Communication gap between China and world responsible for SegWit/block size situation
Editor’s note on 9th January 2017 : The “communication gap” mentioned by Virgilio in our interview has been sadly displayed in the case where PBOC’s inquiry of China’s major exchange has been misconstrued by some western media as a “ban” on Bitcoin. For this issue, 8btc’s international site has been the first to interpret the signal of PBOC as English media in the world, eliminating the “communication gap” between Chinese and Western communities
In this interview with Virgilio Lizardo Jr. , the Vice President of International Affairs at Bitbank Group, talks about Bitcoin mining in China and how some of its issues are relevant to the outside world.
A believer in cryptocurrency since 2013, he completed the Introduction to Digital Currency course at the University of Nicosia and certified as a Bitcoin professional by the Crypto Currency Certification Consortium.
Virgilio is a Dominican born in Panama and grew up in the U.S. But he has been in China for nine years. Moreover, the company he works in, Bitbank Group, covers various aspects of Bitcoin Ecosystem including exchange, mining, digital wallet and financial services. BW.com, one of biggest mining pool in the world, is also the subsidiary of Bitbank group. With his experience in China and Bitcoin circle, Virgilio is just the right person to talk about Bitcoin mining in China.
8btc – How would you describe the state of Bitcoin mining in China today?
The state of bitcoin mining in China is currently a fierce competitive landscape. There are various players from around the world scouring China for the lowest electricity and most efficient hardware. There’s also a huge community of entrepreneurs who are tech savvy and live near the massive power facilities that are perfect for mining. You often see companies here doing road shows highlighting their hardware or software. It is a very exciting, fast-paced and cutting edge industry to be a part of.
8btc – When compared to other parts of the world – with new mining operations being recorded in India and the US as well as some others scattered across the globe – do you see a real threat to Chinese dominance in Bitcoin mining in the coming years?
Though I am very happy to hear about developments in other places, I don’t think they will be serious competitors to China anytime soon. China is a perfect storm of over capacity of cheap electricity and cheap hardware at the right time in the development of Bitcoin. This, with a combination of labor costs, infrastructure and experience will be a tough task for another region to beat.
8btc – Do you think anything is likely to change soon in the Bitcoin mining trend in coming years?
Because Bitcoin mining technology is evolving so quickly, I think the next step in the evolution of mining will be coming in the next few years. I usually call this the “mining farm” era of Bitcoin. We started with laptop mining, then GPU mining, then facilities full of ASIC miners. In my opinion, the future will be smaller and more varied devices that will be able to process Bitcoin transactions. How that will come to be is yet to be seen.
8btc – Do you think the block reward halving have had any significant impact on the Bitcoin ecosystem as a whole?
People always ask, “How will the miners make money if the reward is halved?” Jaja. One of the great aspects of Bitcoin is its predictability in its core functions. Everyone in the ecosystem knows that every four years the supply will halve. Therefore, everyone who was prudent planned accordingly. A difficult era for Bitcoin was 2014 to early 2015 when the price was in a bear market. In China, it was called the “Bitcoin Winter”. In this time, there were many businesses and people that disappeared. If you are still here after that time, you are a true believer and you had a strong business model from the outset
8btc – Lately, there have been interesting developments related to Blockchain introduction into several areas of China’s economy. What can you say about these developments as they relate to China where it is known that the largest concentration of Bitcoin-related activities could found?
Awareness of Bitcoin and Blockchain technology has increased greatly this year. From the PBOC announcement in February, CCTV’s positive piece in May, large and small conferences almost every other week, development of educational initiatives across the country, and more interest from the national and local governments.
China is definitely a global hotspot in terms of activity. I hope to see some tangible products, technologies, initiatives and regulations develop from all this attention.
8btc – Are you in a position to comment on the SegWit/block size expansion? If yes, what would you like to share as a view about the topic from a mining industry perspective?
We recently had visits from the Bitcoin Unlimited and the Blockstream/Bitcoin Core teams to China where they held public events discussing their proposals. I’d like to see more of that kind of outreach. I believe one of the main issues why we’re in the current situation is that there exists a wide communication gap between China and the rest of the world. This is not limited to Bitcoin. But since China is such an important player in the industry, this is exasperated our industry. That’s why I was very happy to see the introduction of 8btc’s English site. It will really help a lot in bridging that gap.
Another aspect is that most of the technical materials of Bitcoin are produced in English therefore the community here needs time to translate it and analyze it. The amount of people that are able to do that is very limited at this time. I believe that the community here are still reviewing the technical aspects of the proposals and discussing how to move forward. We have people with varied opinions in China just like the rest of the world but here the conversations are still mostly conducted together on the most popular forum 8btc.
8btc – Is the current Bitcoin mining operation landscape as you had thought it would be? Or you think something should have turned out differently – price, confirmation time, adoption level etc? If yes, what and why?
I once heard somewhere that if the mining industry is the hottest news in Bitcoin then that means there’s trouble jaja. So that’s what has surprised me the most of the current environment: the fact that the blocksize debate has gotten to the point where everyone is analyzing each action and announcement of the miners with a microscope.
Another interesting aspect has been being able to see development of the mining industry in terms of miner manufacturing. In the last two years, many manufacturers have disappeared and there are many tales of heartbreak and loss. The process of producing these machines is extremely complex in terms of chip design, supply chain management, negotiation, and the extreme time pressure involved to get the miner done. It’s no small feat what the players who are still in the game have accomplished.
8btc – Personally, what do you see that most of us haven’t seen – or have not been paying close attention to?
I’ve lived in China for nine years and I learned about Bitcoin here four years ago. My passion for Bitcoin has grown through the lens of China and I’ve been fortunate to be able to experience Bitcoin from this unique perspective. What I’ve been able to see is the huge disconnect between the impression people have of Bitcoin in China with the reality of the situation and how quickly a false narrative about China can spread. For example the various narratives that pop up every so often like the ever popular “China bans Bitcoin, China unbans Bitcoin” or the “Capital flights from China fuels price rise” narrative or the impression of the “Chinese miners” as monolithic entities that will usurp Bitcoin.
There are several reasons that contribute to this disconnect including the Great Firewall, language, culture, distance, history, among others. They have created an environment where there are very few people who are able to bridge the communication gap. So my advice for Bitcoiners who are interested in knowing what’s really going on here is to do your homework on sources. Get on 8btc, get on WeChat and talk to people here. Where there are great challenges there are also great opportunities. It’s definitely not easy but you will gain an insight that will give you a deeper understanding of not only Bitcoin in China but of Bitcoin itself.