A brief history of “mining”: from CPU to “behavior is mining”

We often say that "Bitcoin is generated by mining". This is actually a vivid metaphor. "Mining" is essentially using computers to solve a series of complex mathematical problems, participate in the maintenance of Bitcoin blocks, and get Bitcoin rewards. The mining process is actually the process of computer calculations. The higher the configuration of the computer, the faster the calculation speed, the more cryptocurrency you get, and the more profit you get. This is somewhat similar to the mining of resources such as oil, gold and silver, except that cryptocurrency mining consumes more electricity.

At first, Satoshi Nakamoto was mining alone in front of his computer and was rewarded with some Bitcoins. Later, the mining team grew larger and larger, and the mined Bitcoins gradually became valuable, becoming "digital gold" and the price soared. As more and more "miners" poured in, the computing power and speed of ordinary computers could no longer meet the mining needs, so professional mining machines were created. 1. From CPU to professional mining machines From Bitcoin to multiple currencies

From 2009 to now, mining has gone through the following four stages: CPU mining → GPU mining → professional mining machine mining → mining pool mining (I) CPU mining:

On January 3, 2009, Bitcoin founder Satoshi Nakamoto used his computer CPU to create the "Genesis Block" and mined the first batch of Bitcoins.

2. GPU Mining:

In 2010, CPU mining had little profit, and GPU mining officially came into the scene. One GPU is equivalent to dozens of CPUs, and the mining capacity has been significantly improved. Now, many miners still use GPU mining to mine Ethereum.

(III) Mining with professional mining machines:

In 2011, as the mining power and difficulty increased, professional mining machines came into the public eye. As more mining machines joined the mining, it became difficult for a single mining machine to mine Bitcoin. As a result, miners gathered their mining machines together to form mining farms and mining pools. We have compiled several common mining methods currently on the market:

At present, mainstream miners use ASIC mining machines for mining: Antminer S9, which ranks first in the global market share, is an ASIC mining machine. It is developed by the mining machine manufacturer Bitmain and uses a 16nm process chip. The computing power can reach 13.5TH/s and the power consumption is 1350W. Recently, another mining machine and mining machine chip manufacturer, Canaan Creative, released the Avalon A9 series, which is also an ASIC chip customized for "mining". According to official data, the Avalon A9 series uses a 7nm process chip, with a computing power of up to 30TH/s and a power consumption of 1720W.

As the saying goes, "Heroes are made by the times." Mining machine manufacturers have indeed gained a share of the cryptocurrency market. According to the Hurun Greater China Unicorn List in the second quarter of 2018, the mining machine manufacturer Bitmain is now valued at RMB 70 billion, and Canaan Creative is valued at RMB 20 billion. China's mining machine research and development and production are already at the forefront of the world. 2. Is it worth it? The controversial cost of "mining"

Generally speaking, any computer can be a mining machine. However, compared with professional mining machines, ordinary computers have very low returns, and may not even mine cryptocurrencies at all. Professional mining machines, equipped with special mining chips, have processing speeds dozens or hundreds of times higher than ordinary computers. Of course, professional mining machines also consume a lot of energy, and Bitcoin's power consumption can even rival that of a small country. PwC expert Alex de Vries calculated and asserted that the power consumption of cryptocurrency mining is comparable to that of Iceland and Austria, and even indirectly exacerbates global warming. This statement caused an uproar. Many people questioned this, believing that Vries' calculations were not accurate and that computer power consumption has always been overestimated. Jan Čapek, co-founder of the Bitcoin mining pool Slush Pool, has publicly stated that his company consumes far less energy than critics have suggested, and that it will also generate a large amount of revenue in the process.

So, what is the cost of mining?

"Mining cost", also known as "mining energy consumption", mainly includes: energy consumption cost and equipment cost. Mining costs vary in different regions of the world, and most mining relies on coal-fired power. According to statistics from Chain Tower Think Tank: South Korea has the highest electricity cost for Bitcoin mining in the world, with the electricity cost of mining one Bitcoin being $26,170; Venezuela has the lowest cost, with the electricity cost of mining one Bitcoin being only $531.

Therefore, mining centers are mostly concentrated in China, Russia, Venezuela, Iceland, Ukraine, Uzbekistan and other regions with relatively cheap land and electricity. At present, 70% of the global computing power is located in China: Sichuan Province has become the place where the world's Bitcoin mining capital is most concentrated; a Bitcoin mine in Ordos, Inner Mongolia is one of the largest Bitcoin mines in the world, with an annual electricity bill of 100 million yuan.

We calculate based on the current market value of Bitcoin: Check the Bitcoin mining cost on https://btc.com/, the daily profit is about 12 RMB, and the rest of the detailed data is as follows:

In addition to purchasing mining machines for mining, we can also mine by leasing mining machines and purchasing cloud computing power. In this case, the mining machines will be managed by the mining farm, and we will regularly obtain various mining data including profits, and we don’t have to worry about electricity bills, maintenance and other things; of course, this requires us to pay some hosting fees, and the mining cost has increased. According to Satoshi Nakamoto’s setting, the total issuance of Bitcoin is constant at 21 million, and it will be halved every four years. The difficulty of mining will become greater and greater. From this point of view alone, stable returns may not be guaranteed. In addition, the price of the currency is also affected by many factors such as the market, policies, and news, and the fluctuation range is large. It is possible to soar or return to zero. Today, the bear market is long. According to the latest market data of Coinmarketcap, the mainstream currencies are all "marked red" and have fallen sharply:

A large number of non-mainstream small currencies have already run out of steam.

In order to ensure the trading depth of mainstream currencies, OKEx recently announced that it will hide transactions or directly delist nearly 100 altcoins and virtual coins at 12:00 on August 17. Known hidden currencies include UBTC, EVX, WFEE, RCT, MDA, CTR, CAG, BT2, BRD, UKG, LA, QVT, WBTC, ATL, AVT, etc. The trading volume of these currencies is very small in recent days. Hiding and delisting can keep the leeks who enter the market later away from virtual coins and embrace value coins. In a bear market, should we still mine?

Some people say: "In a bear market, you speculate in cryptocurrencies, and in a bull market, you mine." Xiao An thinks this statement makes sense. In a bear market, the short-term returns from speculating in cryptocurrencies will indeed be greater than the returns from mining; in a bull market, the risks of mining are less than those from speculating in cryptocurrencies. In addition, as a derivative industry under the prosperity of the cryptocurrency market, the price of mining machines is closely related to the cryptocurrency market. In a bull market, mining machines are often in short supply, and it is not uncommon for miners to spend several times the price to buy mining machines from "scalpers"; moreover, the "mining boom" in the bull market has led to a surge in the computing power of the entire network, increased mining difficulty, and continuous updates and iterations of high-performance mining machines, and the costs paid by miners will be very high. In a bear market, the enthusiasm for mining has waned, and some manufacturers have to reduce the price of mining machines to recover costs. For example, when Bitcoin plummeted in March this year, a certain model of mining machine sold in Huaqiangbei was reduced by 5,000 yuan, and the price dropped from about 19,000 yuan per unit to 14,000 yuan. Although this is the theory, Xiao An believes that in today's bear market, every investment decision should be made carefully! After all, the consensus in the bear market is: survive.

When it comes to mining, we have to mention POW, POS, and DPOS, which are "difficult to pronounce and look dizzying". These are the three consensus mechanisms of the traditional mining model:

At present, compared with the above three mining modes, "transaction mining" is more popular, and it is also a mining mode that the currency circle is more optimistic about. "Transaction mining" was "promoted" by the cryptocurrency exchange FCoin. In layman's terms, in the "transaction mining" mode, as long as the transaction generates a handling fee, the corresponding number of platform coins can be mined. The disadvantage of this method is that miners have no intention of locking positions, and the mined platform coins will be directly sold on the secondary market, which will suppress the price of the currency. At the beginning of this month, the platform coin CAC of Coinall, the first open exchange incubated by OKEx, was officially listed for trading. While adopting the "transaction mining" model, CAC introduced the concept of "locked mining" to reduce the strength of miners' selling after digging out CAC. In addition, Xiao An also sorted out several "non-mainstream" mining modes:

Mining by riding a bike: In April this year, an activity advertisement "Ride now and get GSE tokens!" appeared on the interface of the Singapore version of the ofo bike app. The longer the riding mileage and time, the more tokens the user will "mine" in the system.

Sharing mining: This is mainly the method adopted by content platforms, where rewards are obtained by sharing information. This method is adopted by Bikuaibao.

Task mining: Get rewards by completing tasks given by the platform, for example, get "black diamond" rewards by completing tasks in NetEase's "NetEase Planet".

Sports mining: Some smart wearable products issue rewards based on the amount and frequency of exercise.

Shit Mining: Shit coins will be awarded to those who poop in designated toilets. This is launched by Blockchain Toilet Shet Plus. Other similar mining methods include brushing teeth mining and refrigerator mining. It seems a bit dazzling...

However, the current reality is that many smart hardware products are labeled as "blockchain, mining" to take advantage of the hype and catch the wave of popularity, and many of the details are worth discussing. Perhaps we will find more answers in the next bull market!