Bitcoin mining boom: Revenue continues to decline, latecomers pay the bill

Lan is one of the earliest people in China to invest in Bitcoin mining machines. Because he is located in Shenzhen, there are excellent manufacturing resources in the local area, which makes his mining machine production like a duck in water. Lan's mining machine is designed by purchasing chips from Avalaon. With his previous reputation in the IT industry, a large number of mining enthusiasts gather here to buy goods. So far, he has organized 5 pre-orders, and each time they were sold out in a few hours.

In these pre-orders, the shipment volume was about 50 units each time, and the most recent one was as high as 300 units. Based on the average market price of 50,000 yuan per unit, Lan's turnover has reached tens of millions. And his machines will not be shipped until the end of July or early August at the earliest. Just like Asicme's turnover exceeded 10 million less than a month after its establishment, the influx of a large amount of retail hot money has made mining machine manufacturers make a lot of money.

The work Lan needs to do is not complicated. The most important thing is to get the chip from Avalon. Once the chip is in hand, it will be tested and assembled by engineers in about one or two weeks to complete the whole machine testing and then production. The whole process is not high-tech.

It is precisely because of mining machine teams like Lan and Asicme that a large number of retail investors have the opportunity to enter the mining market. In Lan's reservation QQ group, hundreds of Bitcoin enthusiasts are either discussing enthusiastically or watching from the sidelines, waiting for opportunities to speculate, eager to make a fortune with Bitcoin. Some are big players, buying millions at a time, while others just buy one machine to make a little money.

However, what awaits them is a gamble with an unknown outcome.

Neo is one of the crazy ones, but he did not wait for Lan's "futures", but bought the mining machines shipped by Avalon at the beginning of the year from others at a high price. He used to run an Internet cafe. He first heard about Bitcoin in June. In early July, he cleared the Internet cafe and deployed 6 mining machines in it. Neo is a relatively crazy player. The original price of the machine was 9,000 yuan, and Neo bought it at an average price of 100,000 yuan. The investment in the machine alone was as high as 600,000 yuan.

These machines have high computing power and generate a lot of heat. Neo installed a 5-horsepower air conditioner and an industrial fan inside, which run 24 hours a day. Neo was freezing every time he went to check on the mining machine. He installed dual 100M fiber optic dedicated lines for the mining machine, and the cost of electricity and network power alone was nearly 10,000 yuan per month. However, for this adventure, he felt that it was all worth it. These 6 machines can generate about 9 bitcoins a day, which is about 5,000 yuan at the current exchange rate. If this income is maintained, the monthly income can reach 150,000 yuan.

However, although Neo currently has a lot of profits and can quickly recover its investment at the current rate, it has reached a critical point, that is, these machines could have made huge wealth earlier, and after Neo took over, the mining income showed a sharp decline. The main reason is that the whole people are mining, which leads to an increase in the computing power of the entire network, while the number of bitcoins generated per unit time is constant.

Before 2012, the number of bitcoins generated per day was 7,200. In the four years since 2013, the number of bitcoins generated per day has shrunk to 3,600, which further compresses the profit space of mining.

The current computing power of the entire network is about 230T, while before March, the computing power was only 30T, and in May it was 80T. In March, the monthly income of a machine was as high as hundreds of thousands, but now it is less than 30,000, and it is still declining.

Someone did the math for Neo, and found that he earned 150,000 yuan in July, 120,000 yuan in August, less than 100,000 yuan in September, and even less in the latter part. All of the above cannot cover the more than 700,000 yuan that Neo invested. Neo plans to use the bitcoins he has earned so far to buy the latest and most powerful machines to make up for his losses. To some extent, he has been trapped.

The current situation is that many retail investors are not aware of this, and they optimistically use current earnings to calculate the earnings of "futures". Lan's machine will not be shipped until early August, and Asicme's will not be shipped until September. As time goes by, the earnings at that time cannot be calculated at all, because you don't know how much your earnings will drop when you get the machine.

Computing power statistics for the past 60 days

Someone fitted the total network computing power with a quadratic function based on the past 60 days and derived a function of computing power over time. The function shows that the total network computing power will quadruple by the end of this year, which means that the income will be 1/4 of the current level. And a person who produces mining machines told me that it could also be 6 times.

According to this calculation, mining is not a sure-win business, not to mention the risk of Bitcoin exchange rate fluctuations. If the Bitcoin exchange rate continues to rise, then even if the amount of mining is not enough, it can be compensated by the high exchange rate. If the Bitcoin exchange rate falls, the situation will only get worse.

It's like mining gold. If you have a good eye and good luck, you may become a billionaire. But if you blindly follow the crowd, you may never get rich. Bitcoin mining is almost like gambling. If you are not optimistic about the long-term rise of Bitcoin, it is better to enter the market with caution.

(Note: Lan and Neo are pseudonyms in this article.)