Chinese miners are out: sell machines at a low price or go to sea to find new ways?

Bitcoin miners talked about the two or three things before and after the shutdown, as well as various related mining activities.

Original title: “The Wandering Miner: Two months later, I will go bankrupt”
Written by: Qin Xiaofeng

At 23:00 last Saturday night, a short video was widely circulated in the circle of friends of encryption practitioners, and a crowd of KOLs forwarded it with a text: the end of an era.

In the video, hundreds of mining machines are neatly arranged on racks, and several workers are turning off the power of the mining machines one by one; the sentimental soundtrack and the repeated “Bye” are not only to say goodbye to the mine that is about to be retired. It’s more like saying goodbye with emotion at the end of the golden age of mining.

Video screenshot

The video was filmed at a mine in a hydropower consumption park in Sichuan, and the same scene was staged in many places in Sichuan that night.

In the past two months, Mongolia, Xinjiang, Qinghai and other places have successively introduced policies to clear out encrypted mining projects. Sichuan, which is regarded as the last “hope” by miners, has also recently implemented a policy to completely clear out mines. At this point, the once major encryption mining provinces in China have closed their doors to miners, and Bitcoin’s computing power has been affected and has shown an avalanche decline, which is nearly halved from the peak in mid-May this year.

However, there is not much time left for the sentimental of the miners. There is no shortage of old miners who have already had their wealth and freedom since then died down, selling their machines at a low price and leaving the market. But for more miners who have purchased new machines and are still returning to the current period, they must find another way out.

After recent years of development, the financial tools of the mining industry have been perfected. There are not a few miners with leverage. The pressure of monthly loan repayment forces them to restart as soon as possible. Going to the sea is their last choice.

“The several high leverage multiples around me have been settled on an equal footing. I should be able to survive for another two months. I am also investigating suitable overseas mines, and I am currently inclined to Texas, the United States.” The interviewed miner told me. Odaily Planet Daily.

However, going to sea is not an easy choice. There are already many obvious difficulties in transporting heavy assets to unfamiliar places, and there are more invisible traps. Before this, there are not a few miners who have gone to sea and lost their lives.

During the ups and downs, Odaily Planet Daily interviewed a number of miners and listened to them talk about the two or three things before and after the shutdown, as well as the various related mining activities, where are they going? How many difficulties are still ahead? Where is the most reliable place to stay?

The mines are fully retired, and the “Golden Era” ends

“Actually, we were mentally prepared more than a month ago. But the ship is in a disaster and turned around. Even if you know it, what can you do? Just like this shutdown, we have to inform you one day in advance. We have no power to change the result. “The old miner A was rather helpless.

Old A’s mine is located in a hydropower consumption park in Sichuan, with a total load of hundreds of thousands of kilowatts. Calculated on the basis of a 10,000-kilowatt load input cost of 5 million yuan, the total investment reached hundreds of million yuan.

However, only 10 days after the mine was completed and excavated, it was urgently stopped.

On June 18, there was a notice issued by the Sichuan Provincial Development and Reform Commission and the Sichuan Provincial Energy Administration of the Sichuan Provincial Development and Reform Commission and the Sichuan Provincial Energy Bureau on June 18th. According to the document, the State Grid Sichuan Electric Power Company has investigated and reported 26 suspected virtual currency “mining” projects to the country, led by the relevant municipal (prefecture) government, and cooperated by the State Grid Sichuan Electric Power Company and the Provincial Energy Investment Group. Complete the screening, clean-up and shutdown work before the 20th. The news was later confirmed by The Paper and other mainstream media.

On the evening of June 19, dozens of registered mines, including the old mine A, were all of the first batch of “demonstration enterprises” to be shut down urgently. This was the scene at the beginning of the article. That night, “the collective power outage of the Sichuan Bitcoin mine” was also on the Weibo hot search list.

Prior to this, unlike Inner Mongolia, Xinjiang and other places where coal power generation was criticized and polluted, Sichuan, which mainly used hydropower, was regarded by many miners as the “last hope” for domestic mining.

On May 21, the Financial Committee of the State Council proposed to “combine Bitcoin mining and trading activities” at a meeting. Since then, Xinjiang, Qinghai, and Inner Mongolia have introduced relevant policies to rectify and clean up virtual currency mining.

Although the regulatory signal is clear, many miners still maintain a wait-and-see attitude and are not in a hurry to migrate their layout. In the eyes of many miners, the suspension of mining in Xinjiang and Inner Mongolia is mainly due to the serious environmental pollution caused by coal. Regarding the Yunnan, Guizhou and Sichuan regions that use hydropower energy, they are still optimistic. Especially with the advent of the wet season, Sichuan and other places have hydropower consumption demand, and perhaps there is still vitality.

On June 2, the Sichuan Regulatory Office of the National Energy Administration held a small-scale research symposium to analyze the impact of shutting down virtual currency “mining” on the amount of electricity discarded in Sichuan this year. Participating miners said that mining can be carried out normally, and it also sends a positive signal to the outside world.

At that time, Old A had signed a cooperation agreement with relevant Sichuan authorities and filed for it. He also let go of his hanging heart, he has a formal contract as a guarantee, and there is a high probability that there will be no sudden power failure.

However, only half a month later, the wind direction changed suddenly. Yunnan and Sichuan successively announced the ban on encrypted mining projects, which also gave old A a head blow.

“When the mines were renovated in Xinjiang and Inner Mongolia, many people have already noticed that the intensity is different this time. Because the document in Inner Mongolia has added the content of “preventing financial fraud”, what kind of attributes do you use to shut down the mines? The electricity does not matter. Old A made a summary afterwards.

According to previous media reports, Sichuan is the largest gathering of Bitcoin miners in China and even in the world, with approximately 8 million loads being used for cryptocurrency mining. With this round of remediation, all large mines have been shut down.

However, Old A revealed that at present, some isolated grid power (not entering the State Grid system) mines with a small load (1000 kW to 2000 kW) in Sichuan’s jurisdiction are still operating, but with the implementation of the policy, these mines are closed. Stop also entered the countdown.

Selling machines at a low price is okay, some miners can only liquidate and go bankrupt

“The miners that used to be used for communication are now selling transformers and mining machines.” Old A explained. With the closure of mines in Inner Mongolia, Xinjiang, Sichuan and other places, some miners felt that the policy was tightened and began to consider selling equipment at a low price.

The influx of a large number of second-hand machines into the market caused the price of mining machines to plummet. It is like a two-world situation that was “difficult to find a machine and hard to find a card” a few months ago.

A second-hand mining machine seller told Odaily Planet Daily that now the mining machine has completely become a buyer’s market, and the seller’s quotation is basically invalid. Take S19 as an example. It was fired at more than 70,000 yuan before, but now the second-hand mining machine only costs more than 20,000 yuan. In order to alleviate the pressure of miners’ shipments, Bitmain also recently announced the temporary suspension of the sale of spot machines.

However, exiting the mining machine at a low price is actually an option. Some high-leverage miners have no choice at all. They can only find another way to continue mining, otherwise they will face liquidation and bankruptcy.

Due to the rise of various financial instruments in the past two years, the mining circle’s leverage ratio has begun to rise. A small number of miners choose to pledge coins to borrow money to buy machines, and pledge machines to buy new machines again. Some people are burdened with millions or even tens of millions of loan repayment pressure every month.

In the past, new coins could be mined every month and the price of the coins continued to rise. Naturally, repayment of loans was not a problem. But now that it is cut off from the source, the miners cannot dig the coins, which will cause the cash flow to break. After the expiration, the machine and the pledged tokens will all be liquidated, and they may not even be enough to repay them and need to bear liabilities.

There are many such miners. Recently, a mine owner with a load of hundreds of thousands of kilowatts was blocked by creditors because he could not come up with tens of thousands of cash. An interviewed miner said that if mining is still not possible in the next two months, “the mining circle will die a lot.”

“A few of the high leverage multiples around me have been settled equally.” The interviewed miner told Odaily Planet Daily that a friend of his had only been digging for 10 days in the past three months, and they are still everywhere. Find electricity. “I should be able to hold it for another two months, and I am now also investigating suitable mines overseas, and I am currently inclined to Texas, USA.”

At present, only a few provinces have introduced restrictive policies, and other provinces have not yet implemented it, which also gives miners breathing space to move around (commonly known as “guerrilla”). There are still many mines in operation in some areas, but due to limited energy, it is difficult to load large mines and can only meet the needs of some small miners.

At present, some domestic miners still maintain a wait-and-see attitude. One is that the demand for electricity will be lower after the summer power peak; the other is that there will be some loosening of policies. This is also the truest thought in the hearts of many miners who are currently “playing guerrillas” everywhere.

Due to the demand of miners to fight guerrillas, the demand for mobile mining boxes has soared recently. A certain mine box sales told Odaily Planet Daily that its business volume had increased by 5 times in the past month, and the delivery time of some orders has been scheduled to next month. (Note: The mobile mine box can be separated from the mine, and the whole can be moved at any time, and the mining machine is protected from damage.)

Where to go to sea, Central Asia, Eastern Europe, North America or Northern Europe?

With stricter supervision, small and medium miners may be able to bear the losses and exit the site, but for large miners with tens of thousands of mining machines, it is the way to go to sea to find suitable sites to build new mines.

Nic Carter, the founding partner of Castle Island Investment Company, previously judged that 50% to 60% of Bitcoin’s computing power may eventually leave China.

“In the last month, my friends in the circle, including the mine pool at the head, have been asking me how to go to sea and how to run the process. We also gave a few friends tens of thousands of loads to help them tide over the difficulties in the short term.” The old miner Dong told Odaily Planet Daily that the current total load of all mines in Kazakhstan is about 1.3 million kilowatts, but it is not full.

As early as 2018, Mr. Dong started to build mines overseas, and he currently owns a large mine in Kazakhstan with a load of more than 100,000 kilowatts. When the domestic mining machines were retired this time, Lao Dong moved his mining machines overseas one after another. “In the first two years, it was because I always had to toss back and forth in China, and the price of electricity overseas was cheap. I wanted to leave myself a way out, but I didn’t expect it to be used right now.”

For miners going to sea, Central Asia, Eastern Europe, North America, and Northern Europe have also become several important alternatives:

• Bit Mining, a US-listed company, announced that it will invest in the construction of mines in the United States and Kazakhstan. The latest news is that its first batch of virtual currency mining machines (320 units) arrived in Kazakhstan and is expected to be deployed and put into operation on June 27. Other self-owned mining machines are also being shipped overseas in batches.

• Lebit Mining Pool CEO Jiang Zhuoer said: “The joint mining business will no longer be open to mainland China. Later, mines will be mainly deployed in North America for mining.”

• De La Torre, Poolin’s vice president of mining pools, said: “We are working hard to diversify our global mining hash rate, which is why we moved to the United States and Canada.”

From a policy point of view, many overseas regions have adopted a friendly attitude towards cryptocurrency and have introduced relevant plans as a guarantee. For example, the AIFC Investment Department of Kazakhstan recently announced through the Chinese media that Chinese miners are welcome to enter the country, and a compliant custody mine can be established in three to four weeks. In addition, in June this year, Texas Governor Greg Abbott (R) signed a bill to create a legal framework for cryptocurrency and blockchain, and the Texas Department of Banking notified the state chartered bank to custody cryptocurrencies.

After the Sichuan mine was closed, the old A, holding tens of thousands of mining machines, was also looking for a new battlefield in the country. However, in the end, he had no choice but to go to sea. Texas was also one of the new locations that the old A focused on. One. “We also have some power resources over there, and the price of electricity basically fluctuates at 200 cents. More importantly, the United States is more about the spirit of contract and won’t cut you out suddenly.”

In addition to old A, Texas is also an ideal destination for many other miners. Old Chen, a miner, said that when going to sea, priority should be given to places with sound laws such as the United States and Canada, where people and property are more secure, while there are great uncertainties in Central Asia and the Middle East and accidents are more likely to occur.

“If you are more formal, choose North America, and if you are more cost-effective, you can choose Kazakhstan and the Middle East.” Some insiders summarized the selection criteria for mining farms.

As mines go to sea has become a trend, which also drives the shortage of container resources. Chen Lei, CEO of Bixin Mining, recently posted an article in Moments asking for 200 containers.

Mining machine is being put into the container

Difficulties in going to sea: constant difficulties and numerous traps

Whether it is policy or electricity prices, overseas seem to be very friendly to miners. However, people who have not really experienced the transfer of assets across the oceans in Haiti cannot imagine how many pits are waiting for you after the sea.

The first is that the construction cost is high and the construction period is long.

According to the investigation of old A, the current input cost of 10,000 kilowatt load in Texas needs about 35 million yuan, which is 7 times that of the domestic one. Even in Kazakhstan, which is known for its cost-effectiveness, the construction cost is much higher than that in China.

An important reason is that although Kazakhstan has a large amount of electrical equipment from the former Soviet Union, it has long been aging and is not suitable for building mines. Take the old Dong’s new mine as an example, the total load of 30,000 kilowatts can only run up to the load of 10,000 kilowatts.

Therefore, miners need to choose to purchase electrical equipment from domestic, clear customs and transport them abroad. Mining machines and electrical equipment are transported out of the country by rail to Almaty (the largest city in Kazakhstan), and then transferred to various mines, it takes about 20 days.

In addition, the veteran Dong also reflected that foreign teams generally have slow construction and no professional mining machine maintenance team. Therefore, it is necessary to recruit laborers from China, apply for visas, and vaccinate. After the whole process goes down, it will basically take about two months to build a new mine. “The salary we pay to the maintenance personnel of the mining machine may have reached one million. And the prices of the entire material and bulk commodities are now rising, which has further increased the construction cost.”

In addition, there are many hidden pits in actual operations, which are hard to prevent.

In 2018, when Lao Dong went to sea for the first time to test the waters, he chose to build a site in a city in Russia’s Arctic Circle. However, in actual operations, due to the low temperature, electrical equipment and mining machines often fail, and mining cannot be performed. When finally withdrawing, the partner seized the machine for various reasons, and after negotiation, only got half of the mining machine back. Later, he moved to Kazakhstan, and Mr. Dong’s electrical equipment was also “rented for free” by his partners.

When I asked the old Dong why he didn’t choose to take up legal weapons and defend his rights and interests, he reluctantly said: “They are all related locally, and you go to a lawyer, it is also local; going to litigation may take a year or a half. . To put it bluntly, you can’t consume these people, but in Kazakhstan, if you pass the law and the entire process, it is basically no problem to protect the mining machine.”

The experience of Lao Dong is also the concern of most domestic miners such as Lao Chen. “There are so many pits overseas. Without sufficient resources and contacts, we should not go overseas. It is difficult to develop.”

Due to the high difficulty of overseas mine construction, many small and medium miners choose to trust their mining machines to mature overseas mines. However, the old Dong pointed out that this is a great risk and may lose the ownership of the mining machine. “When the machine is clearing customs, it is whoever will clear the customs. If it is unreliable, it is not impossible to swallow all the machines.”

In addition, there are also many overseas mines claiming to have a large amount of idle resources to attract domestic investment. Old Dong said that due to the epidemic, Kazakhstan does not have sufficient idle resources. “Many mines have a big tone, saying that I have 200,000 or 300,000 loads. It’s all nonsense. Now because of the epidemic, people can’t get in, and equipment can’t get in. Really large-scale construction starts next year. At the beginning of the year, it is reasonable. But no one knows what new situation will be at that time.”

For the entire crypto market, the mining circle has always been a mysterious “big rear”.

Miners communicate mainly online and in the community, and every offline summit is a large-scale meeting of netizens. Once you get acquainted, the connection between people will quickly become closer, and you will keep warm. After this centralized shutdown, some overseas mine workers also helped domestic friends to get through the process of going to sea, and even directly shared their own power resources.

Despite the heavy losses this time, for many old miners and miners, they have enjoyed the dividends given by the market for several years, and they still believe in Bitcoin and blockchain technology.

It is this deep belief that allows miners to overcome numerous difficulties and embark on the road to sea.

It’s just a farewell today, I don’t know when to reunite.

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