The trick behind second-hand mining machines: Beware of the pyramid scheme scam of the "mining machine model"

Since the National Development and Reform Commission listed "virtual currency "mining" activities" as an eliminated industry, how is the domestic market for bitcoin mining machines? Recently, a Beijing Business Daily reporter found that "second-hand" bitcoin mining machines were sold off. At the same time, some illegal pyramid scheme investment scams using the concept of mining machines have emerged one after another. In the view of analysts, some mining machine manufacturers use a similar pyramid scheme model to sell mining machines, and the mining machines taken over by investors are difficult to generate actual mining income, and eventually evolved into a relay game, with the risk of overall model collapse.

Mining machines are being sold off. "A large number of S9 mining machines and t9 spot goods are being sold, challenging the lowest price of 3,000 yuan. "Second-hand" power supplies are the first choice for home mining. If you need them, please contact me." A miner from Shenzhen, Guangdong Province, posted the above information on Caiyunbit, a "second-hand" mining machine trading website. A Beijing Business Daily reporter recently found that under the rumor that the virtual currency mining industry is about to be eliminated, a large number of "second-hand" mining machines have appeared on major trading websites. Most of these mining machines are sold in batches. Judging from the selling price, the value of "second-hand" mining machines is also uneven, ranging from a few hundred yuan to thousands of yuan, and all have price cuts.

Judging from the types of "second-hand" mining machines being transferred, these mining machines are roughly divided into types such as L3+/T9+/S9370. A miner in Nanchang, Jiangxi Province announced that he is selling "second-hand" Antminer DR5 bare metal for only 150 yuan. From the official website of Antminer, it can be seen that the current "first-hand" Antminer DR5 35T is priced at 9,700 yuan, and the price of "second-hand" Antminer has dropped by more than 64 times compared to "first-hand" mining machines.

The production of virtual currency is called "mining" in professional circles. The performance of mining equipment affects the efficiency of obtaining virtual currency to a certain extent. When virtual currency first appeared in 2009, ordinary computers running corresponding mining software could obtain virtual currency. By 2011, high-configuration graphics cards were required. Nowadays, after the development of special chips, graphics cards have completely failed to keep up with the times, and special mining machines must be used. The so-called virtual currency "mining machine" is actually a computer with a professional mining chip, which mostly works by burning graphics cards and consumes a lot of power.

Beijing Business Daily reporters also noticed that in addition to the transfer of "second-hand" mining machines, there are also many "second-hand" graphics card mining machines and official refurbished machines for sale. In the mining groups of major social networking sites, it can be seen that the current price of the more common Antminer S9J is generally around 1,000-2,000 yuan, while the price of the Antminer L3 is only around 700 yuan or even lower, which is really "tempting".

A Beijing Business Daily reporter consulted as a buyer of mining machines. A "second-hand" miner in Hohhot told the reporter that the lowest price for buying a "second-hand" Antminer is 400 yuan. Due to the sluggish industry and the fact that mining has been listed as an eliminated industry, some mining machines with a computing power of more than 10TH/s that were accumulated at the beginning of the year can be traded for around 1,000 yuan, and some small-brand mining machines are sold at even lower prices. He said that he has sold four "second-hand" mining machines through the trading platform, all of which are relatively high-quality mining machines accumulated at the beginning of the year, and the selling price is around 700-1,000 yuan.

In the context of the industry downturn, the road to listing for mining machine manufacturers is even more difficult. In 2018, Bitmain, Canaan Creative, and Ebang International, as China's three largest mining machine providers, all submitted listing applications to the Hong Kong Stock Exchange. However, with the downward trend of digital currency in 2018, the initial listings of the three companies have encountered obstacles, and the applications have all expired. On December 20, 2018, Ebang International once again submitted a prospectus to the Hong Kong Stock Exchange. On March 26, 2019, Bitmain issued an internal letter announcing that the company will restart the listing work at an appropriate time in the future, but there is still no latest progress in the listing.

In the view of analysts, one of the main reasons for the sell-off of mining machines is that the "Guidelines for Industrial Structure Adjustment (2019 Edition, Draft for Comments)" recently issued by the National Development and Reform Commission listed "virtual currency mining activities (the production process of virtual currencies such as Bitcoin)" as an eliminated industry, which caused quite a stir in the mining circle. Many miners shouted that the mining industry will usher in a cold winter.

Mining is about to enter a cold winter

After being identified as an "eliminable industry", what is the future prospect of the mining industry? Financial analyst Xiao Lei pointed out that after being identified as an eliminated industry, the large-scale mining farms may encounter challenges, but more decentralized mining farms may spread faster. After all, the market has this demand. As long as there is mining technology in the secondary market and blockchain model, mining itself is difficult to be eliminated. Therefore, whether mining should be eliminated actually depends on the solutions in blockchain technology, that is, whether the core technology and logic of the entire industry need mining. If not, it is easy to be eliminated. If it is needed, not only will it not be eliminated, but it may become more and more. If we look at the current situation, at least the operation of Bitcoin is inseparable from mining, so from a global perspective, the probability of mining being eliminated is not very high.

He Nanye, a senior blockchain expert, stressed that being identified as an "eliminable industry" is bad news for the mining industry in the short term, because it is the first time that the government has identified mining as eliminated in a document, which poses policy risks and psychological deterrence to miners. At the same time, it is expected that many local governments will rectify the mining industry in accordance with the policy requirements of the National Development and Reform Commission, making the industry outlook unclear.

"Bitcoin mining should not be treated in a one-size-fits-all manner. It should be handled differently. To regulate its development, areas with higher tolerance for Bitcoin mining can be established in some regions, and they can be managed more strictly. While preventing and controlling risks, regulating market order, and preventing the abuse of resources, we should maintain continuous observation and research on emerging digital technology products." said He Nanye.

"Mining Machine Model" MLM Scam

In addition to the cold sales of mining machines, there are also endless activities of pyramid schemes using mining machine models. Beijing Business Daily reporters noticed a "mining" model called YBC Yiwei Chain in social groups. It is understood that there are no transaction restrictions on the mining and trading of the platform. If 5 people are directly promoted, and the team number reaches 20 people, a small mining machine will be rewarded. If 10 people are directly promoted, and the team number reaches 100 people, a medium-sized mining machine will be rewarded. If 20 people are directly promoted, and the team number reaches 200 people, a medium-sized mining machine will be rewarded. The top three people who directly promote the number of people every day will be rewarded with a cash reward of 200 yuan and a medium-sized mining machine. The top three people in computing power every day will be rewarded with a cash reward of 100 yuan and a medium-sized mining machine. Some "miners" even posted that YBC Yiwei Chain is a real "0-coin platform". In response to suspected pyramid schemes and recruiting, Beijing Business Daily reporters tried to contact the YBC Yiwei Chain platform, but the webpage provided by the group link could not be opened as of press time, and the App could not be downloaded.

Beijing Business Daily reporters have previously noticed that a new "GEC Environmental Coin" trading model has been widely spread. This model is labeled with "ecological environment protection", "zero investment", "zero risk" and "high return". It relies on recruiting people to join and develop the capital chain. After going online in February 2017, the platform promised to increase 50 times a month and 1,000 times a year. The "GEC Environmental Coin" is currently only rising and not falling. It is relatively easy to cash out. As long as you make a payment and upload a screenshot, you can withdraw cash. Relevant personnel from the National Internet Financial Security Technology Expert Committee pointed out that from the perspective of the business model, the hierarchical way of recruiting people to obtain income can basically be determined as a pyramid scheme. From another perspective, the process of recruiting people for environmental coins distributes coins and collects funds. Generally speaking, it can be said to be a disguised ICO.

In He Nanye's opinion, under this model, the routine is nothing more than giving registered users some "sweetness" first, then tricking registered users into paying for mining machines, and then letting users continue to develop offline, and finally realize huge income. The risk behind it is that everything is virtual, the machines that users spend money on, and the mines mined may all be fictitious, and there is no corresponding physical object. Once the planner runs away, the interests of all users who have spent money to buy mining machines will be damaged, and the final result is a pyramid scheme scam.

Xiao Lei pointed out that there are many tricks in "second-hand" mining machines. The quality is indeed uneven. Some mining machines that are close to being scrapped are sold as newer ones after being processed by technology. This is still a relatively large risk. In order to sell mining machines, some mining machine dealers and reselling gangs have come up with various models, including those that sell mining machines in a similar pyramid scheme model. There are also many of them. The biggest risk is that the mining machines taken over by investors are basically conceptualized and it is difficult to generate actual mining income. In the end, they have to develop offline and become a relay game. There is a risk of the overall model collapsing.