How to grasp the new opportunities in the mining industry?
2020 is definitely an extraordinary year. First, the 312 Bitcoin plunge, then the halving of the market, various events such as the flood season and the iteration of mining machines have caused the mining circle, which was originally profitable without losing money, to face various challenges. challenge. So, what kind of challenges are the mining industry facing this year, and what are its future development directions and prospects? In this issue of 58 College AMA, Lorreta, the CMO of Yunhu Computing Power, was invited to be a guest in the live broadcast room. Together with Xiaoxiao, a member of the 58-day group, we will talk about the challenges and opportunities in the mining industry.
Xiaoxiao: When it comes to mining, everyone will definitely think of this year's flood season. What impact does this year's flood season have on the mine?
Lorreta: The current mining is showing specialization and large-scale development, so if we talk about the best method or option of mining first, it is of course a big miner like me who buys a lot of mining machines by ourselves and builds a new large one by ourselves. In large-scale mining farms, the team maintains the mining machines themselves more carefully, and the maintenance efficiency is also better. Our model is the optimal model in mining, and it is also the mining model with the most scale advantage. But of course, the vast majority of small and medium-sized miners do not have this scale advantage. For many small miners, if they buy mining machines by themselves and then go to the mine to host them, the cost is relatively high. Mine farms are often unwilling to accept the trusteeship of small and medium-sized miners. If they do, the electricity price may be set relatively high, and there is a certain risk in finding a mine trusteeship by themselves. There are many pits in the mine, such as in the most extreme situation Under the circumstances, it is possible that the machine cannot be picked up, or in other words, the deposit will not be refunded after the machine is picked up in the end. It is even heard that miners were forced to sell the mining machine to the mine in the past.
And the disadvantages of small and medium-sized miners compared to large miners in various aspects are also obvious. For example, this year’s Fengshui will be halved. If you continue to mine in thermal power mines, the income may be greatly different from that in hydropower mines. If you mine in thermal power mines, the proportion of electricity bills is assumed to be 80%, but if you invest in hydropower mines In the case of mining farms, electricity costs only account for 60% or 50%, which means that the net output of hydropower mines will be two to three times that of thermal power mines. Under such circumstances, those big miners who have a keen sense of smell and have done a complete industry research will often move all the mining machines from thermal power mines to hydropower mines as soon as possible. If they move too late, the mining machines may not be able to leave. Because everyone wants to move all the machines to hydropower mines, even for those new models, the output of hydropower may be twice that of thermal power. Our own mining machines were moved to the mines during the high water season in a relatively early period, and we are the shareholders of the mines, so we have an advantage in mobilizing these machines.
For small and medium-sized miners, in addition to buying mining machines by themselves, if they go to the mine to host themselves, they can also choose cloud computing power or products similar to cloud computing power. The advantage of these products is that their retail share is small. You only need to spend tens of hundreds of dollars to buy a computing power and try it out. Some products can also allow cloud computing power to be sold again, which is very flexible. But it is precisely because of the high degree of flexibility that they are basically sold more expensive. So is there a mining method that is more suitable for small and medium miners? This is the joint mining I launched recently. Our joint mining has actually started since 2016, but it was only open to internal partners before. What's going on with joint mining? It means that there are many small and medium-sized miners who want to buy mining machines for mining, but their own scale is relatively small and there is no scale advantage, so we can take them to mine together. In this way, small and medium-sized miners can enjoy the scale advantages of large miners like us, and the mining machine prices and electricity prices we give to small and medium-sized miners are all cost prices, and the discounts for purchasing mining machines are also directly returned to miners.
In other words, the cost of small and medium-sized miners is the same as ours. How much we pay for mining machines is the same as for cooperative miners, and the same is true for cooperative miners as to how much electricity we pay. So how do we make money? We will collect dividends from the profit after the small and medium miners pay back their capital. Simply put, this is a partnership business model. Small and medium miners contribute funds, and we contribute. If the mine loses money and does not make money, we will provide free services and do not charge profit dividends.
Xiaoxiao: Could you share with us the current status of the mining industry and the prospects for future development?
Lorreta：The current mining industry has some differences and changes from before. The mining industry should be the earliest field in the blockchain. In the early days, a group of technical geeks and some early followers started mining. Since last year, we have noticed that many traditional capital and emerging mining giants have entered this industry, which has made this industry more scalable, with higher participation thresholds and greatly improved professionalism. This year is another halving year. It is a very complicated situation in itself to encounter a high water season. Coupled with the iteration of mining machines, the mass production of new mining machines has made the situation even more complicated.
Therefore, many people predict that there may be huge fluctuations in computing power after the halving begins. It is difficult to predict how the entire BTC network will affect the market when the huge fluctuations in computing power are faced. We have also seen a different state in the industry, and financial products for mining have also appeared one after another. Under such circumstances, I think risk control is very important. For new miners to do a good job in their own risk control, old miners choose well model, this is very important.
Xiaoxiao: For ordinary investors, what matters need special attention when participating in mining investment?
Lorreta：New investors still need to be cautious. The authenticity and stability of the computing power behind the product is still the main non-systematic risk. From the perspective of investors, investors should consider from the dimensions of platform, cost, and mining machines: First, choose reliable brands with real mining machines and mine support, good reputation in the industry, strong platform, and strong credit endorsement to ensure the safety of income Transparent, the platform has strong anti-risk ability; secondly, electricity price is the core of mining cost, stable, cheap, and compliant electricity price can support income, make mining cost low, and return cycle faster; thirdly, mining income Affected by the market currency price greatly, choose a new machine with powerful performance to ensure high efficiency and stable condition.
Looking at the current mining market, we have also noticed the recent boom in mining IPFS and other small currencies. According to her many years of investment experience, small coin mining may be a good industrial experiment for the development of the mining industry. For a small group of high-risk investors, it will show a relatively strong profit-making effect in the short term. However, this market is not yet mature enough. The profit-making effect driven by hot spots is not stable, and the reliability of profits is low. The risk of paying for the bubble is very high. Many small mining currency miners will eventually turn to Bitcoin. “Bitcoin remains the best cryptocurrency for mining in the long run.”
Regarding the development prospects of the mining industry that investors are most concerned about, from the perspective of global policies, mining compliance is the trend. On the other hand, from the perspective of the process of globalization, the development of the mining industry also follows the same path. Taking North America as an example, the proportion of computing power in the entire network has increased from 4% at the beginning of the year to 7.2%. Many overseas heavyweight institutional customers have also begun to invest in purchasing mining machines to start the industrial layout. These will usher in greater breakthroughs in the global mining industry. At the crossroads of new opportunities, embracing change is the most important survival rule for the mining industry. Only by keenly sensing the external environment, grasping market trends, gaining insight into market demand, strengthening hematopoietic capabilities, and proactively seeking change can we truly adapt to market changes. Seek new breakthroughs.
Xiaoxiao: How should investors grasp the new opportunities brought by the new track of the mining industry?
Lorreta：IPFS is a new track for the new mining industry. Now IPFS is the hottest topic, I think it is the right time, place and people to create together. The birth of many CX projects in the past one or two years is actually a manifestation of the failure of the blockchain. Since the development of the blockchain for ten years, countless currencies and projects have been born, and all of them have finally become air.
Then why can IPFS land again? Because the essence of blockchain is not born for application landing. As a distributed ledger, it is to solve a trustworthy problem of value transfer and value network, not to solve the problem of landing this application. Then why does the emergence of IPFS make it possible for the blockchain to land? Because IPS is essentially a distributed storage, it can turn a file into a hash value.
A file becomes a hash, what's the point? For example, if we take a photo or record a video now, it turns out that the blockchain has no way to help us store it. Now relying on the distributed storage technology of IPFS, a photo, a video or a file of yours can be stored in A hash value as a representative is equivalent to a globally unique ID number for each of us. In the IPFS network, the hash value of the same file is unique, which means that the blockchain only needs to store this hash value to store this large file.
To sum up one sentence: With distributed storage, the blockchain has the ability to store big data and large files. Relying on distributed storage as the infrastructure, the blockchain can better empower the decentralized DAPP ecosystem in the future, which is what we call WEB3.0. I think that distributed storage star projects like FIL are just the beginning, and more supplementary projects like MW will rise. Because FIL has relatively high performance requirements for equipment, and MW has relatively low performance requirements for equipment, they can be a good complement to each other.
For the distributed storage market, it will explode from FIL and MW. For the distributed storage track, after more applications developed based on IPFS flourish in the future, the entire distributed storage market will shine. Although tens of billions of distributed storage mining machine servers have been sold on the market, I think this is just the beginning. In the future, the sales of distributed storage mining machines will be a market size of hundreds of billions or trillions. With the construction of distributed storage infrastructure in the future, a large number of decentralized DAPPs will be developed on IPFS. What the future distributed storage market will bring is not only distributed storage itself, but more application ecology based on distributed storage. So you can also pay attention to which applications are suitable for development in the field of distributed storage.
Xiaoxiao: Filecoin is a mining project, how is it different from BTC mining?
Lorreta：In Bitcoin "mining", the proof-of-work (POW) mechanism is adopted to encourage miners to contribute computing power to the blockchain network to help bookkeeping, and its incentive system is to obtain Bitcoin rewards. Proof of Work (POW) mechanism, the mode of "proving that a certain amount of work has been completed by solving mathematical problems", the computer that solves the problem the fastest can be qualified for bookkeeping, and thus obtain the corresponding Bitcoin. For IPFS/Filecoin, its mining principle is Proof of Effective Storage (PORep&POSt).
Filecoin uses storage space for proof, as Proof-of-Storage (PoS). When the miners have stored the data, Proof-of-Replication (PoRep) is provided to ensure the independence of each piece of data, and at the same time prevent Sybil attacks, external source attacks and generation attacks. When the miner completes the data storage order, it provides Provable-Data-Possession (PDP), which not only proves that the data has been stored, but also allows the user to verify whether the miner has stored its data multiple times. Ensure that miners help users store data according to the rules.
As far as Filecoin mining is concerned in the current market, single mining machines and cloud computing power have appeared. When faced with the choice of mining machines and cloud computing power, let’s talk about the difference between the two. Filecoin single mining machine is based on providing storage space and upstream and downstream bandwidth to obtain IPFS incentive layer Filecoin rewards. For Filecoin mining, the main accessories are large-capacity storage hard drives and high-speed network cards. As a professional mining machine, the real bottleneck is the disk I/O performance and network bandwidth, and the memory CPU should not be too small. However, for most people, buying a mining machine for mining by themselves requires too much upfront investment and too high a risk. Mining by professional miners is a high-threshold and lengthy job. The long installation and commissioning cycle, continuous operation and maintenance work, and the complex mining factors of the Filecoin project cannot be solved by individual miners.
Filecoin has high hardware requirements for professional miners to mine, fast product iteration speed, high operation and maintenance costs, and high-speed network and power stability are also closely related to revenue. In the event of network and power problems, failure to provide effective storage certificates or storage errors, or even during the storage process, miners violate the contract and endanger the Filecoin network, they will be punished, the mortgaged FIL will be confiscated, and the computing power will be cleared. The Filecoin cloud computing power combines the computing power into a joint operation, and conducts centralized management, operation and maintenance of each mining machine to achieve 24-hour uninterrupted mining. The distribution of dividends is carried out in proportion to the number of nodes you own. No matter which node fails, you don’t have to bear the risk, and you don’t need to consider fault repairs, power outages and network disconnections, etc., saving worry and effort.
Xiaoxiao: Please briefly explain the entire filecoin mining process?
Lorreta：In general, it is divided into four steps:
(1) Storage Commitment
The storage miner network mortgages storage. Storage miners deposit FIL tokens in the blockchain through pledge transactions to ensure their storage to the network. FIL tokens will be locked for the duration of the service, and FIL tokens will be refunded if the miner generates a storage certificate for the data it has committed to storing. If some storage proofs fail, a certain percentage of FIL tokens will be lost.
(2) Receive orders
Miners can provide storage services in the storage market. First miners set a price for their services and submit the price to the market's order book. When the user's demand matches the service provided by the miner, the user sends the data to the storage miner. After receiving the data, miners and users sign the transaction order and submit it to the blockchain.
(3) Sector packaging
Storage miners provide shards for future proofing: Storage miners' storage is divided into sectors, and each sector contains the shards assigned to the miner. The network keeps track of each storage miner's sector through an allocation table. When a storage miner's sector is filled, the sector is sealed.
(4) Provide proof
Storage miners certify that they are storing the committed shards. After data is allocated to storage miners, they must repeatedly generate proofs of replication to ensure they are storing the data. Proofs are published on the blockchain and verified by the network. Executing the space-time proof algorithm has the opportunity to obtain block rewards, that is, mining.
