September public chain observation: How do you view the future of Bitcoin mining?

1. Dapp Overview

Among many public chains, the development of Dapps on EOS, Tron and ETH has received more attention. It can be seen that at present, the transaction volume of the three is similar, all in the range of 5-12 million US dollars; EOS leads in terms of daily active users and transaction volume, among which EOS has about 78,000 daily active users, while Tron and ETH are about 40,000 and 15,000 respectively; the number of EOS transactions is about 2.85 million, while Tron and ETH are 1.26 million and 60,000 respectively; in terms of the number of Dapps, the three have grown steadily in September, among which ETH is far ahead, about 1,986, and EOS and Tron are close, about 600.

2. Hot topic focus: How do you view the Bitcoin mining market in September?

The mining power and difficulty increased, the price of the currency decreased, the income decreased, the "death fork" reappeared, and the risk of "mining accidents" approached. In September, the Bitcoin computing power was 77Eh/s at the beginning of the month, and then continued the upward trend since the end of December 2018. On the 26th, it broke through the "mark" of 100Eh/s for the first time, approaching 102Eh/s (an increase of 25Eh/s from the beginning of the month), and fell back to 95Eh/s on October 2 (Bitinfocharts). Along with this, the difficulty of Bitcoin mining has also continued to rise, from 10.8T at the beginning of September to 12.8T at the beginning of October. However, the price of Bitcoin fell from US$10,575 at the beginning of the month to US$8,365 at the end of the month. The situation of the coin price and computing power rising together for 8 months from December 2018 to July 2019 has been reversed. The increase in mining difficulty and the decline in coin prices have reduced mining income, lengthened the payback period of mining machines, and returned to the situation from January to December 2018. Considering that the dry season in November is approaching, the low electricity prices during the flood season will no longer be sustainable and the mining costs will rise. If this "death fork" trend continues, the mining industry may see the situation where some mining machines reached the shutdown price at the end of 2018 again.

(II) Industry competition pattern: Shenma becomes a "dark horse" , Canaan Creative may go public

Shenma Mining Machine has sold 100,000 M20S/M21S. Yang Zuoxing, the founder of Shenma Mining Machine, said at the 2019 New Era Mining Summit held on the 22nd that Shenma Mining Machine's sales volume was low in March, gradually increased in April and May, and orders increased sharply in July. At this time, there was no spot, only futures, and then the orders were relatively stable. At the time of speaking, 100,000 M20S/M21S (M20S and M21S computing power were 68TH/S and 56TH/S, respectively, or about 12.4Eh/s computing power) had been delivered, and the total number of M20S/M21S on the market at the end of September was about 200,000. According to our calculations, if all these mining machines are turned on, the computing power of Shenma mining machines on the market will be at least 24.8Eh/s, and the computing power of the entire Bitcoin network will be about 95Eh/s at the end of September, that is, the computing power of Shenma mining machines accounts for at least 26% of the computing power of the entire Bitcoin network.

Yang Zuoxing holds a Ph.D. in Engineering Nuclear Physics from Tsinghua University. In 2014, he joined the mining machine team BitQuen led by Xiaoqiang Mining Machine and Kaomao. In 2015, he developed S7 and S9 mining machine chips for Bitmain (S9 once became the mainstream model for Bitcoin mining). In 2016, he founded BitMicro and developed Shenma mining machine. In May 2019, he released five Bitcoin mining machines (including the subsequently popular high-computing power model M20 series). The chip process is 8nm manufactured by Samsung. It has emerged as a dark horse and changed the competitive landscape of the Bitcoin mining machine market dominated by Bitmain and Canaan Creative.

Canaan Creative will go public, which may help it consolidate its position in the industry. According to media reports such as 36Kr, Canaan Creative may go public in the United States in mid-November, intending to issue 126 million new shares with a valuation of US$2-3 billion; recently, Avalon launched a new generation of Bitcoin mining machines, the A11 series, of which A1166 and A1146 are among the Bitcoin mining machines with the highest single-machine computing power on the market. It is understood that the intended orders for A10 and A11 have reached nearly 500,000 units, and it is expected that the total number will exceed 1.5 million units in 2020. If Canaan Creative can successfully go public, it will be beneficial for it to raise funds from the traditional capital market, further compliance with the mining industry, and may help it consolidate its position in the industry.

(III) New product release and delivery by manufacturers: Bitmain released new products and compensated customers for delayed delivery with Shenma

Bitmain releases new products. In September, Bitmain released two new mining machines: S17e and T17e. The former has a standard computing power of 64 TH/S, an energy efficiency ratio of 45J/T, and a price of 20,928 yuan (327 yuan/T, the price when it goes on sale at 19:00 on September 11), and the latter has a standard computing power of 53TH/S, an energy efficiency ratio of 55J/T, and a price of 12,455 yuan (235 yuan/T, the price when it goes on sale at 19:00 on September 11). They will be officially sold in three batches at 19:00 on September 9, 10, and 11, Beijing time, corresponding to shipments from November 1 to 10, 11 to 20, and 21 to 30.

Bitmain provides compensatory coupons for some of the delayed S17, S17pro, and T17 products in August and some S17 products shipped in September. The former is calculated based on the theoretical mining PPS income calculated based on the theoretical computing power of the originally purchased product and the difficulty of the entire network, minus 2.5% handling fees and electricity costs (0.4 yuan/kWh); the latter can choose to exchange for T17 of equal quantity, computing power, and value.

Canaan Creative will mass produce 7nm chip mining machines next year. Kong Jianping, co-chairman of Canaan Creative, revealed, "We continue to develop 7nm chips. In 2018, we mass-produced the world's first 7nm chip for use in mining machines. The mass production of subsequent iterative versions will be launched on the market next year." According to our understanding, Canaan Creative released the 7nm chip mining machines A920P and A921 in August 2018, with computing power of 19TH/S and 20TH/S respectively, and wall power consumption of 1710W/H and 2040W/H respectively.

Shenma Mining Machine issued a statement on delayed delivery. On September 17, Shenma Mining Machine issued a "Statement on Delayed Delivery of Mining Machines", stating that due to factors such as the wafer foundry (Guosheng Blockchain Note: Samsung) delaying the delivery of wafers by 2-3 weeks, Shenma Mining Machine's delivery progress fell behind the contract commitment time, and will communicate the delivery time and compensate users who place orders from official channels and whose delivery time is in August and September.

(IV) Forecast of the market outlook

On September 22, Biyin Mining Pool held the 2019 New Era Mining Summit in Chengdu. At the meeting, many mining professionals shared their judgments on the future of the mining industry.

1. Coin price: $110,000 in 2021, and eventually $1 million?

Based on the charging model (the voltage gradually reaches a steady state as the charging time increases), Yang Zuoxing predicts that the price of Bitcoin will reach a maximum of $110,000 in 2021 and will eventually reach $1 million. His basis also includes his belief that Bitcoin is similar to gold, so the price of Bitcoin can be obtained by dividing the gold price by the number of Bitcoins; Wang Yang, the initiator of the One Person One Coin (BTC) consensus community, believes that the price of Bitcoin will definitely exceed $20,000 after the halving; Wang Haizhou, head of Bitpie China, proposed that the price of Bitcoin will be between $15,000 and $20,000, and there will be a big market in 2021, one year after the halving; Zhang Li, co-founder of Wolf God Mining Machine, believes that in the field of Bitcoin trading, technology is a false proposition, and the price of Bitcoin depends on incremental funds; Chen Lei, founding partner of Blue Whale Blockchain, proposed that Bitcoin still has room for a correction, and a correction is more in the interests of giants; Li Peicai, CEO of Waiyi Technology, proposed that Bitcoin has currently overdrawn part of the halving expectations, and the price of Bitcoin may still be around $10,000 by May next year.

2. Computing power: 120E by the end of the year?

Yang Zuoxing predicted that the computing power will increase to about 120EH/S in 2019 based on the production capacity of Shenma mining machines; Yu Wei, founder of Zhijian Xinyun, believes that if the price of Bitcoin rises, the computing power can be more than 120E, but if the difficulty increases and the price falls, it may be less than 120E. At present, the computing power of the old generation of mining machines is 60E, and the price of Bitcoin will affect whether these mining machines can continue to mine; Zhang Lu, founder of Computing Power 360, believes that the supply of mining machines exceeds the demand, and the market demand for 1.5 million units is still unmet.

In addition, since July, Bitmain has booked 30,000 wafers from TSMC for the third and fourth quarters, and then added 20,000 wafers, including 16-nanometer wafers. According to our understanding, Bitmain's mining machines S17 and S17 Pro, which use the second-generation 7-nanometer chips, contain about 144 chips. A 12-inch 7-nanometer wafer can cut out about 3,000 ASIC chips. Assuming that this batch of wafers is mainly used to manufacture the 7-nanometer mining machine S17 Pro (56T), Bitmain will be able to manufacture about 1.04 million mining machines by the end of the year; assuming that this batch of mining machines is officially launched, sold out and used for mining in early 2020, the computing power of the entire network will increase by 58.24EH/S.

Kong Jianping, co-chairman of Canaan Creative, predicted that the size of the supply chain, technology, and currency prices determine how computing power grows. At the beginning of 2018, computing power could double every month, but the base of computing power growth is getting bigger and bigger, while the chip supply chain has limited production capacity. Taking the end of 2019 as the time node, in 2010, if the currency price rises again, the limit of computing power growth is that it can only double.

3. Mining machine performance: Will the service life be extended to four or five years?

Yang Zuoxing predicts that the era of new mining machines reducing power consumption by half is gone forever, and the power consumption reduction ratio of each generation of mining machines in the future can only reach 10%-20% at most. Mining machines will not be eliminated in a few months like before, and the service life of mining machines will be extended to 4.5 years in the future. Therefore, low-power mining machines will become more and more popular, and it is estimated that mobile container mining machines will account for about half of the market in the next 3-5 years. Water-cooled and liquid-cooled mining machines will become mainstream in about 5 years, accounting for about 80%. The computing board will become the main product form of mining machine manufacturers, and the computing power will be directly switched in the mine field. It will become the main sales model.

4. Mining: More sophisticated and professional

Yu Wei believes that the higher the performance of the mining machine, the less sensitive it is to electricity costs, but the requirements for the stability and safety of electricity, environment, operation and maintenance are getting higher and higher. In the future, mining farm construction will be like real estate, requiring refined operation. For a machine like S17Pro, if the power is cut off for two days a month, it is equivalent to an increase of 1 cent in electricity costs. I think high-performance machines must have higher requirements for the stability of electricity and mining environment.

5. Supervision: Not illegal, not prohibited

Chen Lei, founder of Blue Whale Blockchain, believes that "since the summer of 2018, many regulatory actions have appeared. Supervision is indeed tightening and clear. This is a process of regulatory learning. The most critical thing is the local government. They have a variety of management tools, such as production safety, taxation, industry and commerce, municipal administration, fire protection, etc., but as of last month, no regulatory documents have proposed that mining is illegal and should be banned. Even if there are regulated incidents in various places, each place has to discuss each case separately, and the sporadic nature is high. The risk of high pressure from a unified national policy is not too high."

6. Others: How to define the new era of mining?

Zhu Yu, co-founder of CoinIn Mining Pool, believes that the mining circle has gone through three eras: the CPU/GPU/FPGA mining machine era from 2009 to 2012; the ASIC era from 2013 to 2015, when computing power increased rapidly; the S9 mining machine-dominated era from 2016 to 2018, when 16nm chips were launched and the computing power of a single machine was 13.5T; today, the mining industry is about to enter a new era. The new standard for mining machines in the new era is power consumption of 45-80W/T, and chips will enter the 7nm, 10nm, and 16nm fields. The computing power of 2200-2500 watt equipment will be 30-50T, and the computing power of 3000-3500 watt equipment will be 50-70T.

He predicted that the new environment of the new era will be a larger market capacity, a larger number of users, more discerning and professional users, more practitioners and higher levels; the new pattern of the new era will be de-monopolization, the entry of institutions, the rise of the surrounding ecology of the mining industry (such as law and finance), and the continued differentiation of the miner group.

3. Other News

Bakkt officially launched its custody service Bakkt Warehouse on September 6, and launched physically settled Bitcoin (BTC) futures trading on the Intercontinental Exchange (ICE) on September 23. On the 28th, The Block published an analysis article stating that assuming the weekly price of Bitcoin is $8,700, the value of Bitcoin contracts traded by Bakkt in the first week is approximately $1.5 million (165 contracts), which is approximately 2.9% of the total open interest value of Bitcoin futures launched by the Chicago Board Options Exchange (CBOE) on December 10, 2017 in the first week.

Microcomputer Technology: Grin mining machines will be shipped in October, and the computing power of the Grin network is expected to increase significantly

Zhejiang Microcomputer Technology, a mining machine company, recently announced that the core components and IP of the Grin Asic mining machine chip it developed have been successfully mass-produced and taped out, and the first batch of Grin mining machines will be shipped as planned in October. Zhejiang Microcomputer Technology expects that the G1 PLUS mining machine has received orders for mining machines with three times the current network computing power, and the Grin network computing power will increase significantly starting at the end of October. Public information shows that Microcomputer Technology was co-founded by Kong Jianping, co-chairman of Canaan Creative, and Sun Qifeng, founding partner of Bisheng Capital.

Wuhan Xindong G32 Grin mining machine will be delayed until January delivery

Wuhan mining machine manufacturer INNOSILICON said that the first batch of G32 GRIN mining machines are expected to be delivered to customers in January 2020, which is about 4 months later than the previous expectation of August shipment.

Tencent leads investment in blockchain startup Everledger

Everledger, a UK-based blockchain supply chain startup, has completed a $20 million Series A funding round led by Tencent, with participation from other investment institutions including Bloomberg Beta, Rakuten, and Fidelity.

Alibaba invests in blockchain startup Bitmark

Blockchain property rights startup Bitmark has announced a $3 million Series A funding round led by consumer electronics giant HTC, with participation from e-commerce giant Alibaba and cryptocurrency investment firms Digital Currency Group and WI Harper. The Bitmark digital property rights system can assign unique ownership rights to different types of digital assets, and has previously established a partnership with the University of California, Berkeley.

Japanese social media giant Line releases version 2.0 of its virtual currency LINK white paper

The LINK white paper was first published in September 2018, and the latest version has undergone four revisions. The new version of the white paper adds content about the ecosystem expansion strategy, and will advance work in the order of LINE network, alliance network, and open network. The main tasks include: connecting LINK to Line services; releasing LINK wallets; promoting the Dapps Development Association "LINK Dapp Ecosystem"; and expanding the number of companies participating in the LINK ecosystem through Dapps. In addition, in terms of technology, the new version pays more attention to scalability and explains the flexibility of sharding and side chains. The new version of the white paper also introduces the achievements of transactions so far, such as the release of 3 Dapps using LINK.

South Korean social media giant Kakao’s token KLAY completes Dutch auction

Klaytn, a blockchain platform under the Korean communication giant Kakao, recently announced in a blog that it will officially list its token KLAY on Upbit (Singapore) and Upbit (Indonesia) at the end of September. According to Odaily Planet Daily, Kakao's subsidiary Ground X is developing the Klip wallet, which will support KLAY, and Klip will also be enabled on KakaoTalk. In addition, Kakao may consider listing KLAY on exchanges in China and South Korea, but according to an anonymous Korean official, the South Korean government may prevent it from choosing a platform to list in its own country.

Later, Klay was sold at a Dutch auction on Upbit (Singapore) in less than a minute at 0.00001499 BTC (about 182 won) per coin. Ground X sold 2.5 million Klays in this auction, with a limit of 50,000 Klays for individual participation. Previously, Kakao decided to issue a total of 10 billion Klays, with a private discount price of 0.03 USD (about 35 won) per coin for institutional investors. Therefore, related companies predicted that the auction price might be around 150 won (considering that institutional investors can buy at less than 1/5 of the listed price in most cases). But unexpectedly, Klay ended the auction at more than 180 won.

Source: Guosheng Blockchain