China Miners Not Buying Filecoin’s “Coronavirus Excuse”
Filecoin, which you can think of as the decentralized answer to Dropbox, has delayed yet again its mainnet launch date. The project allows users to buy and sell unused space on their harddrives, via the Interplanetary File System—and like many projects these days, it’s relying on Chinese miners to be the backbone of support. Some 70% of its nodes are based in China, in fact.
This is the second delay in less than a month—the first one was announced January before coronavirus was a thing. But again, on February 19, the company announced yet another six-week delay, citing both development challenges and the impact of coronavirus.
“…it has come to our attention that many of our communities in China have continued to be affected by the coronavirus outbreak,” the statement said. “Some of our Chinese community members have directly asked us to wait to launch Testnet Phase 2 for two or three weeks, until they can safely return to work. We hear you, and your safety is our priority!”
This was upsetting news to some Chinese Filecoin miners. That’s because many of them have been buying up and stockpiling mining rigs in anticipation of the mainnet launch. Now, they’re miffed that they have to wait even longer for their capital investments to pay back.
Their anxiety is justified. Since Filecoin keeps updating standards of the mining rigs, miners who bought their machines in 2018 or 2019 are worried that the old machines will be incompatible with the new hardware standards, incurring permanent loss of their initial investment.
Filecoin is a super popular blockchain protocol among Chinese. Described as “born with a golden spoon (含着金钥匙出生)”, Chinese investors believe that the project is legitimate because it is funded by some of the most well-known investors in the world, including Sequoia Capital, Andreessen Horowitz, Union Square Ventures and Winklevoss Capital.
Why do projects like Filecoin receive so much attention in China? There are two parts to the answer. First, there’s a severe lack of domestic investment options in China. Other than the Chinese stock market, which has mostly been in the dumps since the financial crisis, and the real estate market, which has been in a bubble, China’s burgeoning middle class has nowhere to go to enjoy a decent return on their savings.
Second, China imposes strict capital control, meaning that money cannot be easily sent in or out. Because crypto is borderless, many investors turn into legitimate projects, proven by legitimate VCs, to onboard their fiat to crypto and send abroad (money laundering at retail level).
Some Chinese miners complained that the virus was simply being used as an excuse—in reality, the epidemic shouldn’t affect mining since most miners purchased their machines way before the outbreak.
Filecoin has said that the delay would help miners return safely to their workplaces. That sounds plausible, but tends to fall apart on closer examination. Mining farms are not operationally heavy and require less human capital. Given that most of the country has resumed working and only very few heavily infected regions remain shut down, miners should have no issue travel physically to their workplaces.
It’s not uncommon that software development suffers from delay (see, for instance, Ethereum.) Yet linking the delay to the virus outbreak is a stretch. The latest delay made many miners pessimistic about Filecoin’s real go-live date, which many joked would be at the end of 2020.
In Chinese, there’s an old saying that “one postponement causes a depletion of energy, the second postponement causes depletion of morale, and the final postponement causes death 一鼓作气，再而衰，三而竭.” Let’s hope Filecoin doesn’t postpone a third time.
This article was originally published by Decrypt and written by Shuyao Kong