A Leaving Mining Pool: Too Tired To Carry On in China
In China where bitcoin mining has been steadily warmed, some are leaving…
“I quit, it’s too tiring to carry on”
Zhang Shuai (pseudonym), running a mining pool company, say to thepaper, describing his startup experience as “a mess”.
“Many small-sized mining farms have moved to Canada, Russia and Iceland, and some have been shut down by the local government for electricity theft.”
The mining pool operator eventually ended his business at 16:06 on December 7, 2017.
Crypto-mining help achieve financial freedom
Mining is the upstream industry of bitcoin. Each time a mathematical problem is solved, bitcoin is created. The number of bitcoins generated per block starts at 50 and is halved about every four years. The total number of Bitcoins is designed to be 21 million mined up in 2040. As of Jan 2018, 80% has been mined. In this context, the mining industry should be ended after 22 years, while the appearance of some other cryptocoins such as Litecoin and Bitcoin Cash makes it possible to continue.
- In 2011, Zhang was a salesman in a Shanghai-based server hosting business. His then supervisor brought him to the mining world. At that time, graphics card was mainly used for mining.
- In 2012, Ng Zhang, a doctoral candidate in computer science from Beijing University of Aeronautics and Astronautics, now a bitcoin whale, began to make money by selling mining hardware. His Avalon product could outperform several hundred computers. There came the era of mining with mining machines.
- Since 2013, with the rocketing of bitcoin price, Zhang sold bitcoin constantly to buy more mining machines in and later sold them all to a larger bitcoin company.
- In 2016, Zhang restarted to engage in mining pool.
Zhang is no doubt the lucky one. Many used computer CPU and graphic card to mine bitcoin out of pure interest when bitcoin only worth cents, but later forgot their wallet password for which they might have been a billionaire. Zhang, though not a devout believer in bitcoin, has the obsession that the coin which can be exchanged for two pizzas though in the number of 10,000 in 2010 would eventually bring him wealth. And he did make it, once holding more than 10,000 bitcoins. But he is regretting for selling most of his has-been HODL during those torturing bears.
Mining machines are cash printers
The mining pool he ran is mainly responsible for the centralized hosting of independent miners, maintaining all the nodes in the network and transmitting computing information to the bitcoin network. Once the pool manages to mine Bitcoins the profits are divided between the pool members depending on how much work each miner has done.
“Our pool is not very productive, taking up one percent of the whole world.” It is in effect not productive compared to Antpool with Bitmain who accounts for a quarter.
“Mining machines are cash printers when bitcoin is bullish. Costs for buying a mining machine can easily be returned in half year, and then it’s all about ‘cash printing’.”
But a containing factor is its large electricity consumption. Mining a bitcoin may cost up to 5,000-6,000 yuan even though at a low electricity price of 0.35 yuan per kilowatt hour.
“If you are interested, you can take home a mining machine and mine coins yourself. But it is quite noisy and mind your electric bill.”
Mining farms’ moving, Bitmain turn to AI
High returns cannot stop the moving step, plus the roadblock from regulatory authority. The ICO ban in September has made a quake with many hurriedly dumping their cryptocurrency. In November, rumor came that regulatory authority aimed to crack down bitcoin mining business by limiting power supply. Panic overwhelmed to Zhang, first bitcoin then bitcoin mining, worrying mining pool would be the next target, meanwhile regretting underselling bitcoin in early days (which is a reflection of most investors). He couldn’t fall asleep all night, and eventually ended the mining pool in December.
It turned out he was right, in Jan, the official document was released. In this context, many mining farms are “ant moving” to countries like Russia and Iceland where electricity costs less and regulation is loose.
Some Anhui-based mines are not that lucky but shut down for their electricity theft. Only those mining farms with large size and invited by the local government survived. For those invited mining farms, the contract with local government is still valid and they contribute large sum of taxes, so neither the mines nor the local government have the will to move it, like Guiyang, characterized as a big data center and keen on blockchain development, it’s the last one to drive mining farms away.
Even the mining giant Bitmain is transforming, not only making layout in other countries but to our surprise, it is involved in AI as it promotes its customized chips developed with the AI technology in the AI World 2017.
“A storm is coming, luckily I’ve left…”