The deep pits in the mining circle are all here: being cheated of money, being cheated of electricity, and being forced to be a scapegoat

When the market was at its hottest, the huge profits in the cryptocurrency circle made people who wanted to seize the mining "trend" jump into the mining craze without even having time to think about it.

However, mining is an asset-heavy industry. The price of mining machines has doubled since the beginning of the year, reaching a peak of tens of thousands per unit. Building a mining farm requires funds and resources. Finding electricity requires running back and forth, and you need to understand the "unspoken rules." If you are not careful, traps are set in every link, waiting for the mining army to break in.

Odaily Planet Daily interviewed several miners and reviewed the "pitfalls" they encountered in mining this year.

"Too many!" said one miner. "It's simply a history of blood and tears in mining."

There are also miners who laugh bitterly at their mining experiences this year. "I bought mining machines from the 'mountaintop', got cheated when looking for electricity, and was forced to be a 'takeover man' at the guest mine. I have fallen into all the traps that new miners fall into."

Encountering "tyrannical" terms

As a new miner, the most frustrating thing for Liu Changlin this year is that he bought a mining machine at the "top of the mountain" and encountered "unfair" terms at the bottom of the valley.

In February this year, the price of mining machines reached the "top of the mountain" during the bull market of digital currency. Liu Changlin used his savings from many years in the Internet circle to buy a mining machine.

This is not the worst. The worst thing is that before the mining machine was installed, he encountered a "bully" intermediary.

When hosting the mining machine, Liu Changlin found a Cantonese named Lv Fangyuan, and the two parties agreed that Liu Changlin would get electricity at a price of 0.4 yuan per kilowatt-hour.

But as soon as Liu Changlin's machines were delivered to Lv Fangyuan's mine, Lv Fangyuan suddenly raised the price, raising the electricity price to 0.65 yuan per kilowatt-hour, and said that her cost of electricity was 0.6 yuan per kilowatt-hour, and it was impossible to sell at a loss.

The machines have been moved to the mining site. If they are not put into operation in time, "the net loss of mining income will be hundreds of thousands every day." Helplessly, Liu Changlin had to agree to this clause.

I accidentally became the "takeover man" of the mine

Later, Liu Changlin found out that this mine did not belong to Lv Fangyuan. Lv Fangyuan heard that someone was looking for a mine, so she temporarily asked her friend Li Gang from Sichuan to find electricity to build it.

But they have no experience and no electricity resources, so they charge higher electricity prices than others.

Such expensive hosting conditions made Liu Changlin consider building his own mining farm. So he spent three months building a mining farm in a northwestern province. But when he was moving the machines, he was stopped by Li Gang.

Li Gang said that the mine was built specifically for Liu Changlin, and that it has not yet paid back its investment, and he demanded that Liu Changlin compensate for the losses. The two sides have been negotiating over this issue. He contacted Lv Fangyuan but received no response. Liu Changlin was convinced that Lv Fangyuan had done everything she could to cheat him and was a deadbeat, and that she would no longer care about him.

Therefore, Liu Changlin had to buy the mine for several million yuan, and only then did Li release Liu Changlin's machines.

"The electricity cost of Li Gang's mine is too high, so it is not suitable for mining. It is still idle there." Liu Changlin said with a wry smile.

When asked why he fell into this "chain of pits", Liu Changlin believed that it was mainly because he was a novice and signed the contract hastily amid the industry's frenzy.

"At that time, the expected returns were very high, there was money everywhere, and everyone made decisions very quickly. Therefore, the rationality of the costs was ignored, resulting in hasty decisions. I still haven't made back my money until now," said Liu Changlin.

So can this pitfall be sued? Liu Changlin told Odaily Planet Daily, "It's very tricky."

"Firstly, the contract was signed with Lv Fangyuan, but it was actually entrusted to Li's mine. Many people handled it and the operating entity has changed, so it is too difficult to provide evidence. In addition, if the case is reported, the judicial department may take away the machine, which will further increase the loss." Liu Changlin said.

"In order to stop the loss, I had to admit defeat."

The mine was demolished just after it was built.

In the second half of the year, Wanjing borrowed 20 million yuan to build a mining farm in Sichuan that can accommodate 60,000 machines. After signing the contract with the local power supply bureau, the mining machines were gradually delivered. She was so excited that she began to imagine "having a mine at home".

However, before the mine was started, the power supply bureau suddenly notified that it could not supply electricity and demanded the termination of the contract.

"It's not that easy to have a mine at home." Wan Jing lamented that there are too many unspoken rules in this industry, and it is easy to make mistakes if you are not careful. It is not easy to do business.

At present, the country has no clear regulations on the mining industry. Wan Jing wants to raise the case to the judicial level, but it will be difficult for her to stand firm and it will be difficult for her to be protected by law.

Now, Wanjing is busy dismantling the mine.

When looking for electricity, I encountered a "capital pool"

As soon as Zhao Xingyu heard that there was cheap electricity at 0.22 yuan in Dao County, Hunan, he went there to investigate.

It was October this year. He and several friends from the same mine took a 6-hour bus ride to Dao County. They were greeted by an electricity seller called "Yixun Cloud". The reception was very luxurious, with Rolls-Royce pick-ups and beautiful saleswomen as companions.

The other party said that they could give them 0.22 yuan per kWh of electricity, and the friends were very happy, finally finding cheap electricity. Under the arrangement of Yixun Cloud, four of them quickly signed the contract.

The contract stipulates that Party B (Zhao Xingyu and his friends) needs to pay a deposit of 13 million yuan first. The deposit paid on the spot ranges from 500,000 to over 1 million yuan.

However, when the time stipulated in the contract came, Yixun Cloud was unable to provide electricity and did not refund Party B.

Zhao Xingyu and his friends had no choice but to go to Yixun Cloud to seek redress, but they found that they were not the only ones who were cheated by Yixun Cloud. Many people had paid a deposit first.

Industry insiders analyzed that the Yixun Cloud model is a typical Ponzi scheme, "the scale of the margin in the scheme is in the hundreds of millions of yuan." Jiang Yuanliang, a mine owner who has been paying close attention to Yixun Cloud, told Odaily Planet Daily.

Yu Yang, COO of the paid miner community Kuanghaihui, was also attracted by the low-priced electricity of Esoon Cloud, but after investigation, he discovered in time that the way Esoon Cloud sold electricity was actually a Ponzi scheme.

Yu Yang gave an example to introduce the routine of Yixun Cloud. At the beginning, the electricity seller took 60 cents or slightly lower normal electricity, and the price was not too low. But in the first phase of sales, he would give the customer (usually the owner of the mine) a low price of more than 20 cents, and the total amount was relatively small, perhaps only 10,000 kilowatts; after the electricity buyers used it, they saw that the power supply was normal and believed the electricity seller.

Then the second phase will be scheduled. In the second phase, the electricity sellers will have "200,000 kilowatts or even more cheap electricity", but in fact they do not intend to continue selling electricity, but only want to take away the customers' electricity purchase deposits.

"First they subsidize the first phase, and then they make a lot of money from the second phase. This way of selling electricity is really unheard of," Yu Yang commented.

"Now, the door of Yixun Cloud is surrounded by investors, and some people even eat and sleep with Cai Jie, the boss of Yixun Cloud, and monitor him. But after the rights defenders calculated his fixed assets, they found that he was insolvent, so I'm afraid it will be difficult to resolve the issue," said Jiang Yuanliang.

The scammers won't let go of thousands of dollars.

The above-mentioned scams are just the tip of the iceberg of the mining industry. Zhu Zhe, a veteran in the mining industry, is no stranger to them.

"Even in a bear market, there are still many scammers in the mining circle. Recently, a scammer came to a miner group and tried to defraud several thousand yuan."

Zhu Zhe drove to a hydropower plant more than 400 kilometers away to negotiate electricity at 6 o'clock in the morning. He summarized several pitfalls in the mining circle to Odaily Planet Daily: "For example, Yixun Cloud uses a small amount of low-priced electricity to defraud the deposit. What's worse, they will wait until the mine owner has built the mine before raising the price and charging fees."

"Some mine owners steal electricity to run their mines, using low-priced electricity to attract miners to send their machines. Once the mines that steal electricity are investigated, the mine owners are very likely to face jail time, and the mining machines are also at risk of being seized."

Mining is a resource and capital intensive industry.

Even in the current bear market trough, those powerful mine owners and large miners are making early arrangements for the coming of the bull market and scrambling for electricity resources in Yunnan, Guizhou, Sichuan and other places.

Electricity resources are scarce, the industry is in a continuous downturn, and miners' thirst for cheap electricity has given rise to a market for scammers. Pests inside and outside the circle have been crawling towards miners, and capital pools have been quietly opened under the guise of low prices.

Zhu Zhe believes that "compared to traditional industries, this industry is relatively new. Due to the information asymmetry between the interest chains, scammers can make money by relying on information asymmetry in various interest chains."

The mining circle is at the top of the entire blockchain industry. It is a circle that makes a fortune quietly by relying on the electricity resources thousands of miles away. However, in such a gray industry belt with little supervision, mining itself cannot be legally protected.

With the current Bitcoin market, many inexperienced miners cannot resist the temptation of "sufficiently low electricity prices" and fall into various traps, either losing all their money or continuing to be deceived. In Zhu Zhe's words: "If you go and make trouble, the local tyrants will definitely not be afraid, because your practices are not in compliance with the law anyway."

Take the Yixun Cloud incident as an example. As early as December 16, at the Wuhan Global Consensus Security Industry Summit, a deceived investor wanted to expose Yixun Cloud to his fellow miners at the conference. After verification by Odaily Planet Daily, the deceived investor was negotiating a private settlement with Yixun Cloud. He was worried that the Yixun Cloud fraud incident would be exposed by the media, "If Yixun Cloud runs away, the money will never be recovered."

Liu Changlin, who was badly cheated, sees it more clearly: "I don't know where these desperate people came from. They came in one after another after seeing the huge profits in the mining circle at the beginning of the year. Some of them have problems with their roots and have never seen money. In local language, they are 'farmers are more ruthless than landlords'. They are still cheating people for money."