Bitcoin mining: a game about electricity

Bitcoin mining was originally something that only existed in a small circle of IT (information technology industry), but due to the surge in the value of digital currency in 2017, people who understood technology and those who didn’t all jumped into “mining”.

Xiao Cai, who started working at Huaqiangbei SEG Plaza at the end of last year, couldn’t believe his eyes when he first arrived: he originally thought that only very few people had played with digital currencies, but he found that many of the densely packed shops in Huaqiangbei were selling mining machines...

"I started to get in touch with Bitcoin two years ago, and as I was playing around, I wanted to try mining myself." Xiao Cai, who is only 20 years old, talks about Bitcoin very knowledgeably. "I used to work in a factory in Dongguan, but I still wanted to get deeper into this industry, so I 'moved' to Huaqiangbei." Xiao Cai also mentioned mining pools and mining farms, saying that he had only been exposed to mining pools.

Nowadays, miners can not only work alone, but also gather in mining pools through online platforms to mine coins. If a mining farm is a collection of Bitcoin mining hardware equipment, then a mining pool is a collection of miners' computing power. Specifically, a mining pool is an open, fully automatic mining platform. Miners connect their mining machines to the mining pool, contribute their computing power to jointly mine, and share the benefits. In the process of digital currency mining, as more and more miners enter the market, the total computing power of mining is getting higher and higher, and the output of individual miners is becoming more and more unstable. In order to obtain more stable mining income, miners began to unite and compete with other miners, so the concept of Bitcoin mining pools gradually emerged. At present, the official website of Ant Mining Pool shows that the number of effective miners is close to 40,000. Securities Times reporters also joined a QQ group of Ant Mining Pool and found that hundreds of messages can be refreshed in the group in an hour, and the atmosphere is quite active.

"If you put the mining machine at home, not only will you not mine anything, but you will definitely be complained by your neighbors," Xiao Cai said with a smile. At the counter where he works, a mining machine is in operation, and the rumbling sound is indeed very harsh. At this time, a customer asked him about the hosting of the mining machine, and he quickly typed out a set of numbers on the calculator - this is already an unwritten rule of the industry, "In fact, this is the electricity bill that a mining machine has to pay to the mine in a month." Xiao Cai said.

After all, the key point of digital currency mining is electricity. Because digital currencies such as Bitcoin need to give full play to the computing power of computers, which consumes a lot of electricity.

Now, the biggest difference between large mining companies and small miners is the difference in cost, and the same is true in overseas markets. Small miners need to buy mining hardware equipment from other manufacturers, but large miners can order parts in bulk and even get big discounts on electricity bills. Blockchain infrastructure supplier BitFury revealed that the company not only has enough cash to pay deposits and build mining farms, but also has the ability to connect to power plants to reduce electricity costs. Morgan Stanley stock analyst Nicholas Ashworth predicts that the electricity demand for Bitcoin mining in 2018 will be equal to the total demand of the electric vehicle industry in 2025. Depending on the mining environment in the United States and China (electricity costs, hardware expenses, etc.), the cost of generating a Bitcoin ranges from about US$3,000 to US$7,000.

Bitcoin mining is a game of power transfer, but the growth rate of power consumption is obviously unsustainable. As the price of Bitcoin falls from its highs, and people's attention to energy security issues after power consumption exceeds a certain threshold, the number of mining pools and computing power will be restricted in turn, and eventually a relative balance will be reached, and no unlimited linear growth will continue.

"I believe in this industry, but I never thought that digital currency would be my lifelong career." When talking about this, Xiao Cai also seemed a little conflicted.