroad needed an FPGA machine to mine Bitcoin. So based on his professional advantages, he customized several batches of FPGA mining machines for foreigners in his spare time. At that time, he just regarded this as a job to make extra money, and did not think it was so great. However, since domestic miners were still using GPU mining at that time, when he talked about this in the community, everyone admired him and recognized that he was the first person to launch FPGA mining machines in China. Therefore, he gradually became famous. Because his ID was ngzhang, people in the Bitcoin community simply called him "Pumpkin Zhang".

In June 2012, the community heard that the American "Butterfly Labs" (an organization that develops Bitcoin mining machines) claimed that they were going to develop a new type of mining machine - an integrated circuit (ASIC) mining machine, which was promised to be shipped in September of the same year. It is said that the new mining machine ASIC has the advantages of high performance and low power consumption compared with FPGA. If it is successfully developed, Butterfly Labs is likely to control more than 51% of the computing power in the Bitcoin world. Pumpkin Zhang has learned about the operating principle of Bitcoin. He knows that there is a risk point in the Bitcoin system, that is, 51% attack. If someone controls more than 51% of the mining computing power, he can easily tamper with the transaction records. After seeing this news, Pumpkin Zhang realized that the new machine developed by Butterfly Labs would make it possible for them to quickly have more than 51% of the computing power, which also means that the organization may have complete control over the Bitcoin world.

In order to prevent Bitcoin from being monopolized by Butterfly Labs, Pumpkin Zhang, with the heroic mentality of "maintaining world peace", announced that he would also start developing ASIC mining machines, and then sell them to other users to fight against possible monopolies. At that time, the mining circle believed that the mining machine technology in the United States was more professional, more advanced, and more scalable, so everyone was not surprised to see the American "Butterfly" company. But the final result was surprising. The highly anticipated Butterfly Labs did not bring its own brand new mining machine, but several "delayed payments". In the end, "Pumpkin Zhang" brought the world's first ASIC mining machine, which he named Avalon.

Pumpkin Zhang was very fast. In September 2012, Avalon was released for pre-sale at a price of 9,300 yuan per unit. The first generation of Avalon at that time was not only simple and rough in appearance, but also had no sense of design. The pre-sale contract also included many "tyrannical clauses", such as no promise of delivery time, no after-sales service, no change of delivery address, and no refund even if the goods are not delivered. However, despite this, many people still bought Avalon mining machines from Pumpkin Zhang, because they knew that the computing speed of Avalon mining machines was much faster than that of graphics card mining machines. It is said that the Bitcoin mining machine designed by Pumpkin Zhang can generate more than 300 Bitcoins a day. According to the Bitcoin price at that time, a mining machine can produce 200,000 yuan a day. In the face of huge interests, people can accept all kinds of tyrannical clauses without any bottom line.

The world's first ASIC mining machine "Avalon" invented by Pumpkin Zhang successfully sniped the American Butterfly Laboratory and also made him a lot of money. In April 2013, Zhang Nangeng founded Canaan Creative in Beijing. A year later, Avalon launched the third generation of chips. At this point, the computing power contributed by Avalon mining machines exceeded 1/3 of the entire network at that time, and Pumpkin Zhang's mining machines gradually began to be sold all over the world. In 4 years, through 10 capital increases and 300 million financing, the company's registered capital was changed to 300 million, and the overall valuation reached more than 3 billion yuan. Pumpkin Zhang is undoubtedly a billionaire in the circle and has stood on the road of life subversion.

Genius Grilled Cat makes a fortune

On June 29, 2013, at the Entrepreneurs Public Training Base at No. 200 Guoding East Road, Shanghai, Xiaoqiang, Cao Xiaogang (early shareholder of FC), Shenyu (the founder of domestic mining pools), Chongge (early agent of FC mining machines), and other friends in the industry gathered here. Several PPTs were played here, one of which introduced FC:

The genius boy FriedCat, whose real name is Jiang Xinyu. He is good at English, a tech geek, a generalist, trustworthy, has a keen eye for investment, and is a pragmatist. In 2001, at the age of 15, FriedCat was admitted to the Junior Class of the University of Science and Technology of China with a score ranking 11th in the country. In 2011, FriedCat went to Yale for a doctorate and dropped out. In the same year, FriedCat heard about Bitcoin from his old classmate David at the University of Science and Technology of China and began to study Satoshi’s paper…

On January 16, 2012, Friedcat registered his forum nickname friedcat (Chinese translation: Friedcat) on the bitcointalk.org forum. In June of that year, the news that Butterfly Labs in the United States announced the manufacture of ASIC mining machines triggered a wave of discussion about ASIC mining machines in the community. "Pumpkin Zhang", one of the three giants in the mining circle, announced the manufacture of ASIC mining machines to maintain world peace. The genius Friedcat also followed suit and issued a statement that he also had the ability to manufacture ASIC mining machines and released a research and development plan.

The plan to develop ASIC mining machines was announced, but FriedCat had no money. What should he do? So he discussed with David and prepared to raise funds through crowdfunding. On August 7, 2012, FriedCat conducted an IPO (now called ICO) on the GLBSE exchange, and the name of the issued stock was Asicminer. The total share capital was 400,000 shares, 59% of which were held by FriedCat Company (Bitfountain). The issue price was 0.1 BTC/share, and a total of 163,962 shares were issued. According to the exchange rate at the time, about 1 million RMB was raised. On August 9, FriedCat posted on bitcointalk: "ASICMINER: Entering the Future of ASIC Mining by Inventing It", introducing the FriedCat mining machine and responding to external doubts. Although there were many doubts, there were also bold and careful adventurers. Wu Jihan was one of them. He invested 1,000 BTC without hesitation and received 10,000 shares, and was also given an additional 2,500 shares.

FC lived up to expectations. In 2013, FC's first quarter financial report showed that it paid a total of 67,515.09 bitcoins in dividends. At that time, the average price of FC's shares was 2.5 bitcoins, which was 25 times higher than the IPO price. On the first Wednesday of May 2013, more than 13,000 bitcoins were distributed as dividends. In June, FC's share price reached 3.4 BTC/share. At this time, Butterfly began to ship out orders for 2012.

In this computing power competition, Pumpkin Zhang developed the world's first ASIC mining machine, and FriedCat also successfully developed the FriedCat mining machine, becoming the second person to develop ASIC mining machines. Although it was behind Pumpkin Zhang in time, the FriedCat mining machine far exceeded Pumpkin Zhang's Avalon mining machine in scale. At that time, Butterfly's ASIC mining machine had been delayed in delivery after several delays, and although Avalon's mining machine was highly efficient, there were only 1,500 units in three batches. Compared with FriedCat, the number was far behind.

In April 2013, Avalon announced that it would no longer produce mining machines, but would instead specialize in producing chips and withdraw from the mining machine market in the short term. At this time, Friedcat once firmly established itself as the industry leader. By May, the mining computing power market had almost become the world of Friedcat. Due to the excessive and concentrated computing power, it caused panic in the community twice for two consecutive months about 51% attacks. As a last resort, they had to sell some of the machines. According to public information, after Friedcat established the "mining machine" company, it once had a record of earning 200 million in revenue in 3 months.

After the launch of Avalon by “Pumpkin Zhang” and BBQCat’s own BBQCat ASIC mining machine, the first batch of mining farms in China began to emerge, and China’s Bitcoin “mining” industry has since dominated the world. However, BBQCat mysteriously disappeared later.

The rise of mining tycoon Wu Jihan

Who is Wu Jihan? A well-deserved hall-of-fame figure in the cryptocurrency circle. Do you remember the online crowdfunding project launched by the genius Kaomao in August 2012 when it manufactured ASIC mining machines? Among those who bought stocks at that time, there was Wu Jihan. In fact, this Peking University graduate with a double degree in psychology and economics was already a recognized Bitcoin evangelist in the industry at that time. As early as 2011, he founded the Babbitt information website with the prediction master Chang Jian and others, and later founded the mining machine chip company Bitmain with his golden partner Zhan Ketuan. The success of Bitcoin Mainland upgraded his identity from an industry evangelist to a generation of mining tyrants.

In 2009, after graduating from Peking University, Wu Jihan entered the investment industry and became an investment manager. In May 2011, he entered the Bitcoin industry with the attitude of a venture capital practitioner. After spending time studying Bitcoin, he felt that it overturned his previous understanding of currency and was sure that it had investment value, so he asked a good friend to raise 100,000 yuan to buy Bitcoin. By 2014, he had cleared all the coins he bought, and the return rate was dozens of times, which was Wu Jihan's first victory in the field of Bitcoin investment. Of course, in addition to direct investment in Bitcoin, as an early investor in the Fried Cat mining machine, Wu Jihan also became the biggest winner, and his investment return in the Fried Cat project reached tens of millions of yuan.

The two successful investments made Wu Jihan a small profit, and at least for a period of time he did not need to worry about money. In April 2013, he quit his investment bank job and prepared to go abroad for further studies. At the same time, a Russian mining chip R&D team successfully developed a power-consuming mining chip. In addition, the company he invested in at the time, Baked Cat, encountered an unprecedented crisis. Wu Jihan suddenly realized that he needed to get involved in the mining chip industry.

At this time, Wu Jihan accidentally met a chip expert named Zhan Ketuan who was actively promoting his business on the street. He sent information about Bitcoin to Zhan Ketuan by email. After spending several hours studying the content, Zhan Ketuan also realized that Bitcoin had great development potential. So the two hit it off and jointly established Bitmain. Wu Jihan was right. Zhan Ketuan, who was determined to make a name for himself, took only half a year to turn from a layman to a senior and developed an ASIC chip. He quickly launched this mining machine called "Antminer S1" to the market in November 2013, and Bitmain officially announced its opening.

As soon as Bitmain opened its doors, the industry entered a bear market in 2014. With the fraud incident at Mt. Gox, the world's largest trading center at the time, Bitcoin began to collapse and the price fell to a low point. In addition, the number of Bitcoins decreased, and the difficulty of mining became increasingly greater. The mining costs of miners became increasingly higher, and more and more people were no longer willing to mine a digital currency with a decreasing value. Correspondingly, the sales of Bitmain's mining machines also dropped sharply, and there seemed to be no other way except to wait for the price of the currency to rebound. By the end of 2014, a series of shocking events put Bitmain in trouble and encountered the most difficult time.

Even though it was very difficult, Wu Jihan did not watch Bitmain go bankrupt. After discussing with Zhan Ketuan, they began to study Bitmain's fifth-generation low-power mining machine Antminer S5. The S5 mining machine produced eventually turned around the fate of Bitmain. As the price of Bitcoin rose, miners returned to the mining industry, and Antminer S5 became their preferred mining tool. As expected, S5 sold well, and Bitmain was pulled back from the edge of the cliff. It was precisely because of the S5 Antminer launched by Bitmain that Bitmain brought a substantial turning point and established its dominant position in the mining market.

In this early competition for mining power at home and abroad, FriedCat and Pumpkin Zhang defeated Butterfly Labs, but the final winner was Bitmain. Bitmain's mining machine market share was nearly 80% at its peak, occupying an absolute monopoly position. In addition, Bitmain also participated in mining, and during the crazy period, it directly controlled about 30% of the total network computing power of Bit. In the list of China's top ten chip design companies in 2017, Bitmain jumped to the second largest chip design company with an annual sales of 14.3 billion yuan. So far, Wu Jihan has spent 8 years to become a generation of mining tyrants in everyone's eyes.

To be continued...