Bitcoin miners this year: mining is a 10-minute hunger games

In September last year, the central bank and seven other departments issued a document to stop all types of token issuance and financing. Since then, several major domestic Bitcoin exchanges have successively closed on-site transactions. Recently, financial management departments in many places have taken active actions and adopted comprehensive measures such as electricity prices, land, taxation and environmental protection to guide virtual currency "mining" companies to exit in an orderly manner. This article vividly records the Bitcoin production process from the perspective of a Bitcoin miner, showing the deformed side of the mining industry and investment risks.

On both sides of the 150-meter-long warehouse, there are more than 20,000 rumbling machines densely packed together.

The lights are dim, with only the LED lights flashing green. Amid the noise, there are also the sounds of blowers and air conditioners, which ensure that the warehouse does not turn into a sauna. However, the hot and irritable atmosphere is lingering. This is my working environment. I am a Bitcoin miner. My job is to inspect the machines in the warehouse every day and test each machine with my laptop. If a problem is found, follow the steps in the operating manual - "restart - reconnect the circuit board - remove the machine and hand it over to the technical department."

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There is a slogan on the wall of the mine: "Time is money."

In early 2017, when I first walked into this "mine" in Ordos, Inner Mongolia, which was actually a work place in a warehouse computer room, I was frightened by the huge roar and took three steps back. At first, I didn't know why this place was called a mine.

During a break, I saw my colleagues gathered in a circle, talking to a screen in a mysterious manner. I leaned over to take a look and saw a zigzag line graph with a few English letters on the top - Bitcoin.

A colleague told me that these letters are translated into Chinese as "Bitcoin", and this computer room is used to "mine" Bitcoin, so it is figuratively called a mining farm. But why is the word "mine" used for a virtual thing? I still can't figure it out.

My colleague couldn't explain it clearly, so he asked me to ask the team leader. The team leader, who wore black-framed glasses and looked like a tech geek, must have explained it to many people. He patiently told me the principle behind it: "In fact, compared to mining, obtaining Bitcoin is more like the gold rush that both the United States and Australia have experienced."

"Mining gives people the feeling that you get what you pay for, but it is different from panning for gold in a river. In addition to pure physical labor, it also requires enough patience and good luck. Mining Bitcoin is just like that. To be more precise, our mining is like participating in a 'Hunger Games' held every 10 minutes. Miners from all over the world will participate, and the prize of the game is Bitcoin."

The team leader explained that the reason why you see the current scale of the mine is so large is because the difficulty of getting the prize is increasing day by day.

There are many reasons behind this, such as more and more miners participating. There are now more than 100 mining farms like ours in China alone, and most of the newly built mining farms are in uninhabited places such as Iceland and Russia. But at the same time, the prizes for a single game are getting smaller and smaller. This is a mandatory requirement set by "Satoshi Nakamoto" when he created Bitcoin. Before 2012, each game could generate 50 rewards. After that, it will be halved every 4 years, that is to say, now, each game will only generate 12.5 rewards. Moreover, this game has a clear end time, and it will end completely when the number of bitcoins reaches 21 million. It is estimated that it should be around 2050.

The team leader told me that this is not all. The difficulty of each game is increasing. Why? Because this game is essentially about guessing numbers. In order to control the issuance speed, the correct answer is becoming more and more complicated. Miners may not be able to guess the right number even after 10 guesses in the past, but now they may not be able to guess it even after 1,000 guesses.

“So we have to put 'Time is Money' on the wall of our mine, because time really is money here - the sooner you try, the more likely you are to get new Bitcoins.” At this point, the team leader suddenly stopped and looked at me.

I was still trying to digest what he had just said, when it suddenly occurred to me that he was complaining that I was wasting my work time.

When I got back to work, I realized that there was actually one most important question that I hadn’t asked: What if we got the Bitcoin prize? Why did we participate in such a game?

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I found the answer to this question myself not long after, because a colleague taught me how to read the Bitcoin price chart. At the beginning of 2017, one Bitcoin was worth about $1,000, or more than 6,000 RMB. Obviously, there was no reason not to participate in a game that gave out huge bonuses every 10 minutes.

And I soon learned the trick to the game - there is no trick.

The so-called mining algorithm, which is a method of guessing numbers, is actually fixed and simple, and there is no room for improvement.

So there is only one way to win the game, which is to find hardware that can execute the algorithm the most times per unit time. In addition, 1+1=2, whoever has the most such hardware is most likely to win the game.

I also learned from my colleagues that the entire history of Bitcoin mining is actually the history of the iteration of mining hardware. In the beginning, everyone used the CPU of ordinary computers to mine. It was a beautiful era when anyone could mine.

By 2010, someone discovered that the GPU chips produced by AMD had a specific computing component that could speed up the key steps of guessing numbers, so "GPU mining machines" assembled from multiple GPUs quickly replaced ordinary computer mining machines - this is also why graphics cards are different from other computer hardware in recent years, their prices have often risen instead of falling, and they are often out of stock.

Then at the end of 2011, FPGA (field programmable gate array) mining machines came out, because they eliminated unnecessary graphics computing hardware units in GPUs, so the efficiency was greatly improved. It was at that time that the first mining farm, Eligius, appeared. However, the mining farms were still in their infancy, and miners still mainly referred to personal computers that were quietly mining around the world.

The mining machine I maintain every day is the fourth generation, which is an ASIC chip machine (an integrated circuit designed for a specific purpose). Compared with FPGA, ASIC chips sacrifice flexibility and are made for guessing numbers and mining, so the efficiency has once again made a qualitative leap.

If we make a simple comparison, the mining speed of the CPU is 1, then the GPU is about 10; although the speed of the FPGA mining machine is only 8, the power consumption is 40 times less than that of the GPU; and the mining speed of the ASIC is 2000, and the power consumption is comparable to that of the GPU.

It is easy to understand why the ASIC chip quickly drove the other three types of mining machines out of the market as soon as it came out. In addition, at this stage, mining farms have become the main force of mining. Because a mainstream ASIC chip mining machine, such as Antminer S9, sells for more than 10,000 yuan. At this time, if you want to mine Bitcoin, you need at least hundreds of S9s running day and night.

The top three mining farms quickly became an arena for Chinese players. The strong supply chain and manufacturing capabilities that China has accumulated in the IT field in recent years have been fully utilized at this time.

Take Bitmain as an example. Because it designed the ASIC chip for Bitcoin mining, the company quickly became the leader in the world's mining machine industry. In the past two years, the sales volume of its mining machines has exceeded hundreds of thousands, and each mining machine uses hundreds of ASIC chips. For example, an Antminer S9 uses 189 ASIC chips. It is said that in the first half of 2017, the company's net profit exceeded 1 billion yuan. So in the second half of 2017 when Bitcoin soared, the profit level should be even more amazing.

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Time flies, and I have been working in this mine for half a year. Just when I was celebrating the passing of winter and the coming of spring, and no longer having to shiver in the cold nights in the north, the team leader informed us that the mine was moving.

The old employees around us were very calm about this, and they turned around and started packing their luggage, leaving us newcomers confused and not knowing what was going on. Later we learned that it was a common practice in the mine to migrate like migratory birds, staying in Xinjiang and Inner Mongolia in the winter and going to Sichuan in the summer. But moving tens of thousands of machines is not an easy task, so why is this?

It wasn’t until I saw the new mine in Sichuan that I suddenly realized what was going on. The new workplace was next to a hydroelectric power station, with the river flowing outside the window.

For a mining farm, profit = produced bitcoins × coin price - mining machine cost - electricity cost - maintenance cost and labor cost - mining farm depreciation cost.

What I never expected was that the biggest expense of mining was not the mining machines, which I thought were expensive, nor the cheap labor like us, but the electricity bill. In fact, as early as when I was in Ordos, I felt that the entire mining farm was like a black hole for electricity consumption.

The team leader once mentioned in a casual chat that our mine consumes 40 megawatt-hours of electricity per hour, which is equivalent to the electricity consumption of 12,000 households. Although the local government has given many preferential policies, we still have to pay hundreds of millions of yuan in electricity bills every year. And this is a place with excess electricity. Is there any place with cheaper electricity than there?

Yes, that is Sichuan during the flood season in summer.

When driving along National Highway 301 to Kangding, Sichuan, there are dozens of hydropower stations of all sizes along the way. The surging river water brings a steady stream of electricity to the hydropower stations, but in the summer, this electricity has no time to be transmitted. However, when Bitcoin mines have sprung up like mushrooms after rain, the situation of idle electricity no longer exists.

The new site of our mine is a row of neat blue plastic steel greenhouses, built against the mountain, with thousands of mining machines in each greenhouse. The power generation of the hydropower station supports the operation of the mining machines 24 hours a day, 7 days a week. The wealthy mine owners often rent out the entire hydropower station to ensure the power supply of their own mining machines.

Although the temperature in the mountains is only over 20 degrees Celsius in summer, a wave of heat still hits you whenever you open the door of the greenhouse - the heat energy generated by thousands of mining machines running 24 hours a day is much greater than that of ordinary computer rooms. Almost every day I find that the circuit boards of several mining machines have been burned with yellow spots and cannot be repaired but can only be replaced.

But the team leader told us that it was still worth it. Because the marginal cost of electricity from a hydropower station during the flood season is close to zero, the mine directly buys the electricity from a power station through a contract, which only costs 4 to 5 million yuan a month, which is much cheaper than in Ordos.

What about the dry season? I asked curiously.

The team leader sighed, because the power output of hydropower stations in these two seasons can differ by 5 to 10 times, so the electricity price will rise several times in the dry season. This is also why in late summer and early autumn, miners will migrate to Xinjiang and Inner Mongolia despite the severe cold.

Four

My career as a miner came to an abrupt end earlier this year.

At the end of last year, the mine owners decided to relocate to Xinjiang. Unexpectedly, on January 4, just after the New Year, the Xinjiang Internet Finance Office issued a document requiring local government departments to investigate the local Bitcoin mines.

Although it did not say that it would be outright banned, the local government still took the precaution of canceling the electricity price discount that was previously given to us on the grounds of attracting investment - the standard price of the State Grid is around 0.4 yuan per kilowatt-hour, while the preferential price previously given to the mine was between 0.2 yuan and 0.3 yuan.

The nearly doubled electricity price caused a sharp drop in the profits of the mining farm, and the price of Bitcoin also ended its unilateral upward trend. Although our Litecoin mining machine is still making money, the boss decided to stop while he is ahead and end this business with increasing policy risks.

As for my colleagues, most of them made some money by buying and selling various digital currencies, and now they scattered - some went to other mines, and some simply devoted themselves to the cryptocurrency circle as professional investors.

I didn’t get rich from this because I entered the industry too late and bought coins even later. But long-term work in the mines gave me tinnitus. The doctor said that if you work in such an environment for another two years, your hearing will be permanently damaged. But this is not the key reason for me to leave the mines. In fact, I realized that working here is not even a miner.

I don’t understand hash values, Merkle roots, and I only have a vague concept of blockchain and digital signatures. The only connection between me and Bitcoin, which is known as the “gold of the Internet age”, is the endless maintenance of the mining machine.

The world of "decentralization", "equality for all" and "computing power democracy" envisioned by Satoshi Nakamoto has not arrived. The gap between me, who is standing outside the mining machine, and those who control the computing power is only getting bigger and bigger. I am going to apply for the postgraduate entrance examination next year and go back to campus to learn knowledge. I want to be a real geek, not a miner who only knows how to wipe dust.