Wang Chun: I have N bitcoins, this is my story

Author: Wang Chun (Founder of F2Pool)

Many years ago, when the Internet was still in the late Proterozoic Era, slashdot was already one of the representative brands in geek news, and I used to visit it frequently. In 2010, the website published several articles about Bitcoin. I knew nothing about economics and finance at that time, so even if I saw these articles, I would forget them as soon as I saw them, turn a deaf ear to them, and ignore them directly. It was not until May 2011 that I saw two consecutive news on a domestic/copycat website called solidot, on the 20th and 27th, within a week, mentioning the realization of currency through computer software. Driven by curiosity, I clicked on the wiki link on en.bitcoin.it, studied it for a night, and finally had a great enlightenment, as if I had discovered a new world.

I remember that there was a website called bitcoincharts, which is still half-dead today, playing the role of btc123 back then. The first time I saw the price of bitcoin, it was about $5. A few days later, it rose to $7. That night, I downloaded the bitcoin 0.2.x client, 120,000 blocks, and it only took tens of minutes to synchronize. At that time, the software had its own mining function, using CPU mining. I used my MacBook laptop to run solo all night, with a speed of 800 khash/s. The next morning, I found nothing. So I thought of buying a few to play with. I searched on Taobao first, and there was only one store that had goods for sale. The big brother sold them for 60 yuan each, which was much more expensive than abroad, and he refused to bargain. Fortunately, I had a VISA credit card, so I bought them on bitcoinmarket through paypal, a few at a time, and then sold them to domestic buyers on Taobao. At that time, there was a person named Yang Linke on Taobao who was also selling coins, but he stopped after a few days. He said he wanted to set up a trading website and asked old customers to buy on his trading website.

On that day, May 28, 2011, I bought a few coins in the morning. I thought it was fun, so I roughly calculated that the electricity cost of mining a coin was at most 10 yuan, and a coin could be sold for 60 yuan, which was a big profit. I thought that since I couldn’t mine with my laptop, I might as well buy a few graphics cards to mine. Because I played SETI@home in my early years, I have an innate feeling for using computers to calculate things, so I went to the computer city that afternoon and bought two graphics cards. The Radeon 5870 with the best price-performance ratio for mining coins on the market was all sold out, so I had to settle for the next best thing and bought two 6850s. I took photos and posted them on forum.bitcoin.org, which is now bitcointalk, to show off.

My first Bitcoin address, 1J1F3U7gHrCjsEsRimDJ3oYBiV24wA8FuV , is still used occasionally. The earliest transaction was a purchase of 0.99 coins on BitcoinMarket on May 28, 2011 using PayPal.

Three days later, on May 31, the two 6850s were almost done, and I felt that the speed was still too slow and the mining was still too little, so I wanted to buy a few more graphics card mining machines. So I chatted with Wu Gang, who I had known before, on QQ, and asked if I could invest a few thousand yuan to buy three or five mining machines to mine. Boss Wu immediately said generously that a few thousand yuan would not work. If we want to mine, we have to mine more. Invest 500,000 yuan to buy hundreds of machines and mine as much as possible. On June 1, Boss Wu and I went straight to Zhongguancun to find people who sell graphics cards, motherboards, memory, and spare parts. The motherboard used was a second-hand motherboard that was covered with dust and cost tens of yuan. The memory was 512 MB, and Ubuntu was installed on a SanDisk 4 GB USB drive. The whole machine cost 200 yuan in total. The most valuable thing was the graphics card, which cost at least 900 yuan and as much as 1,800 yuan. I bought 70 or 80 graphics cards of various types, including 5830, 5850, and some 5870.

We rented four houses, each with a capacity of 4 kW, and the rent for each house was 1,200 per month. Then we changed the electric meter... plus the rent, the cost of electricity per kilowatt-hour was 52 cents. It is easy to buy a machine, but difficult to install it. It is not easy to assemble these second-hand junks to work. Even the silicone on the CPU has to be applied by yourself, and it often freezes or simply cannot start. It took more than a month to put dozens of mining machines in place. At the beginning, the difficulty was hundreds of thousands, and only a few mining machines could work, mining more than a dozen coins a day. As time went on, the difficulty became higher and higher, and the technology became more and more advanced. Gradually, I learned overclocking, violent fans, and various unique skills in software and hardware, so that the difficulty later increased to millions, and all the mining machines were in place, and I could still mine more than a dozen coins a day.

My dad helped me find the rental house. When he heard that it was Boss Wu who paid for the mining machines, he was very unhappy and said, "The money should not flow to outsiders." He insisted on buying the graphics cards out of his own pocket. Boss Wu saw that the mining farm was progressing slowly and almost forgot about the mining machines. He just bought a lot of coins directly in the market. One day, the price of Bitcoin just fell from a high of $31 to $28. I chatted with Boss Wu on QQ. He said that he was buying a lot of coins and would not sell them until the price broke $100. Of course, it turned out that the price fell to $2.

Not only mining, but also occasionally speculating in coins. In early September 2011, Zhou Tong, a 17-year-old Chinese genius who was studying in Singapore, launched Bitcoinica, the earliest leveraged trading platform for Bitcoin. I was one of the first few users of the website. There were problems in the first few days of the website's launch. At that time, I had a lot of coins in my hands. I placed a sell order of more than 500 coins on Mtgox. After a few seconds, the buying price of Bitcoinica would fall. At this time, I bought on Bitcoinica and cancelled the order on Mtgox. Although Bitcoinica could not actually buy coins on Mtgox, it still showed that the transaction had been completed on the website. This was a sure win. As a result, the balance on Bitcoinica doubled many times by this method. Unfortunately, in the end, the position was blown up in a sharp drop from US$5.7 to US$4.4. Zhou Tong later discovered this problem and made corrections.

The beginning of 2012 was the most difficult. Initially, I invested about 300,000 yuan to buy coins and mining machines, but the coin price kept falling. I went long on Bitcoinica and suffered multiple liquidations. In October 2011, Russian hackers hacked into my mailbox and stole 300 coins from MtGox. By the Spring Festival of 2012, the coins I had were only worth 40,000 yuan. The graphics cards were also mining less and less. The remaining 20G computing power produced a dozen bitcoins a day, which was worth less than 200 yuan, while the electricity bill and rent were 100 yuan a day. Boss Wu also lost money. He said that he spent hundreds of thousands of yuan to buy more than 3,000 coins, but now one coin has fallen to 2 US dollars. He regretted it very much.

Then the price of the coin began to recover slowly, but the difficulty did not rise much. While I was mining, I also sold coins on Taobao and QQ groups, and sold recharge codes for mtgox/btc-e. At that time, there were also people like Qicai Shenxianyu who were doing this business. Around the end of April and the beginning of May 2012, I found a trading platform called GLBSE, where you can trade shares and bonds with Bitcoin. At that time, several people were acting as agents for BTCST on GLBSE. BTCST promised a daily interest rate of 1% for deposits, but you couldn't register casually. Although many people said that BTCST was a scam, they couldn't resist the temptation of high interest rates and started buying BTCST's agent bonds on GLBSE. These bonds are issued once a week, and the issue price is generally 1 coin, and they are repurchased at 1.35 coins after 5 weeks. I did this for three months until Bitcoin skyrocketed to $15.4 in August, causing BTCST to be unable to cope with the run and run away. However, because I bought bonds on GLBSE and did not deposit coins directly into BTCST, when I heard the news that BTCST ran away, I immediately sold the bonds on GLBSE for 0.8 BTC, then bought them back for 0.2 BTC, and sold them again for 0.5 BTC. I took advantage of the chaos to make a few trades, and in the end I made more than 800 coins.

In October 2012, Pumpkin began to raise funds to develop the Avalon mining machine, and I reserved one. In June, I reserved two Butterfly mining machines, and I also bought one Butterfly and one Pumpkin FPGA mining machine. Graphics card mining machines are very unstable, and they are all broken boards worth 200 yuan, which makes them even more unstable. These FPGAs will not have any problems if they are not taken care of for several months, but when there are too many graphics card mining machines, it is simply a disaster. Every few hours, a machine will freeze and hang up, and it cannot be restarted remotely.

After more than a year of mining, I mined more than 7,000 coins in total. After deducting the expenses for food, electricity, liquidation, and theft, I saved more than 2,700 coins in total. After the halving at the end of 2012, the price of the coin did not rise immediately, which was a bit disappointing. In early January 2013, the price of the coin just rose from $11 to $13 and then went sideways. Shenyu asked me on QQ what I thought, and I replied that I thought it was like this and it couldn't go up any more. After a few weeks, Bitcoin broke through $17, and more than 2,700 coins were finally worth the initial investment of 300,000 yuan. So I sold all these coins, leaving only more than 100 coins, and I still made more than 10,000 yuan.

Actually, I wanted to do some swing trading, but I didn’t buy it back when it dropped to $15…

But I still felt good about getting my money back. Because of the halving, the difficulty of the entire network did not drop much, and there were rumors about the Pumpkin ASIC miner, which was true or false, so I couldn’t continue mining. The graphics card miners all switched to mining LTC, but my machine only had 512 MB of memory, so I couldn’t mine LTC effectively. In addition, the electricity meter was checked strictly, so I closed the mine in early 2013.

It seemed that overnight, arbitrage became profitable, and it was a huge profit. At that time, in addition to trading platforms, there were many places to sell coins over the counter. For example, there was a website called wm-center, which accepted the purchase of Bitcoin with Liberty Reserve. After placing an order for Bitcoin, the price was determined and payment could be made within a few hours, so it became a free option. I bought hundreds of coins at wm-center at a time. After a few hours, if the price of the coin went up, I would pay for it. If the price went down, I would close the order. XMLgold.eu can also operate in a similar way, but unlike wm-center, payment can be delayed for a few hours. Later, btc-e supported OKPay recharge, and OKPay accepted Bitcoin payment. OKPay's Bitcoin price was calculated based on MtGox, so it was common to use the Bitcoin withdrawn from btc-e to recharge back to btc-e through OKPay to earn one or two points. With these, I could earn an average of 10,000 to 20,000 yuan a day from the end of January to March 2013. It's amazing to think about it.

Finally, on March 18, 2013, my Pumpkin brand money printing machine arrived. At that time, the Pumpkin was a real money printing machine. At most, one machine could print 10,000 dollars a day. I also heard that Boss Wu ordered ten machines at once. I guess Boss Wu's 120,000 should have been recovered in one day.

In fact, I am lucky. I made a lot of money when BTCST ran away. I withdrew all my balances a month in advance when Bitcoinica and MtGox ran away. I was lucky enough not to be affected by the closure of Liberty Reserve. Just a few weeks ago, I was still buying hundreds of thousands of LRUSD on Taobao every day for arbitrage.

Of course, there are times when I am unlucky. At that time, Pumpkin said that I could exchange my old FPGA mining machine for ASIC. I took out 110,000 yuan from the money I earned from moving bricks and bought 15 Pumpkin FPGAs on the market. On the day of the exchange, I personally went to the designated place to receive FPGAs. As a result, I waited for more than two years and still have not received the Avalon I exchanged.

In early 2013, double spending was also very easy. The platform had almost no security awareness. Bitcoin top-ups required 6 confirmations, and altcoins with very low computing power also only needed 6 confirmations. This matter is quite sensitive, so I won’t discuss it in detail. However, during the fork in March 2013, I successfully double-spent $10,000 worth of OKPAY Bitcoin, but because the fork happened suddenly and I didn’t do a good job of concealing it in advance, I had to return the money to OKPAY in the end.

When I was mining, there were no mining pools in China. Someone briefly opened a mining pool in the second half of 2012, but it later closed down. In 2011, Boss Wu and I also planned to open our own mining pool. But at that time, I didn’t know why Boss Wu was so obsessed with making a social app first, so we didn’t do it.

Thanks to the Seven-Colored Angelfish, the mining pool project was able to start in April 2013. At the beginning, there were four people in total. Fish is not to be mentioned. I was responsible for developing the backend of the mining pool. One of the other two partners was an inspector, specializing in network attack and defense technology... In addition, there was a web front-end programmer named Fu Dong, who was the first employee of our fish pool. The location was Wenzhou, Zhejiang. At that time, my QQ nickname was "2523", F was fish, and 2 was the first character of my nickname. On April 21, 2013, I took the high-speed train to Wenzhou. On April 23, the mining pool domain name was determined. On May 5, F2Pool was launched.

We were in Wenzhou for two months, with four partners and a front-end programmer. By July, only Yu and I were left. The others founded a short-lived mining pool called 175btc. Instead of operating it steadily, they relied on their advantages in network attack and defense to DDoS us all day long, then ran away and disappeared. Fu Dong, who developed the front-end of YuPool, later went to BTCC and became a core member of the GuoPool team.

Now F2Pool is two and a half years old. Bitcoin still looks young. When I first learned about Bitcoin in 2011, I never thought that mining could be a career and could last until 2015. Looking forward from 2015, the future is still full of unknowns.