Bitcoin completed its fourth halving on April 20, but this also means that miners’ mining costs will continue to increase. This article will lead readers to review the rise and changes of the former Bitcoin mining overlord Wu Jihan and the mining company Bitmain he founded. This article originates from an article written by Golden Finance, compiled and written by PANews.
(Recap:Bitcoin’s $65,000 “calm shock” after the halving. What major economic events should we pay attention to this week? )
(Background supplement:Exclusive interview with Shenyu: Bitcoin halving “limited miners’ dumping”, may altcoins not rise?Optimistic about the integration of AI, metaverse and blockchain )
towerOn April 20, Bay time, Bitcoin finally ushered in its fourth halving.
Halving represents an increase in mining difficulty and has a profound impact on the mining industry. Mining is undoubtedly the most closely connected link between China and Bitcoin.
At its peak, China accounted for more than 70% of the Bitcoin mining computing power, and Bitmain alone had more than 50% of the computing power. Such high computing power is enough to launch a 51% computing power attack on Bitcoin.
After the Chinese government forcefully moved away from the mining industry in 2021, a large number of mining farms left China. Bitcoin mining power in China has even dropped to zero. As Chinese mining machines go overseas and mining power recovers, the big bosses behind those large overseas mines are still Chinese. According to statistics from chainbulletin, China will still account for 21% of Bitcoin’s computing power in 2023. In areas that are not connected to the national power grid, roaring mining machines are still operating day and night.
China is an important part of the history of Bitcoin mining development. The fortunes of mining leaders have also fluctuated with the changes in the industry. The life experiences of Wu Jihan, a former mining tycoon, are a mirror that reflects the development of mining in China.
The unique mining tyrant
In China, an industry leader who cannot be ignored in the history of Bitcoin development is Wu Jihan. He is the Chinese translator and early evangelist of the Bitcoin white paper, and is better known as the founder of Bitmain.
At Wu Jihan’s peak, in 2018, Bitmain’s self-operated mining accounted for more than 50% of the computing power. At this time, it was possible to launch a computing power attack on Bitcoin. At that time, Bitmain was indeed in the spotlight, and computing power was power. In the battle over Bitcoin’s large and small blocks, Wu Jihan led Bitmain and the miners to fork Bitcoin, and BCH was born.
From another aspect of the fork incident, China enjoyed a higher say in the encryption industry at that time.
In 2018, if you look around, 8 of the top ten mining pools in terms of computing power are located in China. Mines that have sprung up near small hydropower stations in Sichuan and thermal power plants in Inner Mongolia have made many Chinese mine owners rich. At that time, local governments turned a blind eye to mining. After all, taxes from large mines were also fiscal revenue, or the excess electricity had nowhere to consume. Some local officials even got involved.
Golden Finance reporters visited a mine planned to be built in Inner Mongolia in 2018. At that time, they directly discussed cooperation with the local flag leader on preferential electricity usage.
The amount of mining power is only one aspect. At this time, China still occupies the center of the encryption industry. Many projects require a pilgrimage to the East. Without the funds from the East, perhaps there would be no Ethereum today.
In June 2021, China completely banned mining and Bitcoin plummeted. With the tightening of China’s Bitcoin policy, most mining farms have moved away from China. Mainland China, which once accounted for more than 70% of the Bitcoin mining computing power, has gradually lost its say in the development of Bitcoin. Bitcoin mining computing power in China even fell to zero. By the beginning of 2022, China’s mining farms have basically completed their great migration to the sea, and countries such as the United States, Russia, and Kazakhstan have become the countries with the largest migration of computing power. The United States has also become a mining power hegemon.
It seems to be a coincidence that Wu Jihan left Bitmain in the year when Bitcoin mining officially “exited” China. The departure stemmed from infighting at Bitmain. Since then, Wu Jihan has become more low-key, which seems to be related to China’s policy on virtual currency.
Wu Jihan’s Twitter has been deactivated for a long time. His last tweet was in 2018. His Twitter profile also reads “Co-founder of BITMAIN”.
Wu Jihan, who left Bitmain, is not completely invisible in the industry, but he is no longer in the spotlight. He deliberately keeps a low profile and rarely attends important conferences in the circle. Avoid media interviews.
Mining has basically left China, but Chinese people are still behind the mining companies and some mining pools that go overseas. Wu Jihan brought BitDeer, which was spun off from BitContinent and focused on overseas markets, to Nasdaq.
Leaving Bitmain, but not leaving mining industry
At the beginning of 2021, Jihan Wu resigned as CEO and chairman of Bitmain. The civil war between Wu Jihan and Ketuan Zhan ended. Bitmain’s cloud computing business, BitDeer, and its overseas mining farms were divested and belonged to Wu Jihan.
Judging from the separated businesses, Wu Jihan was either smart or lucky at that time, and the cloud computing power and overseas mining business belonged to him. Shortly after the split, the Chinese government began to clear out the mines.
BitDeer is a platform that provides users with mining machine sharing services, which saves users the complicated process of purchasing, installing, and hosting mining machines. In 2023, it helped Wu Jihan realize his dream of ringing the Nasdaq bell and become China’s mining unicorn. Bitmain, which has mentioned its IPO again, has not yet gone public.
The founding and success of BitDeer is also a product of the continuous changes in mining technology and business models. Over the years, not only the hardware mining machines for mining have been constantly changing, but individual mining has transformed into collective mining. The popular cloud computing power mining model has also emerged, which allows everyone to participate in Bitcoin mining. To mine cryptocurrencies such as coins, you don’t need to own or manage mining machines yourself. You only need to pay to rent the computing power of an organization.
BitDeer has three main businesses: self-operated mining business, where the company mines cryptocurrency for its own account; computing power sharing business, which provides two solutions: cloud computing power and computing power market; the company serves as a media connection in the computing power market solution Third parties (such as miners or mine owners) and customers with computing power needs only charge service fees.
According to BitDeer’s fourth quarter financial report last year, we can find that the majority of its revenue still comes from self-mining revenue. It is currently the second largest holder of self-owned computing power in the world, and its mines are in the United States, Norway, and Bhutan. Waiting places.
It can be seen from the above that Wu Jihan, who left Bitmain, did not leave the mining industry. He quietly opened mining farms overseas to make money.
The road from Wu Jihan’s mine to the sea is what regular mines do. On the other hand, mining has not completely disappeared in China.
In areas that are not connected to the national power grid, mining is still going on quietly in private hydropower stations. According to statistics from chainbulletin, the proportion of Bitcoin computing power in China in 2023 will be approximately 21.1%, second only to the United States. The reason is that industry insiders speculate that some miners will use foreign proxy servers to avoid domestic monitoring. Mining is carried out secretly in remote areas on a large scale, and even uses off-grid power generation to avoid power monitoring.
The policy rollback cannot kill the mining industry, but it can still grow tenaciously in the cracks. When leaving Bitmain, Wu Jihan also took away the digital asset financial service platform Matrixport. It is more like a private bank in the Web3 world. Although there are many financial management platforms on the market, the biggest feature of Matrixport is that it is subject to supervision and has licenses in Hong Kong and Switzerland, targeting high-asset customers and institutional customers. Matrixport is better known to insiders as it often publishes some research and judgment on the market.
POW will not die, mining will continue
What cannot be ignored is that POW narratives are gradually losing their charm. The main reason behind this is that it consumes too much energy and is not environmentally friendly. Ethereum also switched to POS because of this. Mining is no longer the main narrative of the industry.
In order to cope with the reduction in income caused by the halving, miner groups are also working together to find ways.
The cold in the mining industry is biting. In the last bear market, some mining companies filed for bankruptcy. In this bull market, a cruel reality has also emerged. The rise and fall of mining stocks and Bitcoin are decoupled. While Bitcoin continues to break new highs, mining stocks fall instead of rising.
Galaxy Mining analysts wrote in a research note:
In the short term, institutions seem to be more inclined to go long Bitcoin ETFs and short mining stocks, and we have seen this play out since early 2024.
For traditional investors, they could have invested in the cryptocurrency industry by investing in mining stocks, but currently, they have a new option – Bitcoin spot ETF.
For the mining industry, this can be said to be an enemy from both sides. So last year, Inscription became the new favorite of miners, and they made a lot of money. Because of the related interests, the miners group is also the largest support group behind Inscription. When assets are issued on Bitcoin, the biggest beneficiaries are undoubtedly miners. From this perspective, after another halving, “innovations” such as inscriptions and runes that can increase miners’ income will definitely emerge in endlessly.
In order to cope with the increase in costs, it is not only necessary to open up new revenue sources, but also to reduce costs.
According to a mining report released by CoinShares, the average production cost of each Bitcoin after the 2024 halving is expected to be $37,856. Mining costs continue to increase, and self-developed mining machines have become one of the solutions. After the halving, the difficulty of mining has increased, and the performance requirements for mining machines have become higher and higher. Self-developed mining machines can also help reduce costs and increase efficiency. BitDeer announced a self-developed mining machine at the beginning of this year and has already submitted a request to TSMC. Wafers were purchased.
Looking at the development history of mining and its development trajectory in China, we can see that as long as POW does not disappear, miners can always find a way to survive and even make enough money. Just like Wu Jihan, who has experienced peaks, turmoil, palace battles, and low-key actions, he is still able to flexibly continue to contribute Chinese strength to the mining industry.
