Striving to survive 2014, the history of China’s Bitcoin mining machines

At the beginning of 2014, Xie Jian (Xiao Qiang), the founder of Xiaoqiang Mining Machine, organized a party in Changsha, and Wu Jihan and Wu Gang came from Beijing to attend. At the party, the two made a bet: By the end of the year, can the Bitcoin computing power exceed 1000P?

The stakes for this bet were agreed to be 10 bitcoins. Wu Jihan thought it was not possible, but Wu Gang thought it was possible.

At that time, the global Bitcoin computing power had just broken through the P level, and it seemed a bit difficult to break through 1,000.

However, the skyrocketing price of Bitcoin in 2013 has given many people great confidence, with capital and talent rushing in. The Bitcoin mining machine business is heating up, and it seems that nothing can stop the pace of Bitcoin.

In the end, Wu Jihan won the 10 bitcoins. In 2014, Bitcoin began a three-year bear market, with prices plummeting and faith collapsing. The crowds that once poured in began to quickly withdraw.

Just after the two gold diggers made the bet, amid wailing, the entire world of Bitcoin mining machines began to undergo earth-shaking changes.

1

Why 2014?

What supported Wu Gang's positive judgment was the crazy performance of Bitcoin in the previous year.

In 2013, the price of Bitcoin skyrocketed. From $25 to $260, Bitcoin increased tenfold in less than three months.

China has become the country in the world most enthusiastic about mining and trading Bitcoin.

At that time, more than 70% of the mines and transactions took place in China. Buyers, referred to as "Chinese aunties" by the media, invested about 10 billion yuan in Bitcoin transactions in just one month.

But the good times did not last long. After a crazy surge, Bitcoin practitioners were hit by a cold winter. A bear market lasted from 2014 to 2016, causing Bitcoin to fall from 8,000 yuan to 900 yuan, and Litecoin to plummet from 380 yuan to 5 yuan...

▲ Bitcoin price trend chart in 2014

In 2014, when the bull market began to turn into a bear market and the entrepreneurial environment was not yet very bad, the Bitcoin mining machine business was still a thriving scene.

On the one hand, the wealth effect of the previous year attracted countless entrepreneurs to enter the production of Bitcoin mining machines, from Chrysanthemum Mining Machine, Dragon Mining Machine, Xiaoqiang Mining Machine, Silverfish Mining Machine. The competition among domestic mining machine manufacturers is fierce.

On the other hand, although the computing power of the entire Bitcoin network had just entered the P level at that time, many companies such as Bitmain and Cointerra had already begun planning to deploy computing power in P units within a few months.

This has put those buyers who purchased futures mining machines early on and have not yet received the goods into the embarrassing situation of finding that the goods are outdated as soon as they were purchased.

Just when the chip research and development and mining machine sales were at a stalemate, Bitmain and Bakecat started to engage in cloud computing business. From Computing Nest, Computing Bar, Bit Butler, to AMHash and hashnest, cloud computing became popular.

▲ Overview of domestic and foreign cloud computing platforms in September 2014

With the advent of the bear market, the fierce and crazy mining machine competition at the beginning of the year has also come to a crossroads of reshuffle.

Those new mining machines and new ways of playing that connect the history of China's cryptocurrency mining have experienced ups and downs. Some have disappeared, while others are still making history.

2

The rise of mining machine business

It is no coincidence that 2014 will be an important time point for the entire Bitcoin world.

In the winter of the previous year, Antminer S1 suddenly became popular in the circle, and some people made a lot of money by becoming mining machine agents.

HaoBitcoin COO Chaoyue Jun once wrote an article recalling that he found Wu Jihan through his connections and agreed to be the agent of Antminer, but later he gave up the idea because "he could only earn 400 yuan by being an agent for one mining machine" and the rate of return was too low.

Three months later, word began to spread on Weibo that Antminer S1 had sold 200 million units in just two months. Having missed this opportunity, he could only "howl to the sky and shout **."

The rapid rise in Bitcoin prices and the huge profits from mining machine production have attracted capital and entrepreneurs to rush into the market.

In addition to Bitcoin mining machines, Litecoin mining machines also began to appear. For a time, more than a dozen mining machine manufacturers, including Dragon Mining Machine, Bit Garden Mining Machine, Krypton Mining Machine, Zeus Mining Machine, Silverfish Mining Machine, and Western Mining Machine, competed for the market.

▲ The former USB mining machine

After the Spring Festival in 2014, Xie Jian, who had been concentrating on online writing, also decided to join the market to get a piece of the pie.

At that time, the BBK mining farm accounted for less than 5% of the total network computing power, and had fallen from the dominant position in the mining farm. Under the pressure of a sharp drop in dividends and stock impairment, BBK decided to transform and focus on chips. This transformation gave Xie Jian an opportunity to start a business.

Previously, Xie Jian invested in FriedCat with Wu Gang and made a lot of money. By using the website resources accumulated in his early years, he has been responsible for the domestic marketing and sales of FriedCat mining machines.

After FC decided to transform, Xie Jian used his status as a shareholder to reach a cooperation with FC, with FC providing chips and Xie Jian forming his own RockMiner team to produce mining machines.

It is reported that the chips and solutions used by Xiaoqiang mining machine at that time were basically produced by the Kaomao company, which can be said to be an extension of the "Kaomao mining machine".

In addition, in terms of funding, Xiaoqiang Miner also chose the popular IPO at the time. The result was unexpected, it took only 13 seconds for the project to complete the IPO.

"In the end, there were more than 500 extra coins, and it took us a lot of effort to manually return them to their original locations," Xie Jian recalled.

With money in hand and ambition, Xiaoqiang Mining Machine took internationalization into consideration and spent a large sum of money to buy back the domain name rockminer.com from foreigners.

Soon, in Songgang, Shenzhen, a rural area where "even taxis are not available", the team launched a number of Bitcoin mining machines including R-BOX and Xiaoqiang USB.

▲ Xiaoqiang mining machine R-BOX

In addition, like Xiaoqiang Miner, there are other manufacturers that produce and develop mining machines based on the third-generation chips of BakedCat, including the Garden Miner team and Zhao Dong's HashRatio team.

The former launched an IPO but failed, while the latter claims to be the first company in the industry to have a complete solution for the Chip and achieve mass production.

On May 24, the 2014 Bitcoin Mining Machine Conference was held in Shenzhen. It was said that this conference organized by Bao Erye (Guo Hongcai) was a "closed" meeting and only "men" attended.

On that day, many big names in the domestic Bitcoin circle, including Zhang Nangeng, Guo Yifu, Li Lin, Xu Mingxing, Mo Yiyi, Mao Shixing, Xie Jian, etc., were present, and the atmosphere was lively. At this time, the market still showed signs of vitality.

▲ 2014 Bitcoin Mining Machine Conference

This is a passionate entrepreneurial story, but also a history of brutal fighting.

As mining machines are iterating at an increasingly rapid pace, some entrepreneurs have discovered that their own mining machines are still on the production line, while their competitors’ mining machines with better performance have already been taped out.

Coupled with the impact of the bear market, the price of coins has been falling all the way, and the demand of miners for purchasing mining machines has dropped rapidly. The shrinking market has made it difficult for most manufacturers to survive, and Silverfish Mining Machine, Litecoin Mining Machine, Gridseed Chrysanthemum Mining Machine, etc. have disappeared one after another.

The mining machine business, which was once very profitable, suddenly turned into a cruel battlefield with bloodshed and countless corpses. Even the Xiaoqiang mining machine, which was rich in resources and had unlimited prospects, could not survive the cold winter.

In the second half of 2014, due to continued losses, Xiaoqiang closed the mine and attempted to transfer it. "Of the 6 million yuan invested at the beginning of the year, only 2 million yuan was left."

To make matters worse, the external environment has also begun to impact the status of mining machine manufacturers.

In order to retain investors in the bear market, exchanges have also begun to look for opportunities beyond trading; at this time, exchanges such as OKCoin and Huobi, which have successfully completed financing, are also seeking new growth points.

By borrowing from the financial sector, these exchanges have begun to launch financial service tools.

In 2014, bitcoin exchanges such as OKCoin, Huobi, and 796 announced the launch of bitcoin futures services, and peer-to-peer lending, leverage and other financial methods began to emerge. These new methods directly threatened the status of mining machine manufacturers.

Before this, there was no leveraged trading in the market, and the price of Bitcoin was mainly restricted by mining machine manufacturers, who held the power to dominate the price of Bitcoin.

After the emergence of financial leverage tools, a large amount of speculative funds began to enter the market in a short period of time, seeking arbitrage opportunities. The price of Bitcoin became increasingly out of the control of mining machine manufacturers and began to be determined by the market.

However, after the mining machines could no longer be produced, Xiaoqiang Mining Machine did not withdraw from the stage. Instead, it worked together with Baked Cat, which was under pressure from unsalable chips, to start a new business: cloud computing power.

Faced with internal and external troubles, the once invincible mining machine manufacturers are facing unprecedented challenges.

3

The history of mining machine changes that must be mentioned

In fact, by 2014, Bitcoin mining had undergone several changes.

In the early days, Bitcoin mining only required a computer (CPU).

The reason is that in setting the number of Bitcoins, the creator Satoshi Nakamoto adopted a difficulty adjustment method, which makes the difficulty of mining Bitcoins correlated with the number of mining, thereby controlling the speed at which Bitcoins are generated.

Due to the scarcity of early participants, the earliest miner Hal Finney mined thousands of bitcoins with the help of a computer in just a few weeks.

Later, he turned off the software because he felt that "running the Bitcoin client would cause the computer to get very hot" and the fan noise was bothering him.

Later, Bitcoin began to have a price. In order to mine more Bitcoin, some people began to focus on improving their computing power. After research, they found that the SHA-256 hash value calculation that Bitcoin mining relies on, if calculated using a GPU (graphics card), would be hundreds or even thousands of times faster than a CPU.

As a result, technical geeks began to write programs to mine Bitcoin using graphics cards. After the graphics card mining software was made open source, a large number of players began to purchase computer machines composed of graphics cards and specifically used for mining, namely mining machines.

The CPU mining model is beginning to disappear from the historical stage.

Just when GPUs were becoming popular, in June 2012, Butterfly Labs (BFL), an American organization that developed Bitcoin mining machines, announced that they would develop an ASIC mining machine with functions far superior to those at the time. It would use 65nm manufacturing technology, only perform the SHA256 algorithm, and not all other functions. In addition, they would accept pre-orders.

▲ Butterfly Miner

After raising a large amount of funds, BFL made slow progress. The delivery date of the 50G mining machine pre-ordered by investors was repeatedly postponed, and the final delivery time was a year and a half later.

It is said that thousands of yuan in customs duties must be paid when picking up the goods. At that time, the spot price of this mining machine was only 2,000 to 3,000 yuan, and "there was basically no hope of making a profit."

In addition, before the emergence of large-scale specialized mining machines, there was also a type of FPGA mining machine, represented by watermelon machines and pumpkin machines.

▲ Early watermelon machine

After the concept of ASIC mining machines was proposed, many people began to be interested in this type of mining machine, including Jiang Xinyu and Zhang Nangeng (ngzhang).

In August 2012, BBQ established a company in Shenzhen, announced a plan to manufacture ASIC mining machines, and conducted a public virtual IPO on the overseas GLBSE website, issuing 160,000 shares at a price of 0.1 Bitcoin per share, with the code ASICMINER.

At that time, Xie Jian, who followed Wu Gang to invest in the project, originally wanted to invest only according to the minimum limit. Later, he "struggled in his heart for a while" and thought, "Since I have decided to invest, it is better to invest more than less." In the end, he invested 1,000 bitcoins, plus a 12.5% ​​stock increase discount, holding a total of 12,500 shares and becoming a member of the company's board of directors.

This also laid the groundwork for his later entrepreneurial venture.

The IPO of FC was very successful. On January 3, 2013, the prototype was launched and ran stably.

17 days after the prototype was released by Baked Cat, the Avalon team, formed by Zhang Nangeng, a doctoral student in computer architecture at Beihang University, also completed the delivery of its first mining machine, Avalon 1. On April 20 of the same year, Swedish professional ASIC design company ORSoC announced that they would join hands with KNCminer to design and produce professional ASIC Bitcoin mining machines.

The era of Bitcoin ASIC mining machines is coming.

▲ The former Chrysanthemum Miner

As the number of miners increases, the difficulty of packaging data blocks is rapidly increasing, and the probability of a single mining machine successfully packaging a data block is getting lower and lower, and it may even take years or even decades.

Some people started to integrate the scattered mining machines to form huge cloud computing clusters, and then divided the mining income equally according to the contribution of computing power.

At that time, Baked Cat also used the mining machines it developed to mine and established the world's first Bitcoin mining farm composed of ASIC mining machines.

This model has gradually been accepted by miners, and eventually formed a mining pool with concentrated computing power.

After successfully launching its mining machine, Avalon announced its transformation: it open-sourced Avalon's hardware solutions except for the chip (A3256), positioned itself as a Bitcoin mining chip provider, and no longer sold assembled machines.

▲ Zhang Nangeng, founder of Avalon

Just as FC and Zhang Nangeng were growing rapidly, another entrepreneur was also planning to enter the market.

In the first half of 2013, Wu Jihan resigned and accepted investment from Zhejiang investors. It is understood that a batch of mining chips ordered by investors at that time had been delayed, and he felt that "it was necessary to help them recover their investment costs, which was actually equivalent to taking them on another gamble."

Thus, Bitmain was established.

The team was full of energy. In just 13 months, Bitmain launched three computing chips, reducing power consumption from 2W/G to 0.5W/G, which opened up the situation in one fell swoop. "It also helped them recover the losses from the pre-sale of the chip," Wu Jihan said in an interview.

Although Zhang Nangeng and Wu Jihan were both early investors in FC, by 2014, the three entrepreneurs had each formed their own teams and companies, and a three-way competition among Chinese mining machine manufacturers had gradually taken shape.

Although the ASIC mining machines on the market have the same principle, due to different manufacturers, there are various types of mining machines such as USB mining machines, blade modular mining machines, etc.

4

Cloud computing power has mixed reviews

Let us now focus on the Bitcoin mining machine manufacturers who were caught up in internal and external troubles in 2014.

At that time, although the domestic mining machine market was not monopolized by one manufacturer, there were dozens of mining machine manufacturers competing, and the situation was not optimistic.

By October, as the price of Bitcoin continued to fall and hit a new low, competition among mining machines reached a fever pitch.

For mining machine manufacturers, it is not only difficult to complete the established sales plan, but also the sales profit has broken through the historical low. The once short-lived Watermelon Mining Machine shows the fierceness of the mining machine competition at that time.

The earliest watermelon machine can be traced back to May 2011, which was created by Xigua Li, a software development engineer in Guilin. At that time, in order to improve the mining capacity, he developed a PCI-E7 slot expansion board, allowing an ordinary motherboard to expand multiple interfaces.

At its peak, the Watermelon machine accounted for 3-5% of the total network computing power and was sold until May 2013 when Avalon was launched in large quantities.

Xigua Li, who has never left the circle, developed another mining machine in June 2014, but deployed it two months late. "(The problem is) we have already started mass production and still have a lot of chips on hand." "(If) we want to deploy it, we will have to invest a lot." If it is deployed again, it can only break even at best.

For mining machine manufacturers, being slow means being eliminated.

According to past experience, there are two main ways for mining machine manufacturers to quickly deal with inventory: external sales and self-deployment (including franchise deployment). The former is to sell the mining machines in hand as much as possible, and the latter is for manufacturers to build mining farms, install mining machines and mine.

Faced with a dilemma, Xigua Miner had "difficult internal opinions" and could only try several modes. Other mining machine manufacturers also began to seek ways to survive.

In early September 2014, Bitmain took the lead in announcing the launch of cloud computing services and launched the cloud computing platform "Computing Nest".

According to reports, this is a platform open to all Bitcoin mining enthusiasts and mining machine hosting business operators around the world. After users purchase computing power, they can be allocated daily based on actual output, and can also monitor changes in the mining farm's computing power in real time.

Simply put, the cloud computing model is deployed by manufacturers, and then the computing power is split and sold to customers. For investors, it eliminates a series of tedious mining processes, and manufacturers can also achieve inventory clearance and earn a certain profit (maintenance fee).

▲ Bitmain launches cloud computing platform: HashNest

As soon as HashNest was launched, it was recognized by users. It is understood that within just 30 days, the number of registered users at home and abroad on the platform exceeded 1,000. Soon, the total computing power injected into the platform exceeded 4PH/s, accounting for about 2% of the total network computing power.

There is a consensus that mining is moving towards specialization and scale. After Bitmain took the first step in cloud computing and proved that the model is feasible, followers began to emerge.

Baked Cat, which once accounted for more than 30% of the entire network, misjudged the market trend after the success of its 130nm process chip. The second generation of chips was stillborn, resulting in the loss of its market dominance.

By the time the third-generation 40nm chip was launched, it received poor response due to design errors and initial packaging problems. In addition, the price of Bitcoin continued to fall in 2014, and the company had a large number of unsaleable chips. By October, the company was in a difficult situation and urgently needed to find a new way out.

Seeing the remarkable achievements of ComputeNest, Kaomao believes that cloud computing power may really be the future development direction of AM.

Xie Jian, who stopped operating Xiaoqiang Miner, reached a cooperation with FriedCat again. FriedCat will be responsible for deploying the mining farm, while Xiaoqiang Miner will be responsible for selling it, and they will jointly promote the cloud computing project AMHash.

It is understood that the first phase of the project AMHash1 sold more than 460TH; AMHash2 sold more than 480TH in 10 days. When the project was carried out to December 2014, AMHash3 sold nearly 2P of computing power in less than half a month due to its early reputation and customer accumulation. Everything is moving in a good direction.

Just at this moment, an accident happened.

We know that the key to the cloud computing business is that users purchase computing power through the platform for "remote mining". The income from this computing power must be distributed based on the real computing power and real output of the mining farm. Once the platform commits fraud, it becomes a "pyramid scheme" that makes money out of nothing.

The problem with AMHash occurred in this part. At that time, the team discovered through the mining pool API that the original account had a computing power of nearly 5P, but it suddenly dropped to 3P, and 2P of the computing power was missing.

▲ The partner website hashie.io has suspended service

After coordination, this part of the computing power has not been resolved.

Later, FriedCat disappeared, AMHash died without a cure, and investors lost all their money, leaving only a mess.

Even so, many cloud computing platforms have emerged in this year's Bitcoin: BitButler, ourhash, digcoin, cex.io, KnCminer, Fbmining, Hash Cloud, etc., and it has become a trend for a while.

“I think cloud computing power will be the mainstream of mining in the future,” Wu Jihan said in an interview in December 2014.

It is no coincidence that cloud computing power has begun to become a new business for entrepreneurs. This is the product of the development of Bitcoin mining machine research and development, production, and sales to a certain stage.

Even though it has been criticized along the way, cloud computing has not died out quickly. Today, it is still one of the important ways to play in the cryptocurrency mining industry.

5

end

From single Bitcoin to mining of other cryptocurrencies, the research and development and sales of mining machines once determined the price of Bitcoin.

The mining machine business, as the most mysterious link in the cryptocurrency industry chain, is little known.

From the 65nm mining machine of Butterfly Labs, to the 40nm process technology of Avalon third-generation mining machine and Baked Cat mining machine, to the first-generation 55nm mining machine of Ant, the third-generation chip BM1382 of the 28nm Bitcoin mining machine, and finally to the well-known 7nm mining machine...

Chinese Bitcoin entrepreneurs played an important role in this, and some mining machine manufacturers that have survived several iterations have also become legends.

2014 was an important year in the history of Bitcoin mining machines. It not only pushed ASCI mining machines forward a big step, resulting in the emergence of a large number of excellent mining machines, but also marked the beginning of professional and large-scale operation of mining machines, and even developed the gameplay of leasing cloud computing power for mining. These have had a particularly far-reaching impact on the entire Bitcoin world.

Now, the annual flood season is coming again, and the miners who have just experienced a year of bear market baptism and are reluctant to leave are also beginning to move.

New mining machines are still emerging, and this period of Bitcoin history involving Chinese entrepreneurs will continue to move forward.

Some reference articles:

1. Caiyun interviews Xigua Li: Decoding the origins of the watermelon machine

https://www.cybtc.com/article-1281-1.html

2. Li Yingfei: Not mining will definitely make the price of coins lower and lower. Introduction to the Hashnest project

www.wanbizu.com/jingyan/201409092254.html

3. I. Ant: Let’s talk about the relationship

https://www.cybtc.com/forum.php?mod=viewthread&tid=15409&fromuid=402

4. Cloud mining is becoming mainstream. Overview of domestic and foreign cloud computing platforms

https://www.8btc.com/article/44980

5. Let’s talk about AMHash for the last time

https://www.weibo.com/p/1001603819603678652587?mod=zwenzhang

6. History of Bitcoin Mining (Part 1): The Beginning of the Story, the CPU Era

https://www.cybtc.com/forum.php?mod=viewthread&tid=23

7. “Miners” describe the Bitcoin world: 90% of mining machine companies have gone bankrupt

http://tech.qq.com/a/20161219/005934.htm

8. The entrepreneurial journey of a “Bitcoin evangelist”, an interview with Jihan Wu (QQagent)

https://www.8btc.com/article/38390

9. Bitcoin Fortune Stories

https://www.cybtc.com/thread-6857-1-1.html

Some of the pictures in this article are from Caiyunbit