Mining Insider | NDRC: If the "mining" restriction order is issued, investment will be prohibited; Bitcoin mining profitability rises to a six-month high

Mining machines and computing power

1. Bitcoin mining profitability is at a six-month high

According to BCtrend statistics, on April 15, the Bitcoin mining profit rate reached 0.24 (which can be understood as an investment return rate of 24%), close to the level of 0.255 at the end of October last year, reaching a nearly six-month high.

Image from BCtrend, date: 2019.04.22, 11:00

In this regard, cryptocurrency analyst Joseph Young commented: "Bitcoin mining is easily profitable again, which can be said to be a small step forward in the long and brutal correction process of 16 months." What he meant was that since the peak of the currency price at the end of 2017, miners have found it difficult to make "huge profits" from mining.

Corresponding to the mining profitability is the continuous rise in Bitcoin’s network computing power. According to statistics from Btc.com, Bitcoin’s network computing power has fluctuated from 36.55 Eh/s in mid-December last year to 45.76 Eh/s in mid-April, an increase of 25%.

But by April 21, Bitcoin's mining profitability and network computing power had both declined slightly. In addition, Bitcoin's network activity, including the average block size, average transaction speed per block, number of unconfirmed transactions, and mining fees, all declined. Odaily Planet Daily believes that Bitcoin achieved a small harvest in the bull market that started in early April, but as the price of the currency fell and stabilized, the network's speculation weakened and stability increased.

In the week from April 14 to April 21, the computing power of Ethereum and Litecoin also increased rapidly. Among them, the computing power of Litecoin reached 385 TH/s on April 15, setting a historical high.

2. After being delisted by Binance, BSV’s network security is in crisis again

In the early morning of April 19, the BSV network began to roll back six blocks at block height 578640, causing concern. Although it was later proved to be a side effect of the network's adoption of large blocks, not a 51% attack. However, LongHash noticed that the BSV network's computing power had dropped from 976.5964 PH/s on April 1 to 699.5656 PH/s on the 16th, a drop of 28.4% in two weeks. The reason for the decline may be that the price of BSV has fallen continuously for weeks, with a drop of 35%, which also means a decline in mining revenue, which has affected the computing power of BSV.

LongHash pointed out that the total network computing power of Bitcoin during the same period was 47.3767 EH/s, and only 1.5% of the computing power was needed to continuously launch a 51% attack on BSV. By next year, BSV will complete the block revenue halving before Bitcoin, which may continue to drive away BSV miners.

There are signs that the BSV network is extremely unsafe. In addition, the leader of the BSV community, Craig Wright, often puts himself at the center of controversy. If there is any retaliation from the community and miners, it will be a time bomb for network security.

Mining Policy

3. Follow-up of the NDRC’s “elimination” of mining: Once confirmed, investment will be prohibited and elimination will be limited in time

On April 8, the National Development and Reform Commission issued the "Guidelines for Industrial Structure Adjustment (2019 Edition, Draft for Comments)", which listed "virtual currency mining activities" as industries that have been explicitly eliminated or immediately eliminated by national industrial policies.

A single stone can cause a thousand ripples. This draft for soliciting opinions has triggered many assumptions in the domestic mining circle. Odaily Planet Daily has interpreted this.

On April 18, Yuan Da, director of the Policy Research Office of the National Development and Reform Commission, further interpreted the draft opinion, which can provide some reference for mining practitioners.

Yuan Da answered questions from reporters at the National Development and Reform Commission's regular and themed press conference on April 18, saying that the elimination category mainly follows three standards during this revision: First, according to the actual development of the industry, the relevant safety, environmental protection, energy consumption, quality and other standards will be appropriately improved. Second, the processes, technologies, equipment and products that have been eliminated in actual production and life will be deleted from this category. Third, more stringent elimination standards can be formulated and implemented for key areas.

Regarding the question of what measures should be taken to eliminate the obsolete items, Yuan Da said that according to relevant regulations, the general requirement is that investment in obsolete projects is prohibited; production technology, equipment and products that have been explicitly eliminated by the state must not be imported, transferred, produced, sold, used or adopted. All regions, departments and relevant enterprises must take effective measures to eliminate them within the prescribed time limit.

From this speech, mining practitioners can obtain the following information:

• Regardless of the nature, if we only consider the production activities themselves, mining may have touched the red line of excessive energy consumption;

• Whether mining will eventually be included in the list of eliminated projects remains to be determined;

• Once included, investment will be prohibited and the industry will be phased out within a certain period of time. The industrial guidance policy pressure from national ministries is still relatively large.

Chen Yunfeng, director of the Internet Finance Professional Committee, analyzed: "From the perspective of policy orientation, the decision of the NDRC will indeed have a negative impact on the mining industry in the short term, but in the long run, whether this decision will have a decisive guiding role in the industry is still unknown and needs further observation."

Mati Greenspan, an eToro crypto analyst, envisioned where Chinese miners would go after the ban becomes a reality. He said that the two most critical factors for miners are that the country must have accumulated a considerable amount of "cheap renewable energy" and that the country's legislation and attitude are "crypto-friendly." He believes that Canada and Russia will become the two largest crypto mining powers, and that mining activities in both countries have also increased significantly recently.

Finally, regarding the assumption that Bitcoin consumes energy, industry data analysis company Coin Metrics has a different opinion.

The data provided by the company shows that the energy consumption of Bitcoin mining for 10 years, based on the energy consumption of S9, consumes 1.75 e17 joules, which is equivalent to 4.2 million tons of oil. American cars consume 1.3 million tons of oil every day. Therefore, the energy consumption of Bitcoin mining for 10 years is actually equivalent to the energy consumption of all cars in the United States in 3-4 days.

Furthermore, Bitcoin’s electricity usage is quite low compared to the electricity usage of the global banking industry. Coin Metrics says that private banks alone conservatively use 100 TW per year, not including central banks, which use even more. Bitcoin currently uses only 40-50 TW per year, so it’s clear that the banking system consumes much more energy. Also, unlike most of the banking industry, most of Bitcoin’s energy consumption is renewable energy (such as hydropower).

Finally, Bitcoin’s Proof-of-Work (PoW) consensus mechanism will only become less costly as technological innovation makes cracking the algorithm the most energy-efficient, so Bitcoin’s energy consumption problem will improve over time.

Mining Curiosities

4. Mining history research: Mysterious miners once mined 1.8 million BTC

Sergio Demián Lerner, Chief Scientist of RSK Labs, recently published an analysis of early mining blocks on the Bitcoin network. The evidence provided shows that an independent miner mined 1,814,400 BTC between 2009 and 2010, but 63% of the mined bitcoins (about 1.1 million bitcoins) have never been used since the day they were mined. In order to better help the crypto community understand the mining situation during the birth of the Bitcoin protocol, Sergio Demián Lerner also launched a tool website called "Satoshi Blocks".

5. State Grid cooperates with the police to crack dozens of cases of stealing electricity for mining

According to the Daily Economic News, recently, staff of the State Grid Pingdingshan Power Supply Company discovered that data analysis in recent periods showed that the 200 kVA transformer area registered by the city's electricity user named "Changsheng Stationery Store" may have stolen electricity. After receiving the alarm, the police in Pingdingshan, Henan Province quickly investigated and seized more than 1,700 electricity-stealing mining machines on the spot. According to preliminary calculations, the electricity theft den steals nearly 40,000 kWh of electricity a day (enough for a family of three for 40 years). Pingdingshan Power Supply Company stated that since 2018, the company has cooperated with the public security department to seize a total of 21 similar "mining machine" electricity theft cases.

Overseas Mining

6. Belarusian President proposes building a Bitcoin mining data center

According to bitcoin exchange guide, Belarusian President Alexander Lukashenko proposed to build new Bitcoin mining data centers in Belarus as places to mine cryptocurrencies. In addition, he stated that Belarus will fully support digital assets and the local digital economy.