The darkest moment for miners: Losses as soon as the machines are turned on, will Iran, where electricity costs less than 0.1 cent, be a way out?

Author: BlockBeats 0x28

Recently, many mining machine manufacturers have encountered obstacles in their listing. Even though they are at the top of the mining machine industry pyramid, the situation of miners can be imagined. In addition to a large number of withdrawals, some large mine owners have chosen to find places with cheaper electricity to "extend their lives".

A miner also revealed to BlockBeats that electricity prices in Southeast Asia are no longer profitable for mining, and everyone is looking for cheaper and safer sources of electricity.

The "mining disaster" caused by the decline in the price of coins is causing miners to migrate passively. Coindesk reported not long ago that a large number of Bitcoin miners are moving to Iran, and the reason is Iran's cheap electricity resources of 4 cents per kilowatt-hour. Compared with the cheapest electricity in China, 1.5 cents per kilowatt-hour, Iran's electricity will save more than 73% of electricity costs for mining farms. This figure means that even for a small-scale mining farm with only thousands of mining machines, 4 cents of electricity can save at least tens of millions of yuan a year.

The cryptocurrency mining crisis has been raging for nearly two months. The price of coins plummeted, mining machines were unsalable, mines were closed, and miners fled. All of these touched the sensitive nerves of stakeholders. They paid extra to buy mining machines and tried every possible way to mine. But when the mining machines were discounted, no one bought them. Even when the price was reduced by hundreds of yuan a day, they could not be sold and could only be sold as scrap metal by kilogram. It took only six months from being hot to being unsalable.

Life-saving electricity found in the Middle East

In many reports, it has been confirmed that most industries related to cryptocurrency mining have reached a critical moment. The price of coins has fallen as if there is no bottom, the cost of mining has continued to rise, and thousands of mines are announced to be closed every day. The mine owners have begun to look for new places, mining paradises where they can restart their mining machines.

According to Coindesk, some large mining farm owners have set their sights on Iran, a country with internal divisions and constant wars. What attracts mining farm owners is Iran's extremely low electricity cost, which is $0.006 per kilowatt-hour, equivalent to about 0.04 yuan per kilowatt-hour in RMB.

Electricity at 4 cents is undoubtedly the best location for mining farm owners. Compared with the cheapest electricity in China, which was about 1.5 cents per kilowatt-hour from power plants, Iran's electricity at 4 cents per kilowatt-hour saves more than 73% of electricity costs for mining farms. This figure means that even a small-scale mining farm with only a few thousand mining machines can save at least tens of millions of yuan in electricity costs each year.

In fact, electricity at around 1.5 cents is not common in China. It is only the mines near the hydropower stations deep in the mountains that can enjoy preferential electricity prices. Once the dry season arrives in winter, the electricity consumption of mines in the hydropower station area will rise to 3 cents, which is doubled. Most of the time, the doubled price in winter or directly equals the electricity cost saved in summer.

Therefore, wind power areas with balanced electricity in all seasons have become the first choice for many mine owners. According to a previous report by Tencent News, at the end of November, the preferential electricity price in the name of "cloud computing" in Shihezi, Xinjiang was 0.28 yuan. After entering December, these retail miners and small-scale mines that rely on the abundant wind power in the northwest have been unable to make ends meet, with a monthly loss of tens of thousands of yuan in electricity costs alone. Coupled with the recent US sanctions on Iran, the Iranian legal currency Rial has depreciated significantly, making electricity prices more attractive.

The mining resorts in southwest and northwest China, which were previously favored by mine owners, have now become high-priced electricity areas that mine owners want to escape from. The situation in which mines are forced to move due to the burden of electricity is not only happening in China. According to Coindesk, the electricity prices in Western European countries are also difficult to maintain the profitability of mines. Many mine owners have visited farms in Iran from Spain, Ukraine, Armenia and France to select sites for mines.

But is Iran really a mining paradise? The answer is no. The first obstacle for foreign mine owners to enter Iran is whether they can enter Iran safely. Judging from the current situation in Iran, one of the branches of the Iranian military, the Islamic Revolutionary Guard Corps, still controls the border area, and only they can decide what goods can enter.

In other words, whether or not to enter Iran depends on the Islamic Revolutionary Guard Corps. If foreign mine owners enter, they are likely to lose both their money and their people, and face the possibility of being detained at the border and having their mining machines confiscated. Moreover, even if they are lucky enough not to encounter obstacles at the border and are allowed to pass by the Islamic Revolutionary Guard Corps, importing miners to Iran still requires some special transportation procedures and complicated administrative formalities. In addition, the whole world knows that the United States has imposed sanctions on Iran. Will investors face greater political risks if they enter Iran to mine at this time?

These uncertainties make Iran, a "mining paradise", out of reach.

The price of coins plummeted, and a mining accident occurred.

The reason why mine owners travel to other countries to find mining sites is that the price of the currency has hit an abnormal bottom in the past two months. Under the double blow of investors' assets and psychology, the price of the currency seems to be on the road to a low point from which there is no return.

In one month, Bitcoin led other cryptocurrencies to start a sharp decline. Bitcoin alone dropped from around $6,500 in early November to around $3,500 in early December, a drop of nearly 46%. If calculated based on Bitcoin's price of $3,200 on December 17, the drop exceeded 50% in less than two months.

Behind this figure is the fact that the market value of Bitcoin is evaporating at a rate of hundreds of millions of dollars every day. Of course, every dollar of evaporated market value also corresponds to a huge loss for investors who bought Bitcoin at the peak of the bull market. For the mining industry chain that is heavily dependent on the encrypted digital currency market, the impact of falling currency prices has only increased.

The first to be affected are the miners. Migrating abroad is the choice of some mine owners. They usually have sufficient capital support and can sustain losses for a period of time. Finding a place with lower electricity costs to continue mining is a good second-best option. But this only represents a very small number of "big players". More retail miners, ranging from a few to hundreds or thousands of small mines, can only liquidate and leave.

Although the computing power of Bitcoin has dropped by more than 10% compared to a month ago, the decrease in mining difficulty has not retained miners. The Ant S9, which has a maximum price of nearly 3,000 yuan, has no one interested in the new product price of 1,200 yuan, and second-hand mining machines have become the standard for "picking up bargains". On the Caiyun Bit official website, there are 113 pages of information, a total of 2,249 mine transfer and mining machine transfer information, all of which reflect the "cold winter" of the industry.

When checking BlockBeats, the most recent transfer information was released half an hour ago, "In order to reduce the cost of finding electricity for many mining peers, Galaxy Mining has released 5 power resources to build mines or transfer power resources with peers." Below this message, "During the annoying dry season, mines and miners share the same suffering, and electricity prices are falling, falling, falling" even more expresses the sadness of the mine owners.

The slump in the price of coins even affects the predators at the top of the industry's capital chain. Recently, there are reports that Bitmain, which was once the most promising company to be listed on the Hong Kong Stock Exchange, may be blocked. Although the rumor that "Bitmain's listing was blocked" has been clarified as a rumor, the decline of the top companies in the mining machine industry chain represented by it still makes the entire industry panic. In addition, Canaan Creative's IPO application in Hong Kong was rejected, and the real first blockchain stock has become out of reach.

In fact, the highlight of cryptocurrency mining machines was one year ago. At that time, the mining machine industry chain was hot and the first blockchain stock was within reach.

There was a shortage of mining machine dealers. People would buy a mining machine even if the dealer increased the price or even doubled it. Mining machine manufacturers made a lot of money from this. The three major mining machine manufacturers—Bitmain, Canaan Creative, and Ebang International—chose to go public in Hong Kong during the bear market. At that time, the global mining machine industry was at its peak.

However, before entering the capital market, bad news came one after another. Of course, mining machine manufacturers are unwilling to become victims of the bear market, so they created mining machine heaters to "pull up the market" for the mining machine industry. For example, BlockBeats has previously reviewed the "Avalon A851H Mining Heater". Canaan Creative has built-in a water circulation system in this mining machine, which can transfer the heat generated by the chip when performing hash operations to the room, thereby achieving the effect of heating the room.

In actual effect, the heating time and temperature of the mining machine heater are still somewhat different from those of the air conditioner.

Compared with the forced "pumping" method of the mining industry, the "rescue" of the currency circle, which has the same purpose, has entered a cycle mode. Entering the second half of 2018, the encrypted digital currency was sluggish, the panic became more and more serious, and the voice of "rescue" has not stopped. As a result, the "rescue" method of creating concepts and diverting attention on paper came into being, but it did not work at all. Bancor, STO and other financial concepts have not successfully linked blockchain and finance.

Recently, a big shot in the cryptocurrency circle has updated his rhetoric and created a new concept. He said that Bitcoin was $400 three years ago and $800 two years ago. If we regard it as the intrinsic price of Bitcoin, then the price of Bitcoin was $1,600 a year ago and is now $3,200, so the "intrinsic value of Bitcoin next year is $6,400." If BlockBeats must respond to this sentence, then I will give you the three words "speak human language."

What the boss said is not without reason, but it seems too serious to complicate simple things and fool ordinary people. The so-called intrinsic price is the increase law obtained according to the approximate increase of Bitcoin in 2 or 4 years, doubling every year. According to this estimate, the price of Bitcoin will be $6,400 next year.

The bear market is generally recognized by industry insiders as a good time to recuperate. New blockchain leaders should read more books and coin fewer new words. Learn from Teacher Li Xiaolai. It takes real skills to fool the leeks, not to coin new words. If you must coin new words, please use "intrinsic value" to save the mining industry. Thank you~

History of Miner Migration

Electricity costs have always been a choke point for miners, and now that the price of coins continues to hit bottom, it is even more of a decisive factor in the survival of miners.

According to the shutdown prices of various models posted by Shenyu on Weibo, based on the electricity price of 0.4 yuan/kWh, the current BTC mining machines S7, A741, M3+ downclocked version, and T9 have reached the shutdown price. In other words, mining with these four models of mining machines has completely lost income.

The purchase cost of the mining machine itself and the mining losses, plus the corresponding supporting facilities for the construction of the mining farm, a medium-sized mining farm equipped with tens of thousands of mining machines costs tens of millions of yuan. With such high cost investment, even if the machines are shut down to stop power consumption and losses, the large number of mining machines cannot be resold, and the supervision and maintenance of the mining farm also requires a lot of manpower costs.

In other words, the more mining machines a mine owner has, the greater the loss. When it is impossible to shut down and transfer the machines, exporting the mining machines overseas becomes the most cost-effective way out. Compared with the cheap electricity in China, which costs 0.4 yuan on average in winter, the attractiveness of electricity in Iran, which costs 0.01 US dollars, to mine owners is imaginable.

Electricity prices are a headache for miners even in a bull market. So after experiencing the risk of being caught for stealing electricity, miners began to move according to quarterly changes in electricity prices in various places, forming a migration path for miners.

Commercial electricity consumption in my country is generally higher than residential electricity consumption. In most areas, commercial electricity consumption is even more than 1 times that of residential electricity consumption. Therefore, retail miners initially came up with the "dirty trick" of mining at home. In June 2018, a tenant in Wuhan set up a mini-mine in a rental house and was later detained by the police for suspected electricity theft.

The mini mine is composed of 80 mining machines, 4 axial fans and 1 air inlet water-cooling curtain device. The electricity comes from a cable that the tenant directly connects in the cable box. The equipment consumes 2040 kWh of electricity for 24 hours, which is 61,000 kWh per month. According to the commercial electricity price, the monthly electricity bill is 53,000 yuan, and the annual electricity bill is nearly 600,000 yuan.

By August, the Bitcoin hashrate was close to 50EH/s, and the difficulty of mining increased, which meant that profits were getting smaller and smaller. Even though the mines in the south were in the flood season with low electricity prices, the mine owners began to prepare for the coming of the cold winter. The north, with its vast land and sparse population and low per capita GDP, became the first choice.

Some southern mine owners choose Xinjiang and Inner Mongolia as their winter destinations. Xinjiang's abundant wind power resources throughout the year, the rich coal resources on the Inner Mongolia Plateau, and stable and sufficient wind power and thermal power are the most important factors that attract mine owners.

By September, the policy of the 1941 anniversary came as expected, cracking down on the offshore operation methods of trading platforms and defining the behavior of "illegal mining". Market sentiment and encrypted digital currencies fell to the bottom at the same time. The high legal risks and low actual profits faced by mining made some miners turn their attention to overseas.

Compared with the depression in China, mining abroad is in full swing. Take Canada as an example. A number of mining companies have already entered the capital market. Rich hydropower resources, cheap electricity, daily low temperatures, and relaxed policies make it a paradise for the mining machine industry. Bitmain, which has experience in building factories overseas, has begun to select sites for building mines in many places in North America. Other mining machine manufacturers have also chosen to build mines or invest in countries with relatively stable policies such as the United States and Canada.

Now, in the last month of 2018, the global mining machine industry has entered its darkest hour.