It's not easy to make money from Bitcoin. 5,800 "mining machines" cost 6,720 yuan a day in electricity bills

As the "leader" in the current virtual currency, Bitcoin is well-known. However, in the production of Bitcoin, how does the Bitcoin "mine" operate and how profitable is it? It is still difficult for the outside world to know more.

Bitcoin "miners" perform hash collisions 24 hours a day in order to compete for the right to record the blockchain. Whoever records the latest bitcoin will be rewarded. This is the original design of "Father of Bitcoin" Satoshi Nakamoto.

In simple terms, the Bitcoin industry chain has been developed to the present, and is currently divided into the output link (Bitcoin "mines" and mining pools), the transaction link (exchanges), the storage and circulation link (Bitcoin wallets) and the final use link (various applications). Generally speaking, the coins mined by the "mines" will be stored first, and then sold in the market when the opportunity arises. This is also the most fundamental profit model of the "mines".

Recently, a reporter from the "Daily Economic News" went to the scene to learn about the operating status of the Tianjia Network Bitcoin "mine" in Mabian County, Leshan City, Sichuan Province, calculated the "economic account" of the "mine", and also took a glimpse into the operation of the industry's "mine".

Electricity costs account for 60% to 70% of operating costs. Tianjia Network's Bajiaoxi Hydropower Station "mine" is the largest Bitcoin "mine" in Leshan City. There are more than 5,800 Bitcoin mining machines in four computer rooms, with a computing power of more than 40 petahashes, which can "mine" nearly 27 Bitcoins every day. According to the current market price of Bitcoin, the "mine" has a daily output value of nearly 200,000 yuan.

However, behind the 200,000 yuan, the "mine" also has a lot of cost expenditures. The biggest monthly expense of operating a Bitcoin "mine" is electricity bills, which account for about 60% to 70% of the operating costs. In comparison, labor costs, broadband fees, site fees, etc. are relatively small. For example, the operation of mining machines requires high-speed networks. The Bajiaoxi "mine" is connected to three broadband dedicated lines, and the annual fee is only more than 50,000 yuan.

At present, the Bajiaoxi "mine" consumes 7,000 kWh of electricity per hour and 168,000 kWh of electricity in 24 hours. The "mine" staff did not disclose the specific agreed electricity price to the reporter of "Daily Economic News". However, if calculated based on the industry average price of 0.4 yuan per kWh, the electricity cost of the "mine" is 6,720 yuan a day, and the annual electricity cost is nearly 2.45 million yuan.

Of course, the initial cost of building the machine room, arranging the cooling system, and purchasing mining machines was not cheap. According to Lei Ke, the operation team leader of the Bajiaoxi "mine", the company invested more than 5 million yuan in the early stage just to build the Bajiaoxi "mine" plant. The price of mining machines is even more expensive, with an average price of nearly 10,000 yuan for a mining machine. The entire "mine" has more than 5,800 mining machines, and the total investment exceeds 60 million yuan.

"Such a large investment cannot be borne entirely by the owner of the mine. In fact, some of the mining machines are not ours. The industry adopts a 'hostage' model. For example, you buy a few mining machines and put them with me. We charge a certain service fee, which reduces costs and hedges risks." Lei Ke told reporters.

At present, how is the profitability of the entire "mine"? According to the staff, the Bajiaoxi "mine" can generate 3 cents of profit for every kilowatt-hour of electricity used. According to the reporter's calculation, the "mine" uses 168,000 kilowatt-hours of electricity a day, generating a profit of 5,040 yuan a day, and the annual profit of the "mine" is expected to reach 1.84 million yuan.

The price of bitcoin is a barometer of the profitability of a mining farm. According to theoretical calculations, a medium-sized bitcoin mining farm like Bajiaoxi can generate nearly 2 million yuan in annual revenue. However, the return on investment of a mining farm also needs to take into account factors such as the fluctuation of bitcoin prices, the periodic halving of bitcoin production, and changes in the difficulty of mining.

If the mined Bitcoins want to be converted into cash, they must eventually be invested in the market. Therefore, the price of the currency directly determines the income of the "mining farm" and is the "barometer" of the profitability of the "mining farm".

However, each "mine" has its own trading style. Due to the fluctuation of the currency price, each "mine" chooses different timings to cash out, and the benefits obtained are also different. Lei Ke told the reporter of the "Daily Economic News" that in addition to paying off the necessary electricity expenses every month, the remaining bitcoins of Tianjia Network's "mines" are generally kept, "the company's strategy is long-term investment."

The price of bitcoin is also the most authentic industry prosperity index. In 2013, when bitcoin was at its peak, the price of each bitcoin reached as high as 8,000 yuan. Lei Ke recalled, "At that time, although the price of electricity was as high as 70 or 80 cents per kilowatt-hour, the "mine" could survive. And the high price of bitcoins also led to the price of mining machines." However, in early 2015, when the industry was at its lowest point, the price of each bitcoin fell to more than 900 yuan. "Many "mine" companies closed down overnight, and the market was extremely bleak."

Another factor that affects the revenue of mining farms is the decreasing bookkeeping rewards. According to Satoshi Nakamoto's algorithm, the output of Bitcoin will be halved every four years. Correspondingly, the coins mined by mining farms will be greatly reduced. The most recent halving occurred in July 2016, and the next halving will occur around 2020. However, since the halving time can be predicted, mining farms will make corresponding preparations in advance.

In the early days of Bitcoin, Bitcoin was very easy to "mine". It could be done with an ordinary computer CPU. You only needed to download the software to automatically "solve the problem". Since the number of blocks produced each day was fixed, as the price of the currency rose, more and more people "solved the problem", and the difficulty of mining coins would increase. Correspondingly, the more the global computing power increased, the more difficult it would be to mine coins. However, the price of a single coin mined is also likely to rise.

"The income of the mining farm is affected by many factors, and it is generally a dynamic balance process. If the current market situation remains unchanged, it may take eight or nine months to get back the investment in a Bitcoin mining machine." Lei Ke analyzed to the reporter. However, compared with traditional industries, a business that can get back the investment in nearly a year is rare.

In the entire Bitcoin industry chain, Lei Ke believes that "miners" are actually at the bottom of the entire industry chain. "Just like gold panning, gold diggers work very hard, but it is definitely not the gold diggers who can make big money. In our industry, the same is true. The ones who really make money are the mining machine manufacturers and trading platforms."

"The living environment of the miners is not good, and most of the work they do is dirty and tiring. Many times, we help others manage mining machines and provide services. The miners earn their money through hard work." Lei Ke said with a smile.

About Bitcoin?

In essence, Bitcoin is a digital currency generated through a large number of calculations through a specific program.

It is understood that in 2008, a person with the online name "Satoshi Nakamoto" proposed the concept of "Bitcoin". In 2009, the world's first Bitcoin algorithm software appeared. As long as a computer connected to the Internet runs the software and completes the calculation task, it can obtain a certain number of Bitcoins. However, the software will automatically control the difficulty of the task to ensure the speed of Bitcoin generation. The more Bitcoins there are, the more difficult it is to obtain new Bitcoins. It is estimated that by 2140, the total amount of Bitcoin will reach the upper limit - 21 million.

At the beginning of this year, the price of Bitcoin, which had been in existence for 8 years, reached a new high, reaching 8,895 yuan on January 5. As the central bank entered the three major domestic trading platforms for "talks", Bitcoin's flash crash began immediately. Data on January 10 showed that the price of the currency once fell to 6,347 yuan. On January 11, it once fell to around 5,400 yuan.

After the Spring Festival, the price of Bitcoin rebounded. As of 9:05 on February 21, the price of Bitcoin rose to 7,231 yuan.