The top American mining farm that once issued coins and claimed to mine for 50 years has also collapsed

In recent days, the price of Bitcoin has continued to fall, hitting a new low yesterday, and the entire market is wailing.

The first question that comes to my mind is: Are miners still mining? Is mining still profitable now?

Therefore, Sanyanjun analyzed the current situation in the mining circle in yesterday’s article - miners are almost unprofitable, the output of high-energy-consuming mining machines is no longer enough to cover the electricity bill, and the "mining disaster" has indeed arrived.

Today, news of the "mining accident" continues to ferment, and "mining machines sold by kilogram" has even been included in Baidu's hot search list, and was once ranked first on the list.

Sanyanjun took a deep breath: Fortunately, I bought a graphics card when I was researching mining last year. Now that I don’t mine, I can still play PUBG and games like Assassin’s Creed that require high graphics card configuration. If I had bought an ASIC mining machine, I might have to sell it as scrap metal now.

"The domestic mining industry is in such a state, and the situation abroad is not much better. I remember that a mining farm abroad issued coins last year, and it seemed that one coin was equivalent to 50 years of mining rights. I don't know what's going on now."

Sanyanjun was just thinking to himself when another piece of news about the mining circle appeared before his eyes - the top mining farm in the United States, Giga Watt, has filed for bankruptcy.

Giga Watt Home Page

Giga Watt is the one that I have heard of before. It is a hot coin issuing mine in the domestic mining circle last year through the innovative model of "one coin is equivalent to 50 years of mining rights".

Past glory: Becoming a top mine in a few years

Dave Carlson was originally an unknown peddler, engaged in computer repair and electronic product sales, just like many repairmen and salesmen in China who used to wait for customers to come to them at a small counter in Zhongguancun Computer City.

In 2012, after hearing about Bitcoin, Dave Carlson discovered that mining could be profitable and even lucrative. So he converted the basement of his house into a small mining farm and founded a company named GigaWatt, which literally means "billion watts", symbolizing that the company would develop into a mining farm with huge power consumption. Later, as the price of Bitcoin soared, in just one year, this company running in the basement became a multi-million dollar enterprise.

Dave Carlson: Former Giga Watt CEO

In April 2017, the price of Bitcoin started a new round of surge, and GigaWatt also benefited from it and continued to buy more mining machines. The computing power reached 1.3PH, becoming a veritable large mining farm and ranking first in the United States. At that time, its computing power could earn hundreds of thousands of dollars a day.

Giga Watt's large-scale mining farm

But Dave Carlson was not satisfied with this. He began to expand the derivative business of mining - the production and sales of mining machines, as well as the computing power leasing business.

Business expansion: selling mining machines, issuing coins and selling computing power

With the support of top mining farms, GigaWatt's business plan of producing and selling mining machines successfully attracted many investors. So GigaWatt began to produce mining equipment based on Bitfury chips and sold them to other Bitcoin enthusiasts.

As for the computing power leasing business, GigaWatt took a different approach. Unlike the common computing power leasing business on the market at that time, which only sold computing power hosting services on an annual basis, the one-time payment would be very high. Instead, it issued a token based on Ethereum ERC20 rules, WTT, through the initial token offering, which was very popular at the time, and sold the site leasing rights of the mine in the form of tokens, which is actually computing power.

According to its publicity, after such a conversion, the entry threshold for investors is greatly lowered, and investors can enter the mining industry at a very low cost.

GigaWatt once advertised on Babbitt that doing so could reduce investors' investment costs by half.

WTT's promotional materials on Babbitt

Specifically, each token corresponds to a 50-year lease for a mining farm with a one-watt power consumption mining machine. For example, if the power consumption of an S9 mining machine is 1350 watts, then the investor only needs to take out 1350 tokens to host the mining machine without leasing fees. The investor only needs to pay low electricity and maintenance fees, and the output will all belong to the investor. After the mining machine is scrapped, the tokens can still be used to host a new mining machine until the 50th year.

WTT's promotional materials on Babbitt - prices and instructions

This new computing power leasing business was pioneered by GigaWatt and spread throughout the mining circle in a short time. The 30 million tokens were quickly sold out, earning a total of more than $30 million worth of Ethereum. After that, the token price quickly rose to nearly $3, and in December last year it rose to $3.6, 3.6 times the initial issue price of $1.00.

The market turned cold, mining machine sales were hindered, and token prices plummeted

However, this year, as the price of the currency has been falling, the funds raised by GigaWatt have continued to shrink, the mining project has been stranded, and it has also been hit by two class-action lawsuits. The tokens it issued have also fallen. In March this year, WTT had fallen to the issue price of $1, a 72% drop from its peak.

In August, CEO and founder Dave Carlson resigned from the company. In September, the company laid off 63 employees. In early November, WTT had fallen to $0.14, a 96% drop from its peak, and even a 86% drop from its IPO price.

Giga Watt’s WTT token chart

On November 20, Giga Watt filed for bankruptcy protection in the U.S. District Court for the Eastern District of Washington, claiming that its assets were less than $50,000, but it owed creditors nearly $70 million.

This mining company, which once rose to prominence in less than a year, went from the peak of its business to bankruptcy in less than a year.

At this point, Sanyanjun can't help but wonder, hasn't the mining industry always been profitable, why is it declining so quickly? As a former top mining farm, why is GigaWatt in such a huge debt?

Competition is fierce, and mining farms have to accelerate expansion to survive

In fact, competition in the mining circle is far more intense than ordinary people imagine.

GHash.IO, once the world's largest mining pool, was established in July 2013. In its heyday, in July 2014, the mining pool's computing power once exceeded the critical value of 51% of the entire network, but it was forced to choose to close down during the bear market in 2016. The rising star, BTCC mining pool, which once ranked third in the computing power of the entire network, also stopped operating during this year's bear market. Once they are at a disadvantage in the competition, the bear market is the last straw that breaks the camel's back.

The mining farm is similar. The reason why Giga Watt raised funds, produced mining machines, and expanded the mining farm last year was to purchase more mining machines and increase computing power to cope with fierce competition. However, most of the funds raised by the company were virtual currencies, and the price of the currency plummeted with the bear market, resulting in many of the company's plans being unable to be implemented, and eventually bankruptcy and closure.

A schematic diagram of the mine that Giga Watt had planned to expand.

On the other hand, the WTT token it launched advertises investing in cryptocurrencies at half the market price. The reason for its establishment was based on the currency price and computing power at the time, as well as the conclusion that the 50-year lease rights could be fully redeemed.

If the 50-year lease cannot be fulfilled, or the currency price fluctuates greatly, or the computing power increases significantly, any of the three conditions is not met and the conclusion cannot be established.

In the white paper of the token WTT it issued, the scrapping and renewal time of mining machines was calculated as 2.5 years. In fact, the rate of increase in computing power and the speed of mining machine renewal far exceeded this estimate, not to mention the sharp drop in the currency price.

I remember that when I heard about Giga Watt's fundraising plan for its 50-year mine lease last year, I lamented to a friend that the company had long-term plans, but I also questioned whether the 50-year lease could be fully fulfilled.

Now that Giga Watt has declared bankruptcy, the so-called 50-year mine lease rights contained in WTT are obviously no longer possible. From the fundraising last year to now, the redemption time has only lasted for one year, and this has not yet deducted the time for the construction of the mine.

I remember when I first heard about the 50-year computing power leasing plan last year, I was amazed at the company's long-term planning. Thinking about it now, it's really sad.