Ethereum mining machine manufacturer Linzhi starts testing

This article is from Coindesk, original author: Wolfie Zhao

Odaily Planet Daily Translator | Moni

After delaying production for nine months following a $3.8 million investment, Shenzhen-based Linzhi, a “secret” mining machine manufacturer, is now ready to produce the first batch of powerful new mining machines to help miners mine Ethereum and Ethereum Classic.

On Wednesday (September 10), Linzhi revealed that it had ordered 37 wafers from Taiwanese chipmaker TSMC, which will allow them to build about 200 application-specific integrated circuit (ASIC) miners. In fact, these miners will be used as prototypes and tested to see if they can support the proof-of-work algorithm ethash for effective mining. Once the prototype is successfully tested, it will mark an important step for Linzhi towards large-scale mass production of mining machines, allowing them to compete with other chip manufacturers (such as Nvidia) and mining equipment manufacturing giants such as Bitmain and InnoSilicon. (Note from the Planet: Currently, both Bitmain and InnoSilicon's miners support the ethash mining algorithm)

About 5 million native ethereum tokens are mined each year, currently valued at over $800 million, while for ethereum classic, which remained on the original ethereum ledger before the 2016 hard fork, about 9 million native tokens are mined each year, currently valued at over $60 million.

Powerful chip

Linzhi was founded in February 2018 by Chen Min, the chip design director of Avalon Bitcoin mining machine manufacturer Canaan Creative. He revealed that he started the business entirely with self-funded funds, with a start-up capital of about $4 million. In September 2018, the company announced that it would produce ASIC mining machines that support the ethash mining algorithm. It is said that the mining efficiency of the new mining machine will also exceed similar products on the market. Its target specification is set at 1400 MH/s and the power consumption is 1 kWh.

What does this mean? Let’s compare it to the Nvidia GTX TitanV 8 on the market. According to the f2pool miner profitability index, this graphics card is currently one of the most profitable devices for ethash mining, with a hashrate of about 656 MH/s and a power consumption of 2.1 kWh.

If we calculate based on the current price of Ethereum of about $180, the electricity cost of $0.04 per kilowatt-hour and the network difficulty, the average daily profit of each GTX TitanV 8 can reach $7.35. Similarly, if this device is used to mine Ethereum Classic, the final average daily profit is about $6.70.

“Plan A, Plan B”

Since the announcement of the mining machine production plan, Linzhi has used almost all of its initial funds on chip design and development. Their operation team has about a dozen people, and they have placed an order for the first batch of wafers, hoping to achieve the expected mining capacity through prototype testing.

According to information previously disclosed by Linzhi Company, they originally planned to order the first batch of wafers around December 2018 so that the prototype could be ready in April 2019. If the test goes well, mass production can be started in June, but the plan was eventually delayed.

In response, Linzhi Company stated:

“We underestimated the complexity of chip manufacturing and under-estimated the time it would take the development team to complete the project. But we are now cautiously optimistic that we can proceed as planned, which means that the prototype will be deployed in December 2019 and mass production is expected to begin in February 2020.”

However, the biggest risk facing Linzhi is that the Ethereum community has decided to activate the so-called ProgPow algorithm, which is to weaken the advantages of using ASIC mining machines, but the specific implementation time has not yet been determined. Not only that, Ethereum developers also hope to switch from the proof-of-work algorithm to the proof-of-stake algorithm, which will completely eliminate mining.

For these problems, Linzhi Company may need to prepare a "Plan B".

According to Chen Min, they are actually more active in the Ethereum Classic community than in Ethereum:

“Our plan A is to focus on Ethereum Classic mining, so if Ethereum is an option, that’s good too. The Ethereum community is still undecided about whether to implement ProgPow, but we think this is not a market we are eager to get, so we are not too concerned.”

Reverse Discount

Chen Min said that Linzhi plans to adopt a so-called "reverse discount" strategy. If the prototype is successfully tested, they will start accepting pre-orders for mining machines, which means that the more you buy, the more you pay. This strategy is actually not very beneficial to individual miners, because usually a single mining entity will not buy too much mining equipment. Linzhi's sales strategy seems to be more oriented towards those more powerful miners or mining pools.

Although the final price of the Linchi mining machine has not yet been made public, they revealed that even individual miners with relatively small orders can get a return on their investment within four months. Chen Min finally said:

“This is our effort and contribution to the concept of decentralization. Mining machine sales will first target developers and communities in certain specific regions. If the order volume is large enough, we will provide reverse discounts. Individual miners will get a return on their investment in about four months, while large orders will have to pay more.”

This article is translated from https://www.coindesk.com/powerful-new-ethereum-miner-reaches-final-stage-before-mass-production. If reproduced, please indicate the source.