Bitcoin money-making chain: Focused on mining and trading

In less than a year, Bitcoin has increased 95 times!

It is entering the public eye with unprecedented impact. For investors who are swept into this world by the magic of Bitcoin's skyrocketing, the greatest significance of Bitcoin is to make money. For those Bitcoin believers who worship Bitcoin "like a flame", this "perfect" Bitcoin will be the replacement of future currencies, and they hope that one day Bitcoin will "unify the world".

Half fire, half ice water.

Last Friday, European financial regulators issued a notice warning that Bitcoin has the risk of "violent price fluctuations". This is the second time in just half a month that regulators have poured cold water on Bitcoin, following the Chinese mainland, South Korea, and Hong Kong. On the 5th of this month, the People's Bank of China and five other ministries and commissions jointly issued a "Notice on Preventing Bitcoin Risks" for Bitcoin. This is seen as the first time that Chinese regulators have jointly "encircled and suppressed" Bitcoin.

Whether Bitcoin can really become an ideal currency or is the next "tulip bubble" that is getting worse and worse is a hot topic among all parties. Guo Tianyong, a professor at the School of Finance of the Central University of Finance and Economics, said that the popularity of Bitcoin reflects the public's low trust in existing sovereign currencies due to excessive issuance.

As Bitcoin believer Luo Jinhai said, in fact, technology itself is neutral and rational, and all the madness is given by humans. Behind the madness of Bitcoin is a technological revolution, an economic issue, and even a social issue.

A 95-fold increase in one year

At 10:50 p.m. on December 14, most factories in Shenzhen's Longgang Industrial Zone stopped working for the day. But 31-year-old fashion designer Wang Zheng was still busy receiving a customer who came all the way from Shanxi.

At this time, his identity was not a fashion designer, but a "mine owner" and a businessman selling mining machines.

Behind him, in this factory building of more than 1,000 square meters in Shenzhen Longgang Industrial Zone, hundreds of mining machines are working day and night with a rumbling sound, in an effort to mine the artifact of wealth that many people are crazy about - Bitcoin.

Public data shows that the price of Bitcoin was only 50 cents in 2011, and then rose to 13 dollars, a 2,600% increase. After entering 2013, Bitcoin has seen an even crazier rise, with an increase of more than 95 times this year. In particular, in mid-November, Bitcoin rose by $100 almost every day, and on November 29th, it hit a new high of $1,242, while the price of gold at that time was only $1,241.98 per ounce.

Bitcoin has attracted worldwide attention with its astonishing growth, and in China, various Bitcoin wealth creation myths have stirred the nerves of many investors. Bitcoin has completed the upgrade from "a small circle of IT geeks" to "known and hotly discussed by the general public."

So what is Bitcoin that attracts so many people?

Bitcoin is a type of virtual currency. In January 2008, a person named Satoshi Nakamoto published an article in a mailing group on the Internet discussing information encryption, outlining the basic framework of the Bitcoin system. The following year, he established an open source project for the system, officially announcing the birth of Bitcoin.

"The biggest feature is that it does not rely on a specific monetary institution to issue it, but is generated through a large number of calculations using a specific algorithm, using a distributed database composed of numerous nodes in the entire P2P network to confirm and record all transaction behaviors." Xu Dong, a Bitcoin research expert at Alibaba Small and Micro Finance Research Institute, told Nandu reporters that its uniqueness lies in the fact that it does not require a central clearing center or financial institution to clear transactions.

In addition to the characteristic of "decentralization", Bitcoin also has the following characteristics:

Circulating all over the world, no matter where you are, you can mine, buy, sell or collect; exclusive ownership, a private key is required to control Bitcoin, and it can be isolated and stored in any storage medium; relatively low transaction fees; cross-platform mining, users can explore the computing power of different hardware on many platforms...

In addition, the issuance of Bitcoin is subject to software algorithms and has a certain limit, rather than unlimited issuance. By around 2140, the number of Bitcoins produced will reach its upper limit of 21 million. This "limit" undoubtedly adds to the mystery of Bitcoin.

Bitcoin believers vs. speculators

Bitcoin's generation mechanism based on cryptography and Internet technology has fascinated IT geeks. Almost all of the first batch of Bitcoin supporters came from IT geeks, and Luo Jinhai is such a believer.

Luo Jinhai, a science and engineering man, works as a new media IT person and is also a science fiction writer. He calls himself a hardcore believer in the value of Bitcoin and likes to position himself as a Bitcoin evangelist.

After 2011, Luo Jinhai devoted most of his spare time and energy to Bitcoin. He also built a Bitcoin news portal that focuses on searching for Bitcoin news and sharing it with more people.

"Bitcoin is a combination of mathematics, cryptography, and programming. Its P2P and decentralized spirit is in line with my own value system." Luo Jinhai added: "I will not sell my Bitcoin even if it drops to one dollar."

When the Nandu reporter asked, "Bitcoin believers' admiration for Satoshi Nakamoto is like Apple fans' admiration for Steve Jobs?" He smiled and said, "Steve Jobs is a real entity. But Bitcoin believers' love for Satoshi Nakamoto is a belief in themselves, a belief in the free nature of their own bones."

However, what surprised the Nandu reporter was that he only had about 10 bitcoins. He said: "I don't own many bitcoins, 10 is enough. I actually hate the talk of holding tens of thousands of bitcoins. The key to being a Bitcoin believer is to identify with the Bitcoin spirit."

In his eyes, Bitcoin believers have at least the following characteristics: "1. Believe in the power of logic. 2. Prefer Google and do not approve of Facebook. 3. Have a desire for new knowledge. 4. Be more rational than emotional. 5. Tend to be perfectionists. 6. Be paranoid and have a clear personal worldview. 7. Like to argue and do not like to argue."

In the Bitcoin world, there is another group of investors who are different from Luo Jinhai. In terms of the number of people and the amount of investment, these investors are the main force in the current domestic Bitcoin world.

The reason they pay attention to Bitcoin is very simple—Bitcoin can make money, and most of them don’t even fully understand the principles of Bitcoin.

Financial writer Duan Hongbin first learned about Bitcoin from some geeks in 2010, but the tens of cents of Bitcoin at the time did not attract his attention. In the summer of 2011, Bitcoin had risen to tens of dollars, and Duan Hongbin even felt a little regretful, thinking that he had missed the best opportunity for Bitcoin. However, the subsequent increase in Bitcoin's value surprised Duan Hongbin.

In 2012, Duan Hongbin initiated the establishment of a private Bitcoin hedge fund among his friends. He told a reporter from Nandu, "This is the first fund in the country to invest in Bitcoin."

However, when he told his friends about his plan, they all thought it was incredible. "Some people directly said that I was stupid for believing in this." In the end, Duan Hongbin's fund only raised 100,000 yuan from four or five friends, many of whom were "friendship subscriptions."

At the beginning of the position building, Bitcoin suddenly dropped from 30 US dollars to 20 US dollars. The fund had a bad start and was trapped all of a sudden, with a floating loss of 10%. Then it continued to fall. Duan Hongbin bought the bottom, but he did not expect that Bitcoin would fall to 2 US dollars mercilessly, a drop of 93%. Duan Hongbin, who had no confidence, could only take a look and no look attitude. But just as he did not expect the big drop, he also did not expect the subsequent big rise. This year, Bitcoin ushered in two rounds of big rises, and the 100,000 yuan of Bitcoin he bought in the beginning was eventually exchanged for more than 11 million yuan of assets. This is something that people who invested in him out of favors could not imagine.

Duan Hongbin is not an isolated case. The roller coaster-like trading price also attracted Yang Yang to join. Unlike Luo Jinhai, although she also spreads information about Bitcoin, Yang Yang defines herself as a "Bitcoin investor." In her eyes, Bitcoin is just one of the investment methods.

Yangyang doesn't watch the market, doesn't speculate on coins, and never does short-term transactions. Currently, Yangyang has about a few hundred bitcoins. She is relatively relaxed about the future trend. She said: "It is a risky investment. If you can afford to play, you can afford to lose."

In the Bitcoin world, Bitcoin believers and investors have different understandings of Bitcoin, and there is a barrier between them, like "day does not understand the darkness of night". Hardcore "Bitcoin believers" represented by Luo Jinhai never seem to want to be called "Bitcoin investors". In their eyes, many investors are just part of the industrial chain, but unfortunately, these investors do not have the spirit of Bitcoin at all.

Chinese aunties and Wenzhou guests are coming?

Wherever there is money to be made, Chinese aunties and Wenzhou people will appear. Since November, when Bitcoin has risen sharply again, news about "Chinese aunties" and "Wenzhou people speculating in Bitcoin" has appeared in the newspapers. In the media reports, they have also joined this Bitcoin arena.