Master the bitcoin world, monopoly power! The most powerful super player in the coin ring

Source: financial web site

In November 28, 2018, the price of bitcoin fell to $3865, down about $80% from a peak of about $20000 in 2017. Is the bubble bursting out of its once worth of assets, which was once worth 300 billion?

With the huge fluctuations in the price of bitcoin, the miner who provides power for bitcoin has also experienced a thrilling journey. As the world’s largest producer of miners, bitcoin, the world’s largest producer of the world’s largest miner, has also led bitcoin’s first large-scale bifurcations, extending its own ASIC chip to the AI, seeking to break the block chain ecology.

Source: new wealth Author: Guosheng securities block chain Research Institute

01

The largest provider of power in the world:

“Crazy” bit coins make the legend of the bit continent

Bit continent is now the world’s largest supplier of bitcoin miners, with a design of 70% of the total computing power of the bitcoin machine. At present, the S9 series of ant ore machine in bit continent uses the ASIC chip of 16nm process, the force reaches 14TH/s, the power consumption is low to 94W/THs, and the market is almost monopolized by its cost-effective, stable working state and good after-sales service. Bit continent also extends to the downstream of the industrial chain. At present, three mineral pools are controlled by bitcoin mining, Antpool, BTC.com, ConnectBTC, and the total calculation of the three pools reaches nearly 40% of the global calculation force. At the same time, bit continent also sells ASIC mining machines for other encrypted currencies such as the Wright, the ether, the Monroe currency, and the gradual transformation of the Xiang Yun infrastructure and the field of AI computing.

10 years ago, Ben Cong invented bitcoin, which opened the wave of block chain digital assets and the wealth revolution that subverted social cognition; in 2010, it was reported that a programmer had “bought” 2 pizzas with 10 thousand bitcoins. In 2013, a company named bitland was founded and pushed out of its own bitcoin MINT to “dig” bitcoin by bitcoin enthusiasts around the world. 5 years later, the price of bitcoin has reached 6000 US dollars per year (over 20000 US dollars at the end of 2017). While bitcoin mainland has reached $2 billion 846 million in the first half of the first half of the year, the company once grasped more than 50% of the world’s bit of bitcoin power and the market share of the mining machine exceeded 70%. It can be said that the wave of block chain digital assets led by bitcoin has made the legend of the bit continent.

At present, the company is growing up as a technology company focusing on high speed and low power customization chip design and development. It focuses on high speed operation chip, integrated circuit IC industry, Internet finance, high-performance computing HPC, machine learning algorithm and artificial intelligence (AI). The main business of the company covers mine machine sales, ore pool operation, mine field service and self mining. It is now the second largest wafer – free plant design company in China, and the fourth largest ASIC chip design company in the world. It is expected that the global ASIC chip market will increase from $25 billion 700 million in 2017 to $59 billion 700 million in 2022, maintaining a 18.4% compound growth rate. With the rapid expansion of digital assets in the block chain, the special ASIC chip for mining mining is expected to show an explosive growth.

02

The bitcoin machine provides physical resources for the system. It’s the cornerstone of the “value Internet”

Block chain (Blockchain) is a kind of non tamperable and non forgable distributed accounts which combine data blocks into chain data structures in chronological order, and are guaranteed by cryptography. In short, if we want a fully point – to – point payment / exchange market (the market does not require any intermediaries, such as banks, service intermediaries, etc.), the block chain can provide a centering account scheme. Taking the payment transfer as an example, the traditional payment transfer system needs the bank as the third party (the corresponding concept “centralization” and “the third party trust endorsement”) to transfer the corresponding amount according to the request made by the parties of the transaction, namely, to change the account balance under the name of the two parties in the database, and the right to account is completely owned by the bank in this process. In the payment and transfer system which carries the block chain technology, the user can directly deal with the point to point transaction (the corresponding concept “de centralization”). We do not need a centralization agency to account for the users, instead, each user in the system can participate in the competition in accordance with the specific rules. In a certain period of time, the user scramble for the bookkeeping right to write the transaction in a block of time, as if written to an account page. Other users in the system confirm that the account is not a false account, backups it, and completes the whole action. At the beginning of the next period, each block is connected to the end to form a complete chain. Through the cryptology principle, the new block forms a tamper protection protection for the previous block.

Since there is no centralization of the organization, the block chain is automatically run according to the predetermined program, which can greatly reduce the cost and improve the efficiency, and ensure that the data recording process and results are transparent. In addition to payment transactions, block chains can also be used in a wider range of fields, such as medical, supply chain management, Internet of things, security certification, social and artificial intelligence, which have a profound impact on the social structure.

Point to point value transmission, block chain leading the future “value of the Internet”. The advent of the Internet era breaks people’s barriers to point to point information transmission, and the emergence of block chain technology makes the Internet not only a carrier of point to point information, but also a point of value transfer. In both the human and the animal world, the point – to – point groups that are completely de – centralization are rarely seen, most of which are centralization. We think of the human society. In the history of human civilization, no matter how primitive tribes are, there will be some hierarchy to restrict the whole system. Even the small primitive tribes will have a management mechanism headed by the Chieftain to maintain the operation of the community. In this system, people and people have a simple or complex division of labor, with established principles of distribution, and a certain basis of trust between each other. Even the lions on the African grasslands, one or a few lions as the decision leader, are responsible for the protection of the lion’s territory, and the hunting is basically done by the lioness, and the leader of the lioness is the first to eat. Modern society, whether it is all kinds of physical property (housing, car, securities and so on), or Internet data assets, and other social activities data books, are recorded under the various central institutions. In essence, financial institutions and Internet Co, even government departments, are intermediaries. The operation of a country’s market requires the operation of many central institutions, such as national machinery, law, policy, supervision and intermediary companies, to ensure the operation of the market. It is very rare to go to the central market like the Yap Island. Like the Pacific Yap Island (Yap) for more than two thousand years of the big stone wheel money “fee”, is a few distributed accounts, to centralization of the monetary mechanism; but because of a small population, a single industrial structure, such a mode of de centralization is difficult to replicate.

In October 31, 2008, a network named “Zhong Ben cong” published 9 pages of bitcoin white leather, called “Bitcoin: A Peer-to-Peer Electronic Cash System” (“bitcoin: a point to point electronic cash system”), for the first time in human society to bring a ccash application to the center. When Nakamoto So was designing bitcoin, he followed the law of economics. Bitcoin is an electronic cash system, or bitcoin itself is a degrading, point – to – point accounting system for electronic cash accounts. The bitcoin network is the first payment transaction system that successfully applied the block chain technology, without the centralization agency credit endorsement. The “trust value” of the system is created by its encryption algorithm and consensus mechanism. At the same time, we introduced the first block chain link (Token) – Bitcoin (bitcoin, where bitcoin refers to a tradable coin, rather than a network system of the same name), which is the only wealth expression of the system – the transfer of electronic cash (bitcoin) in the bitcoin network, and the need to pay the bitcoin as a fee. And the computer power resources that support the safe and reliable operation of the network are provided by miners, and the fees are paid to the miners as a reward – the process is called mining. The “mining” act encourages more network nodes to join in, and to maintain and increase the “trust value” of the system. Bitcoin mining, in one sentence, is to “fight for the system’s right to account, and get bitcoin as a reward.” The concept of unfolding needs to know “how to dig” (PoW consensus mechanism) and “what” (incentive mechanism).

Consensus mechanism is the core rule of generating and updating data (maintaining account books), which is the core support for the realization of the value of the block chain system. In short, a block chain is a network that implements point to point (P2P) interaction, which is a typical de centralization system. The key technology of block chain is chain hash structure, cryptology principle, consensus mechanism and distributed network. In a broad sense, the essence of many human social activities is accounting behavior, business activities to record financial accounts, and Internet service providers to record information accounts of user accounts (you experience the first step of any Internet application is registered user accounts), social activities (such as beauty pageant, election) record participants performance accounts. And a book, in addition to the security of the user, the most concerned is the update of the data, because it is related to the latest “balance” of the user’s account. On the block chain book, the latest account (transaction) information is recorded in the latest block chain. The consensus mechanism determines which node is generated by the latest block chain and is synchronized by the whole network. That is, the latest block chain is dug out by this node, or the node will win the right to account, and the node will receive Token as a reward. This is obviously a very tempting job for the miners: the latest account information is updated by you (it’s not very convenient to remember to make a false account!) The other nodes synchronize the blocks you generate, and there are plenty of rewards. The decision of the right to account means that other nodes trust the bookkeeping node, be willing to synchronize the block chain it generates, and watch it take the Certificate Award. This is the role of the consensus mechanism – the trust and incentive mechanism that the whole network will abide by, and the economic rules of the system.

The consensus mechanism is the core economic rule of the block chain system operation, and it is extremely rare to centralization the consensus mechanism. The block chain system is a typical point to point (de centralization) system, and the consensus mechanism is the economic rule of the system operation. The consensus mechanism solves the mutual trust between nodes under the thought of centralization, which is the core rule of the cost input and income distribution between the nodes. Block chain technology solves the problem of transmitting trusted information and value transfer on untrusted channels. In other words, block chain is an open system, the participation node and network transmission are open. Block chain technology ensures the security of the book in the transmission process (tampering, anti-counterfeiting, transmission access security). The consensus mechanism solves the problem of how the block chain is consistent in the point to point distributed network, which is the core rule of the block chain operation. From an economic perspective, the most important issues of the consensus mechanism are the trust and incentive mechanism (cost input and income distribution), a decentralized system, a point to point exchange under the consensus mechanism (resources, items, data, etc.). How to ensure mutual trust between nodes and how to motivate nodes to participate in point to point systems?

Bitcoin mining follows the force market competition mechanism. The mechanism of bitcoin mining is the PoW consensus mechanism, that is, the Proof of Work, which is the “game rule” of the user’s competitive accounting rights. In short, the miners are free to compete by computing power, and the most powerful people can win the right to account, produce the latest blocks on the chain, and get the award (Token, bitcoin). It ensures a large distributed network to achieve consensus, at the same time, because users have to pay a price for the right to account (computing resources and time), the PoW consensus mechanism also restricts the noise and intentional attack in the network, and ensures the security of the network.

The bitcoin machine, in essence, is a computer, provides physical resources for the system, and is the cornerstone of the value interconnection. While bitcoin price and block chain network are growing, calculation force provides the system with the support of physical resources, which is also the case that bitcoin never had any errors and was successfully attacked in the 10 years of bitcoin. In particular, the mainstream bitcoin machine is mainly composed of the following parts: the calculation chip, the heat sink, the fan, the controller circuit board, the aluminum alloy shell, and the external power supply. The core component of this is the computing chip. The calculation performance and power consumption of the mining machine are determined by the computing chip. The cost accounts for about 80% of the total cost of the mining machine.

“Unit power consumption” is the core index to evaluate the performance of the mining machine. In the case of the same computing power, the smaller the power consumption of the miner means the better the performance of the miner, the so-called “unit power power” is the power / power of the miner. With the overall improvement of the whole network computing force, the difficulty of mining success will become more and more difficult, so the mining machine needs to be constantly replaced regularly to maintain the original income. In recent years, the mainstream manufacturers usually upgrade a series of products each year. In this process, the calculation force of single miner has been continuously improved, while the core index “unit power consumption” is decreasing.

In order to optimize “unit power consumption”, special type chips should be used instead of general type chips. The development of bitcoin miner chip has gone through four processes from CPU, GPU, FPGA to ASIC. In this process, the chip that provides the power of calculation has gradually shifted from the general type to the special mining type. The so-called ASIC chip (Application-Specific-Integrated-Circuitchip) refers to an integrated circuit designed for a special purpose. The characteristic of ASIC is to meet the requirement of specific algorithm. In batch production, it has the characteristics of smaller volume, lower power consumption, higher reliability and lower unit cost compared with general purpose integrated circuit. Bitcoin mining is a repeated calculation under specific algorithms, so the application of ASIC scheme will greatly improve the performance of the chip.

The technological process of the chip of the bit continent ASIC mining machine is advanced, and the product change speed is fast. The advanced chip process technology can improve the precision of the integrated circuit, reduce the characteristic size of the electronic devices, improve the chip integration, reduce the power consumption and improve the chip computing power. In order to obtain the best performance, the design and manufacture of ASIC miner chip has been in the forefront of the chip industry. At present, the mainstream ASIC miner chip in the market has been upgraded from 110Nm, 55nm, 28nm to 16nm. Bit continent is the latest ASIC miner chip of 7Nm process in the second half of this year to keep the industry leading. The following are the products of the bit continent and the change of chip.

03

Why investment miners – “call options” in the eyes of investors

The value chain participants related to bitcoin are shown below: the upstream is the design and production of the mining machine; the test package, the seller; the middle reaches of the mine and the mine; the downstream is the bitcoin exchange and the wallet.

The upstream provides the mining machine for the bitcoin mining. They are mainly responsible for chip design, mining machine assembly and sales, and the manufacturing, testing and packaging of the miner chips are handed over to the factory, and the manufacturing, testing and packaging factories, such as TM and sun and moon, are also included. The middle reaches are mine to identify transactions in the network, while the system’s additional bitcoin flows into the market. Because of the exponential increase of the whole network calculation force, the probability of the success of the individual mining is nearly zero at present, so there is a large and small mine and ore pool, and the power of a large number of mining machines will be gathered to compete for the accounting right and increase the probability of the success of the mining. The main participants are bit continent, Bitfury, BTC.com, Antpool, F2pool and so on. A trading, using and storing service provider in the lower reaches of bitcoin. The bitcoin exchange can provide exchange between French currency and bitcoin, bitcoin and other encrypted currencies.

The supplier of bitcoin machine generally adopts the crystal free model. That is, it is only responsible for the design of the miner chip, and the production, testing and packaging of the chip are made by the third party. Because the chip manufacturing process requires huge capital expenditure, this model can allow bitcoin suppliers to focus on the core of the product – the development of chips, and to obtain a reasonable, advanced process capacity. The advanced production capacity of the upstream plant is limited and the new capacity expansion is slow. Because of the high performance requirements of the bitcoin ASIC mining machine, the new product needs to apply the most advanced manufacturing and packaging technology. This will put forward certain access threshold for the corresponding factory, only with advanced process line, high quality packaging level (high product integration, good heat dissipation) can take off the order. And in the field of chip, such factories usually have the characteristics of small quantity and large market share, and the global market is dominated by TSMC in the 7Nm process line which is about to be put into production. On the other hand, because the new technology is in the initial stage of production, the production capacity of the corresponding pipeline is limited, and the construction of new capacity often requires a lot of capital and time investment, and it is difficult to get a promotion in the short term. The upstream generation factory has a strong discourse power, only the customers with large orders and high prices can give priority to the capacity of the customers. As the choice of the industry as the leading industry, at the same time the capacity is limited, and the same period of competition generation of factory capacity share of the large cell phone chipmakers (apple, high pass, HUAWEI and so on), so the mining machine suppliers are relatively weak to the upstream generation of discourse power. Only the large quantity and high price can become the priority customers of the factory, and it is necessary to lock the capacity ahead of time in the form of prepayment, which puts forward the threshold for the scale of the mining machine suppliers and the circulation of funds.

The supply side of the mining machine: holding the pricing power, the price is adjusted synchronously with the profit of mining. The limited capacity + oligopoly makes the bitcoin suppliers have a very strong bargaining power to the lower reaches. In recent years, the price of bitcoin has been rising, driving the new demand of mining machine. In the case of limited production capacity (limited by production capacity) and oligopoly, the upstream mining machine has absolute pricing power. The price of natural mineral machine is also rising at this time. When the price of bitcoin rose at the beginning of this year, the ant mine machine S9 sold the futures price of 34000 yuan in the Huaqiang North market for a time. So, how can the mine be priced? Using the historical price data, we make the following analysis: the current price of the mining machine = fixed return cycle and the daily income of the current mining. Through the historical monthly mining machine price and the monthly average mining daily income (here only for income, but not income, that is, excluding electricity, rent and other costs), the current mining daily income and the current mining machine prices have a linear relationship. We interpret it as the following formula: P = D x (R – C), of which P is the price of mining machine, D is the return cycle, R is the current mining income, C is the current mining cost, R – C is the profit of the current mining. That is, the current price of the mining machine is in direct proportion to the income of the current mining day.

According to the above formula and the linear regression results, we get the pricing strategy of the mining machine supplier: the fixed return cycle is about 180 days, and the price of the mining machine is dynamically adjusted according to the mining income in the current period.

It is worth noting that in such a pricing strategy, the daily income of mining is static, that is, it is assumed that the future daily mining earnings remain unchanged for 180 days. If the price increases in the future lead to an increase in the income of the daily mining, the actual return cycle will shorten, and vice versa.

In addition, when we actually buy the mine machine, we often have a deviation between 180 days when calculating the static cycle, which is mainly caused by the following factors:

The price adjustment of the 1. mining machine is low frequency relative to the mining income, so there is no synchronization phenomenon, resulting in the deviation of the static cycle cycle. In particular, the profit of mining will vary according to the BTC price, but the price adjustment of the mining machine is not so high. For example, the same type of mining machine may send out three batches of goods in one month, so only three prices are adjusted in a month.

The 2. mining machine suppliers will also take into account the expected changes in future mining earnings when they are actually priced. In particular, when the market is soaring, the profit of the future mining will be judged optimistically, which will increase the price of the mining machine and lead to the longer cycle of the static return.

The 3. mining machine suppliers may not be willing to compress their own profit space in the decline of the downstream mining income. The decrease of price synchronization is less than that of mining income, which makes the cycle of static return longer.

From the point of view of mines and miners, the purchase of mining machinery is an investment activity, and its demand is affected by the “expected rate of return”. As an investment product, the higher the expected value of the return on investment and the lower the risk, the higher the demand for the mining machine. In the market, it is generally believed that the impact of the demand is “mining income”, but through the analysis, we found that the purchase price of the mining machine will be dynamically adjusted with the current “mining income”, so the recovery rate and the static return cycle do not change in theory, and there is no way to talk about the impact demand. The real impact on demand is “expected mining earnings.” Specifically, if future mining gains are expected to be higher than current mining gains, it is expected that the return cycle will be shortened and the “expected yield” will be increased to increase downstream demand.

The “expected price” of bitcoin is the main cause of the “expected rate of return”, and the “expected price” of bitcoin affects the downstream mining demand. There are four factors affecting the mining income: algorithms, markets, mines, and hardware. Among the four factors, market factors play a dominant role, mainly because relative to other factors, the price volatility of bitcoin is larger. Taking Avalon Miner A721 as an example, the daily mining income is exponentially attenuated when it is priced in bitcoin, which is mainly caused by increasing total network computing force, while the daily mining earnings change with time is similar to the bitcoin price time curve when the price is priced in US dollars. This fully shows that the biggest factor affecting the profit of mining is the price of bitcoin. As a result, the main factor affecting the “expected rate of return” is the “expected price” of bitcoin.

Further refining the above point of view, that is, the mining machine can be regarded as a “call option” for the price of bitcoin. At the cost of buying the miners, the miners obtained the relative determination of the future number of bitcoins at the cost of the future. The miner’s idea of buying the miner comes from the expected future bitcoin price will be higher than the present, leading to the “expected profit of mining” higher than the present profit of mining. From this point of view, the miner can buy bitcoin at a future price lower than the market, and the miner can be regarded as a “call option” for the currency.

It is the rapid development of iterative ability, strong supply chain management ability and proper capital operation ability, which makes the bitcoin continent can stand out in the ten years of the wave of sand. The period of the founding of the bitland is the period of the “spring and Autumn Warring States” which attracted more geeks and enthusiasts into the field. The basic principle of bitcoin mining is to compete with power, and the growing power of computing attracts many entrepreneurs into the research and development of mining machines. However, as the price of bitcoin slumped and slumped in the market, the bitcoin machine showed a development from “a contention” to a oligopoly. At present, the bit continent has become the absolute supremacy of the mining machine industry.

04

Confused bifurcations:

The bit continent calls for force to forcibly split the bitcoin.

Looking at the 10 year development history of the bitcoin and the block chain, the “bifurcation” is an unavoidable, highly tempting and destructive existence. Since the point – to – point electronic cash bookkeeping system based on block chain technology, it is easier to fork or build other chains. A white paper and a slightly modified computer code can open a new block chain because the marginal cost of its development will decline quickly. At a time when bitcoin just appeared, the performance of the computer network system was far from today, by restricting the size of the block to 1M to ensure that the weaker PC was able to participate, and to prevent the attacker from overloading the bitcoin network. Under the limit of 1M, a block of 10 minutes can accommodate up to 2000 transactions, that is, 7 transactions per second, that is, 7tps (transaction number / second). In 2010, the “disappearance” of the central tcong completed the disintegration of bitcoin, but it was also an ambush for the future development of bitcoin.

Under the controversy of “crazy hegemony”, bitcoin is the first large-scale bifurcation of bitcoin. In 2017, the bitcoin mainland once grasps more than 50% of the world’s bitcoin power, and the market share of the mining machine exceeds 70%. This undoubtedly causes the industry to worry about the “51% force attack”. In the bitcoin network, if one of the miners master more than 51% of the power, that is, it is possible to rewrite the book of the historical block, and the security of the network is not enough. This is the most preparedness of the block chain “51% force attacks”. Over the past year, the number of blocks dug by BTC.com and AntPool (BTC.com and AntPool) for a period of more than a year has been hovering around 51%, a proportion that has caused concern in the industry for 51% power attacks. In fact, there are some worries. Miners use pool calculation to reduce the cost of mining. The standard of miners’ selection of ore pools lies in their rates and network stability. Because the final choice is always in the hands of individual miners, the calculation of the pool is not the same as that of a company. In any case, it is an indisputable fact that the bit continent has the ability to call a lot of power.

Blocksteram, Bitcoin Core as the main representative of the technical school to promote the bit coin cell block technical route, while the bitcoin community big block supporters believe that the block technology scheme is the direct cause of the block network congestion, slow transfer confirmation, high formalities. As the contradiction between the large blocks in the community and the representative of the block technical route is intensifying, the big block supporters are finally hard to fork out BCH on the bitcoin. At 20:20 on August 1, 2017, a new version of bitcoin, bitcoin Bitcoin Cash (BCH), launched by a small bit of bitcoin developers, began to dig, and each bitcoin investor would have a BCH of bitcoin (BTC) equal to the amount of bitcoin (BTC). The difference between BTC and BCH is the name of the nomenclature. All of the two are from the bitcoin white book of Chinese Ben Cong. All of the two have a considerable scale of community supporters and payment recipients. They all claim that they are in accordance with the original intention of “bitcoin” of Chinese Ben Cong. This is the first large-scale bifurcations in bitcoin history. The 2 bit continent holds $886 million 900 thousand worth of encrypted currencies, of which 1 million 20 thousand are BCH, and BCH has a strong support of the bit continent, according to the bit mainland prospectus. Since the split, the median market value of BCH has been maintained at the level of 1/10 of the bitcoin, which is both the result of the community consensus and the free choice of the miner’s computing power; all this has a confused shadow of the development of bitcoin and the market perception of the most powerful “backstage” of the BCH.

“Fragile” BCH, the result of bifurcations. In August 8th, Bitcoin ABC, a major BCH development team supported by bit continent, announced that it would upgrade BCH in November 15th, hoping to develop BCH in the direction of the infrastructure and open up more applications. But the nChain development team, controlled by Craig Steven Wright, did not agree with this change, and launched the Bitcoin Satoshi Vision (BCHBSV) scheme, hoping that BCH should stick to the concept of “Zhong Ben cong” and focus on the transfer transaction itself. Then, Coinbase announced the hard branch message of BCH, which is imperative. As one of the soul figures of the bit continent, Wu Jian is disagreed with Craig Steven Wright in the interview, and the two people also have multiple water wars in social media. At the end of October, the media reported that the ant ore pool under the bit continent has recently interviewed Xinjiang’s major mines in a near future, and 90 thousand S9 miners are urgently deployed to deal with BCH hard bifurcations. Craig Steven Wright, the opponent of Wu’s cold, said, “it’s an endless war, or I win, or you can lose together.” At the bifurcation moment, the competition between the two sides is very fierce. BCHABC is leading in the block speed. From the mineral pool calculation, the industry speculated that the bit continent switched BTC force to participate in the BCH bifurcations. At present, the BCH force keeps the lead, and the threat of “empty block attack” (which can be analogous to the DDoS attack on the network) remains. In any case, BCH has ceased to exist, and then instead of two new chains – BCHABC and BCHBSV.

The calculation force has created the value basis of the block chain, but the competition of the calculation force is free. This is the original intention of the PoW (work proof) consensus mechanism adopted by Zhong Ben Cong, and it is difficult for any individual or company to monopolize the power of calculation. A strong supporter of cash in bitcoin is now facing the same challenge. The influence of bifurcation to a chain value is obvious. Under the established miner’s calculation force, bifurcation can only divert consensus and shake the market value basis of the project. According to the current incomplete exchange data (because of the limited number of exchange traded by the two parties), the total market value of the two chains after the bifurcations is about 33 billion 800 million yuan, while the lowest value of the market value of the forked BCH is 50 billion 600 million RMB. At the same time, the recent bitcoin also has a nearly 40% decline, the result can only be said to be two losers.

05

The competition of the mining machine is hot, but it is not afraid of the bear market, and it is still sunrise

The global block chain hardware market space is big, the growth rate is fast, in 2018 nearly 50 billion. The hardware equipment related to the block chain is mainly used for the mining of the encrypted money. According to Frost &; Sullivan statistics, the sales revenue of the global block chain hardware has increased from 70 million yuan in 2012 to 19 billion 300 million yuan in 2017, and the annual growth rate is more than 200%. At the same time, the wide application of the future block chain technology in all walks of life will promote the growth of block chain hardware demand. In the next three years, the market will maintain 72% annual compound growth, the global market scale will reach 45 billion 600 million in 2018, and to 2020, the market scale of the global block chain hardware will close to hundreds of billions.

At the beginning of 2018, the price of bitcoin has fallen sharply (up to nearly 80%), with some views that the mining industry will also be in the cold winter. We think that the demand for new calculation force is still in the high growth stage, and the neutral judgment in 2018 will reach 165%. Since the beginning of the year, the market prices of the bitcoin have been lower, the price of money and mining earnings have fallen sharply, which has led to the slowdown in the growth of new mineral demand. But through the data, we found that in the remaining time of 2018 for the BTC expected price of $10 thousand, the new 39930PH/s demand will be generated in 2018, an increase of 165% last year. Although compared with last year, the growth rate is still at the stage of rapid development, which is essentially the following four factors:

1. mining machine product change quickly, high performance mining machine pull demand development.

The price of the 2. mining machine falls with the price of the coin and the profit of mining, so the static cycle of the mining machine investors has not changed obviously.

3. the current currency price level is low, most mining machine investors look at the BTC market for the next half of the year, so choose to buy in the bottom of the mining machine at this time.

4. the world has always existed in parts of the region for the price of electricity and rent, which continues to pull the local mining demand.

In the current period, the price is 3000 dollars (pessimistic expectations), 4500 dollars (neutral expectations), 6000 US dollars (optimistic expectation), the corresponding new calculation force demand is 3.7, 3.8, 40 thousand PH/s, the growth rate of 177%, 188%, 199% in 2017.

06

ASIC chip design “Warring States melee”

The perpetual hegemony of the bit continent

The main mainstream of the bitcoin mining machine supplier is the non wafer factory model. Its competitive advantage is mainly embodied in the design of the ASIC miner chip, and the ASIC chip design belongs to the high-tech industry. It needs the enterprise to launch the better performance of the generation product in time according to the market. Therefore, it puts forward a relatively high entrance threshold for the enterprise’s R & D capability and capital investment, and the enterprise needs to have the following resources to stand undefeated in the industry.

1) strong R & D ability. The upstream ASIC mining machine chip designer needs to be able to adapt to the rapid product change market. Only with the leading speed of the industry, the product of higher price ratio can be continuously introduced, so as to gain the opportunity of the new product market of the same kind, get the corresponding premium and more customers’ favor. At the same time, rapid and effective R & D ability can also reduce the number of failures in R & D, thus reducing unnecessary R & D costs. All this requires the chip designer to have a strong R & D team, years of research and development experience and accumulated R & D data.

2) strong capital guarantee. The design of the chip has the characteristics of large investment and long period, so a large amount of research and development funds are needed in the early period of the enterprise, and it is able to bear the potential loss caused by it. This provides a certain threshold for the flow assets and cash flow of the enterprise.

3) good cooperative relationship with the upstream high quality factory. Only the most efficient ASIC mining machine can get the favor of the market, and in the production process of the generation factory, the process technology used by the miner chip is very important to its performance. In view of the limited production capacity of the high end process process line, only the order of the enterprise is carried out by the factory in order to ensure that the latest products of the enterprise enter the market in time and occupy the first opportunity. Therefore, it is necessary to maintain a good cooperative relationship between the enterprise and the high-quality generation factory, which is usually not available to the potential entrants.

4) economies of scale. In general, the cost of the hardware of the chip = (chip cost + test cost + encapsulation cost + mask cost) / final yield. Efficient ASIC chips need the most advanced process technology, and at the beginning of the latest process, the cost of the mask is expensive, up to $one billion (a mature process may be only a few million dollars). Only after the formation of economies of scale can the cost share of the mask can be shared and the cost of the unit is reduced and the cost advantage of the product can be formed.

The industry is in the period of the Warring States war, and one independence is difficult to continue. In terms of the deliveries of the 2017 miner’s machine, bitcoin ASIC mining machine market, bit continent and Jia Nan Yun Zhi take up more than 80% of the market share, about 70% of the bit continent and 20% of jiaxan. Fast and powerful R & D ability, strong capital guarantee, good relationship with upstream factory and scale economic effect are the unique resources that industry leaders firmly grasp. The market share of the head and the absolute pricing power of the product show no doubt in 2017, but the core of the miner chip is still a strong R & D and fast iterative ability. At present, whether the overlord is able to sit stable and still remain variable.

The future competition pattern of the bitcoin mining machine industry is unchanged, and two leading enterprises are more than other enterprises in the core resources. Through the comparison of the products, we can find that the two core parameters (“unit power and power consumption” and “unit calculation force price”) have advantages in the market leading bit continent and Jiayan weeding, and the annual change of new products also proves the sustainability of the two companies’ R & D capacity; in comparison, other mining machine suppliers have the problems of insufficient scale effect, high price of products and insufficient series development ability.

The competitor’s peak product is constantly shining, and the coin price bear market is hard to mask the hard competition of the chip. At present, the digital asset market, such as bitcoin, is in a bear market stage, which is the most severe test for the survival of industry enterprises, and the survival ability of the enterprise comes from its intrinsic value. For the rapidly changing block chain market, it is helpful to keep the value basis of mining enterprises to keep the advantages of R & D leading and rapid iteration. For the top 7 nanoscale chip design, the head lottery has been picked up by the biggest competitor of the mainland. Jiaxan is now the second largest bitcoin supplier in the world. In August 2018, the company successfully produced the world’s first 7Nm based ASIC mining machine. In addition, the artificial intelligent AI chip was also used in the field of speech recognition, gene detection and unmanned driving. On the basis of the 7 nanometer technology, the ASIC mining machine is 3 months late. In the competition situation of “one day of the coin circle and one year of the world”, the challenge of the hegemony of bit continent is seen as a spot.

The new market in the block chain, any enterprise that has the opportunity should not be ignored, the strength of the mining machine industry has hundreds of millions of communications, Halong Mining and core science and technology, the future of the winner is not known. It has strong technical strength and market competitiveness in the fields of data communication, fiber transmission and communication, software development, ASIC design and so on. The company owns the wing bit series mining machine, the mainstream product E9.3 uses its independent research and development 10nm chip, the calculation force reaches 16TH/s, the unit power consumption 110W/THs. The Pangolin Miner Shenma miner M3X is a ASIC mining machine with 28nm chip, with a power of up to 13TH/s and a unit power consumption of 162W/THs. The product is the main price to the price, through the low price into the market, relatively short cycle of relative large factories to get some users.

Halong Mining, a ASIC chip manufacturing company, is set up by foreign bitcoin developers. The company aims to provide the market with high quality options outside the bitland mining machine and break the original monopoly pattern. At present, the company’s product line has only one machine: DragonMint T1, the calculation force reaches 16TH/s, the power consumption is low to 90W/THs, the capacity limit is the main problem that the product meets, and the product has been sold out at present. In addition to selling mine machines, the Future Ltd will also sell the mining chips separately.

Core technology is a domestic IP/IC design company, both in China and North America have a design team, through advanced products and services, core technology IP has helped many front-line companies to achieve the rapid success of the SOC. At present, the company’s latest bitcoin miner product INNOSILICON T2 uses the ASIC chip of 10nm, with a powerful 17.2TH/s power and a unit power of 91W/THs. But at the same time, the mine is priced at up to 1500 dollars, compared with other mining machines, the static cycle of the cycle is longer.

07

To extend to AI, the company takes the block chain ecology to break the Bureau

With the success of ASIC chip design, professional experience and strong R & D capabilities, bit continent extends its focus to the field of AI and seeks new breakthroughs. According to the company’s prospectus, bit continent is one of the few AI chips in the market that has the ability to develop chips for cloud training and inference, while other manufacturers mainly include Google and NVIDIA. The first AI chip BM1680 was launched in the second quarter of 2017, and the second generation of AI chip BM1682 was introduced in the first quarter of 2018. Among them, BM1680 is a universal AI chip, without direction bias, image recognition, Natural Language Processing, text processing, finance, medicine and other fields can be applied, so it can be used as cloud training and inference AI chip. BM1682 is upgraded on the basis of BM1680 and is equipped with a basic system for video processing. It is very convenient for the application market that needs image and video processing, such as security, to play an important role in the cloud.

At present, SBC and smart terminals for security and park applications on the ASIC of AI have also been launched. The prospectus discloses that bit continent will also expand business to cover a wider range of AI technologies and applications, such as device – side computing chips, algorithms, and development platforms to capture the huge potential for growth in the AI industry.

In order to stabilize the supply capacity, the company has established a partnership with the major suppliers of the industry to improve the company’s ASIC chip development capability. The company has established a close and stable connection with the world’s leading wafer generation power plant, especially TSI has listed the company as an equally important customer in the world’s top companies such as apple, high pass, and Bo Tong.

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