A few days ago, an elder from my family called me. He is in the business of selling mining machinery and noticed from the news that the prices of mining machines had surged. He said that wasn't the case, as his own excavators hadn't increased in price at all. He questioned why the news was spreading misinformation. After explaining to him for a long time, I'm not sure if he understood, but essentially, the mining machines reported in the news were not the same as the ones he was selling.

The concept of mining machines wasn't clearly explained, but he became very interested in cryptocurrencies. He started researching online and inquiring about them, even planning to buy a few.

Generally speaking, this elder is a real heavyweight in the financial world. He is extremely insular, and if he starts inquiring about something, it's often at its peak. When he begins to raise funds to enter the market, the value of that thing tends to collapse due to his involvement. This has been proven time and time again, and people who know him call him "Investment Tail Light, a precursor to a crash."

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This time, it was even more bizarre. He was asking me how to buy Ethereum, and the cryptocurrency market crashed directly. In the past few days, Ethereum has almost halved in value. He feels very guilty, thinking that after causing the collapse of Moutai last time, he has now caused the collapse of cryptocurrencies. Fortunately, he has a solid foundation and has been through several such incidents before, so his life hasn't been greatly affected.

Coincidentally, many people have been asking about mining recently, and I know quite a few miners. It's a good opportunity to explain to everyone.

At the beginning of the article, I must make a serious statement: this industry is very deep, and most people can't grasp it, so don't get involved casually.

1. Origin

Digital currency emerged in 2008, during the financial crisis. People were discussing how to deal with the bottomless money printing by central banks. As a result, the concept of cryptocurrency began to rise, mainly focusing on three key points:

Decentralization, meaning there is no central bank involvement, so no one can issue currency indiscriminately;

Unregulated, even if a criminal is caught, as long as he doesn't confess, the government can't access his wallet. However, once he confesses, it becomes the government's. Many countries themselves do not mine, but their governments own a large amount of Bitcoin, mainly because they have seized a lot of coins in the process of cracking down on crimes, making the government a large holder of Bitcoin.Scarcity is easy to understand; it means limited quantities, and I won't elaborate further on that.

This thing has been quite a stir since its inception, with prices that have always been like a roller coaster. Moreover, because of its enigmatic non-mainstream behavior, it has attracted a large number of participants from the start. This led to the emergence of "high-end players" and "amateur players."

I actually know a high-end player. He used to have tens of thousands of bitcoins when they were still worthless, and he would give them away everywhere. Everyone knew he had a lot. Later, as bitcoin experienced several ups and downs, people thought it would soar to half a million dollars during the surge, and when it plummeted, they thought the bubble had finally burst, and the participants also followed the price fluctuations and made a fuss.

He was no exception. After a series of micro-operations, when bitcoin really rose, his coins were basically gone, which is the experience of most people playing with coins.

However, he suddenly realized that he had no coins in hand, but the real coin speculation had just begun. He was everywhere, claiming that he had achieved financial freedom through coin speculation, selling courses, and giving lectures. Now he should be truly financially free. This is somewhat similar to a real estate blogger in 2016 who actually didn't have a house but taught others how to make money by buying houses, and then he made money and successfully bought a house. There is also a career blogger who didn't earn more than 100,000 a year when he was working, started as a career planner, and although he was not very good at working, he made money by teaching others to work, which is quite magical.

Speaking of this, we need to talk about where these coins come from.

I believe everyone has seen mining on TV? A mine is designated, and various machinery and people work inside. Miners dig out the ore one piece at a time, keep the useful ones, and discard the useless ones. This process is also happening every day in the digital world, where there are mines, mining fields, miners, and ores.

Let's talk about the types of mines first. It can be said that different digital currencies are like different types of mines, just like mining in the real world, some mines are gold mines, some are silver mines, and some are copper mines. Gold is relatively scarce, that is bitcoin; silver is much more abundant and also cheaper, that is Ethereum. Copper is abundant and the price is very cheap, that is other various non-mainstream currencies.

And "mining" is essentially using a computer to solve a very complex mathematical problem. If the result is calculated, it can be exchanged for currency. The computer runs an algorithm day and night without stopping, which is similar to real-life mines. I have previously translated a bitcoin video that describes this principle, so I won't elaborate here.

In the digital world, each type of mine is also independent, some are mining bitcoin, some are mining Ethereum, and some are mining Litecoin. Each type of mine is like a huge mine, with countless miners digging inside. By the way, now people often hear about people mining at home with a few graphics cards, these people are usually mining Ethereum, not bitcoin.The places where people use computers to mine are known as mining farms. The scale of different mining farms varies greatly. Some farms are so large that they occupy an entire mountain in the real world. To mine, they have to build their own power stations, with monthly electricity costs reaching tens of millions, and the scale of the substations can serve a small county. On the other hand, small mining farms are just a few square meters of a small computer room, built in a tin shed on the roof, or many otaku at home on TikTok also have a few graphics cards to form a micro-miner.

There are naturally miners in the mining farm, but in the digital world, mining is done by machines, and humans are all managers. Everyone manages these machines to mine, responsible for the construction of the mining farm, daily maintenance, the purchase and repair of machines, and other daily trivial matters.

The so-called ore is various digital currencies, which is the significance of mining. Once mined, the obtained currency can be collected into one's digital wallet, which can be used or exchanged for real-world currency according to the exchange rate.

It sounds not much different from real mining, right? In fact, if you talk about mining, the difference is not very big.

As mentioned earlier, the biggest feature of digital currency is decentralization, that is, these various virtual currencies have no managers, and everyone can freely mine with equipment.

In the digital world, to solve that complex mathematical problem, a very large amount of mining is needed, and the energy consumption is almost the same as mining a real mine. Moreover, the initial investment is very large, and the word "mine" perfectly describes the difficulty of finding digital currency in the blockchain world.

Since this is the case, friends may think, since it is everyone mining together, but there are so many people mining, everyone's power in the entire mining farm will only be a little bit, so the possibility of mining is not very low? If you are unlucky, you may not be able to mine for a long time, and the income will be very unstable, but everyone's investment is real, is there any way to solve it?

Don't worry, as long as it is related to money, there will naturally be people who have thought about it, and there are solutions. This is the so-called "mining pool". The principle is to gather a group of scattered miners of various sizes, and everyone goes together every time they mine, digging together, and the more people, the greater the power. The possibility of a group of people mining is much higher than that of a single person.

When the digital currency is mined, everyone is allocated according to their respective mining efficiency, which is the so-called "computing power". Those with more computing power will naturally get more, and those with less will get less. Even if you are unlucky and have never mined, as long as you connect your miner to the mining pool, you are considered a member of the organization, and the organization will recognize you as one of its members. No matter who in the organization mines, you will get a share, and if you mine, you also have to share with everyone in the organization.

So some people say that they mine 0.0001 Bitcoins or 0.002 Ethereum every day, which is worth several US dollars. Don't think that these digital currencies are mined in fragments. What is mined is a whole piece, but it is the result of all the miners participating in the mining pool, and then distributed according to the labor.2. The World of Miners

In the real world, who are the people involved in mining, where are they located, and how do they live?

I happen to know some of these individuals who were once my colleagues. They often traveled for business and learned about this industry while on flights. After understanding these things, they began to operate in this field.

I contacted one of them this time and asked him to explain to me how this is played.

As mentioned earlier, mining farms vary in size. This friend of mine once built a very rudimentary mining farm with a friend. The so-called mining farm was actually the rooftop of a residential building. At that time, they bought more than a hundred graphics cards, connected them to a mining pool, and even wired the electricity themselves, consuming 15 degrees of electricity per hour. There are many things to pay attention to in mining, the most critical of which are cooling and dust removal. Each graphics card is like a miner, and the most feared thing is heat. Because the scale was small and the space was sufficient, they tried to keep a larger distance at the time. The rooftop was high, and the wind was naturally strong, so the cooling problem was not too bad. However, dust removal was a bit fatal. The city had a lot of dust, and they had to blow the dust from time to time.

As for mining itself, there is not much to say. Anyway, it's a daily struggle, worrying about the price falling, worrying about the machine breaking down, worrying about unstable voltage, and there's not much to do while watching, but leaving is also afraid of problems. Even in dreams, they dream of being robbed of everything.

Due to the constant fluctuation of the prices of those coins, everyone's mentality follows suit. When the coin price soars, they can earn thousands of dollars a day, naturally, they are very happy. They post in the circle of friends, something like "The daily life of a miner is to make money lying down, oh no, occasionally lie tired also stand to earn." Sometimes when the coin price plummets, they dig for a day and lose for a day, crying and shouting, saying "The life of a worker, the disease of an entrepreneur."

Here is something to mention, how much electricity does the global digital currency mining consume every year? This number may be much larger than everyone thinks, because the statistics are not necessarily complete, estimated to be between 120 billion and 150 billion degrees, accounting for about 0.5% of the global power generation.

With such a large energy consumption, mining machines and electricity costs account for the vast majority of mining investments, and electricity costs are even more significant. So, whether mining can make money mainly depends on the location of the mining farm. As mentioned earlier, mining has high cooling and high power consumption, so the best location is a place that is cold and has cheap electricity. Firstly, cheap electricity can save money, and secondly, if the weather is cold, the cost of cooling will be much less. If such a place is found, a large number of miners will flock to establish mining farms.

The world is so big, there are all kinds of places, and the world's largest mining machine gathering place is in Sichuan, China. To be precise, it is in the high mountain area of western Sichuan, that is, where Sichuan goes to Tibet. As for how concentrated it is, you may not believe it, China accounts for half of the world's computing power, and Sichuan's computing power accounts for more than half of the country, which is about 1/3 of the world.Such exaggerated achievements mainly come from two aspects. One is that the place has an inherently advantageous geographical location. The Western Sichuan Plateau is on the way to Tibet. What kind of place is Tibet? It is the highest plateau in the world, not just cold but extremely cold, where a fan is enough to cool down.

The cold is nothing, but the water resources here are particularly abundant. How abundant? This is the common source of the Yellow River and the Yangtze River. Abundant water resources mean that hydropower stations can be built. Hydropower, especially large-scale hydropower stations, has low electricity generation costs on one hand, and the main benefit is the ability to provide sufficient power. Moreover, the mountainous area of Western Sichuan is divided into flood season and dry season. The water volume during the flood season is astonishingly large, and the generated electrical energy is particularly abundant. As for how abundant it is, the computing power here is so great that if it were to switch from the flood season to the dry season, the global computing power could decrease by more than 10%. You guys can imagine.

However, it is difficult to transport so much electricity, and the electricity price will also be greatly reduced. So there is a slogan saying "make a profit during the flood season," which means that all the investment in equipment can be earned back within a flood season, and from then on, it will be pure profit.

In a place that is cold enough, there is also enough cheap and abundant electricity, such a place is naturally suitable for mining digital currency.

Another reason is China's attribute as a construction maniac, coupled with strong industrial production capacity. Normally speaking, the Western Sichuan Plateau, with such a high altitude, so many mountains, and the environment can be described as harsh. If it were another country, the infrastructure might not be complete, let alone building so many computer rooms and hydropower stations in such a remote mountainous area, even building a suitable road would be difficult.

Fortunately, this problem is not a problem for our country. A large amount of materials have been transported to Western Sichuan, and mines and hydropower stations have been built.

As for China's industrial production capacity, it is the Chinese who first invented the specialized digital currency mining machines in the world, and now 3/4 of them are produced by China, basically monopolizing the market for professional mining machines, and a large amount of exports are required every year.

You ask me what a specialized mining machine is? This requires a bit more explanation.

At the beginning, everyone used the CPU for mining. The CPU is similar to a college student, capable of complex calculations, such as calculus, but there are few people, and they cannot perform many parallel calculations at the same time. In fact, the graphics card is also a CPU, but the principle is not quite the same, equivalent to stuffing a bunch of elementary school students, each with not very strong computing power, but there are many people, and they can perform many calculations at the same time. Just right for mining, which requires many people to handle a bunch of simple calculations at the same time, so the graphics card is used.

So some people use graphics cards for mining. The design of the graphics card is very suitable for simple calculations, and mining is much more professional than the CPU, which is equivalent to a large number of excavators. So since the popularity of digital currency has increased, the price of graphics cards has also been driven up. When the currency rises, the price of graphics cards also rises, which is called "mining tide." And once the currency price falls, the price of graphics cards also falls, which is called "mining disaster." And the fluctuation of the graphics card price is like metaphysics, and I know some friends who have made a fortune by selling graphics cards.Although mining with a graphics card is much faster than with a CPU, people still want to go even faster. As a result, a real professional tool has emerged. Its Chinese name is too long to mention, but in English, it is simply referred to as ASIC, or "professional mining machine." This device is specifically designed for mining and can only mine a specific type of cryptocurrency. The more specialized the application, the higher the efficiency. Compared to graphics cards that can also be used for gaming and graphic design, the efficiency of ASICs is more than a hundred times higher. Therefore, as soon as they appeared, they almost dominated the market.

However, professional tools also have their own problems. They can only be used in specific mining fields and are very expensive. The investment required is much greater than that of graphics cards. Moreover, due to their high speed, they have higher environmental requirements. If you want to mine, the initial investment is much higher than that of graphics cards.

Because they are specialized, you have to buy new equipment to mine other types of cryptocurrencies. Nowadays, there are many types of digital currencies, and designing and producing specialized equipment for a specific mining field is very expensive. Therefore, only a few digital currencies have specialized mining machines. If the popularity of a currency is not high enough, it is like a small mining field, and equipment manufacturers will not design and produce specialized equipment for it.

3. Migratory Birds

The two friends, carrying money, first took a plane and then switched to a car, traveling through mountains and rivers to Sichuan. Originally, they were ordinary urban white-collar workers, but they were at a loss when they arrived there, not knowing where to start. They knew they should build a factory, connect electricity and the internet, and then mine, but they had no idea how to start in an unfamiliar environment.

Fortunately, when they arrived, some people had already built mining fields, and even taxi drivers and restaurant owners could tell at a glance that they were there to mine. The taxi driver, seeing that they were new and less knowledgeable, personally instructed them on how to start working. After a few days, they sorted out their thoughts, met a few fellow provincial mine owners, and found an organization. They were no longer in the dark, and the following matters proceeded in an orderly manner.

The so-called "when the time comes, the world helps; when the luck goes, heroes are not free." They did not open their own mining field but partnered with others and took over the equipment of a person who had quit, which was equivalent to starting a business directly.

The electricity price there is very cheap, and the actual profit is even better than the best result they expected. Especially after they took over, the price of Bitcoin continued to rise. Compared to their previous small-scale mining, a regular mining field is really different.

As for what a large mining field looks like, there is nothing novel about it.

In general, a mining field is no different from a large computer room, except that the cooling and ventilation are particularly exaggerated. Because the heat dissipation is much more severe than in a regular computer room, when you enter the room, you can see the mining machines densely arranged. As a result, the heat dissipation is particularly fierce, and the requirements for cooling are higher. The fans are large and numerous, and the wind is so strong that it's hard to stand. Even in a place like western Sichuan, where the flood season is in summer and the temperature is not as low as in winter, many require not only air cooling but also water cooling. Even so, the temperature inside is above 35 degrees Celsius, and it is noisy, humid, and stuffy. You can only wear short sleeves when you go in, and you need to wear a jacket when you come out. If you patrol at night, you need to wear a coat outside, and you can only take off to a short sleeve when you go in.The riverbanks are lined with sprawling mines stretching for several miles, with the most conspicuous feature being the thick power cables, thicker than a person's arm. Locals are all involved in the mining industry, some opening restaurants, while others have set up makeshift rooms to buy drinks and create a simple karaoke setup.

However, life in the area is not very convenient, as transportation is quite isolated. Since mining is a 24/7, 365-day operation, everyone works in shifts. When it's their turn, they are busy running around inside and outside, but when they have free time, they are extremely bored. The bosses are always busy with various tasks, while the partners with shares have little to do, other than playing with their phones and games, as there is not much entertainment available. They can't go far, so they just wander around the vicinity, where the scenery is actually quite beautiful, but after staying for two or three months, it becomes monotonous.

The people who come to mine are diverse, but most of them are originally engaged in computer-related work. Some are hardware sellers, some are programmers, and some are electrical engineers. Most of them are young people who are doing jobs that are more or less related to mining. They heard through word of mouth that this can make money, so they entered the industry.

There is an exception, a taxi driver from Chengdu. One day, two mine owners hired his car, and he overheard them talking on the phone about spending 200,000 yuan on electricity last month. He casually asked the two where they were from and learned about this industry, so he joined in. Although this person doesn't understand digital currencies, he is an expert in transportation.

As for why a transportation expert is needed, after the autumn, the flood season ends, and the water level during the dry season will be very low, which cannot meet the mining needs, and the electricity prices will be much higher. So the mine owners need to move their mining machines, moving the equipment to Inner Mongolia and Xinjiang. At that time, the weather is already cold, and the equipment is heavy and numerous, making the move very difficult. It requires disassembling the equipment one by one, packing it well, and then loading it onto the truck. The scene at this time is very spectacular, with a continuous stream of trucks carrying things in a line, forming a line on the mountain road. When spring comes and the water rises, these trucks will come back again, just like migrating birds, or nomadic tribes.

Why go to Xinjiang and Inner Mongolia?

Because Inner Mongolia and Xinjiang are also very suitable places for mining, with high latitude and cold climate, and transportation is more convenient than in Western Sichuan, so it is inevitable that some people set up computer rooms here for mining.

Moreover, the power supply in that area is also sufficient, but it is not hydropower here, but mostly relies on coal-fired power generation, because coal is cheap and the electricity price can even be lower than hydropower (some areas in Xinjiang can even be as low as one cent per kilowatt-hour).

This is why, from the mining map, Sichuan, Xinjiang, and Inner Mongolia are the three peaks of the world's mining computing power.Let's talk about the issue of graphics cards.

Every time there is a mining boom or disaster, apart from the miners themselves, the most affected are the prices of graphics cards. As mentioned earlier, professional mining machines can only mine a specific type of cryptocurrency. In comparison, graphics cards are much more flexible. They can be adjusted through software and can still be used for gaming after being restored to their original state.

As a result, there are still many people using graphics cards for mining, especially when a mining boom occurs, the prices of graphics cards skyrocket.

The problem is that for gamers who buy graphics cards, it is a pure investment, while the miners who use graphics cards for mining are making money. Compared to them, gamers are naturally at a disadvantage.

Speaking of mining with graphics cards, the first issue is that the prices are driven too high. Gamers who buy cards may have to pay twice as much, especially for the latest models that are out of stock. Miners and speculators hoard them, and many gamers who are envious also join in the hoarding, driving the prices even higher. They end up paying more just to play games properly.

Another issue is that, as mentioned earlier, mining is continuous, which means the graphics cards also work continuously. This significantly reduces the lifespan of the graphics cards. Statistics show that the wear and tear from mining for one day is greater than playing games for a month. This has led to the issue of "mining cards."

The so-called "mining cards" are graphics cards that have been used for mining for a period of time. Many of these cards may look brand new on the outside, but the actual condition inside is uncertain. It's not that all cards used for mining are bad. Electronics can be quite mysterious, but just like cars, it's not certain which will have issues first: a brand new one or one that has traveled 100,000 kilometers. However, a bunch of new ones is definitely better than a bunch that has been driven 100,000 kilometers, otherwise, why are they more expensive?

After mining for a certain period, while the cards are still under warranty, they are replaced and cleaned up for resale. Since mining cards appear to be in good condition on the outside and have not been used for a long time on paper, and their prices are lower than those of genuine second-hand cards, many sellers do not disclose the actual situation. Some gamers who are not familiar with the industry are deceived, and they may receive cards that work normally at first but fail after a short period of use. When they try to find someone to help, they can't find anyone, and the manufacturer won't take responsibility.

Why won't the manufacturer take responsibility? It's still due to mining. When the cards are damaged by mining, they are also sent to the manufacturer for repair. At first, the manufacturer responded positively, but the repair rate for various brands increased significantly, and the after-sales service was overwhelmed.

The manufacturer realized that mining does indeed cause the graphics cards to be scrapped prematurely and directly added a statement on the packaging of the graphics cards saying "no warranty for mining damage." As a result, the second-hand market has become the only way out for mining cards. This has led to a situation in the second-hand graphics card market where any second-hand card is considered a mining card. Many gamers are hesitant to buy cheaper second-hand cards, and the high price of new cards makes it difficult for them to sell their old cards at a good price.Game players say I have a phrase "ma mai pi" and I don't know if I should speak it or not...

However, what we talked about above are all mining gangs and big players. Now there are a large number of amateur enthusiasts in the market. For example, a large number of internet cafes have been closed specifically for mining, and there are also many people who put a few graphics cards at home and blow them with a fan. A few days ago, I specifically asked a wild miner. Before the Bitcoin crash, the price was at a historical high. There were eight 3060 graphics cards in a miner, and they could earn 200 to 300 yuan per day. He has twenty miners and invested more than one million yuan. He hopes to sell the graphics cards in the future when he stops mining.

When he bought it, a 3060 was more than six thousand on a certain east platform. He originally planned to return the investment in half a year to one year, but he didn't expect the sharp drop in the past few years, and he is crying with his head in his hands.

This is also why I said at the beginning of the article not to try casually, unless you have prepared for all the money to be lost.

4. Epilogue

I used to think about a problem, could it be a conspiracy of the United States, to take back the US dollar through Bitcoin. I talked with a friend in the industry during this period, and he smiled and said, do you know Russia? I said I didn't even know what Russia was, could you explain it to me.

He said the Russian government regards the mining industry as an important means of earning foreign exchange through exports. After mining, it is sold internationally, and then the foreign exchange is enriched. The salary of the Chechen mercenaries fighting in Syria is paid with the money from mining. In order to mine, the Russians have even built mines in the Arctic, burning natural gas to generate electricity to mine Bitcoin, minus forty degrees, and the place has less dust, and the cost is extremely low. In addition, the former Soviet Union left a large number of abandoned bases, military and civilian, which are now being used to actively mine. Not only that, the Russian military is also mining on a daily basis. In the future, the Russian military will not only sell arms but also sell Bitcoin. Are you afraid?

The problem is that the Russians seem punk in mining, but the actual mining power is only 7%, and some of this 7% is also moved from Chinese mines. China has 65%, that is, most of the world's Bitcoin is mined in China, sold internationally, you say it is export earnings or US dollar reflow?

There is also Iran, which said that due to the tension of electricity caused by digital currency mining, there was actually a power outage.

Because Iran has abundant energy, especially natural gas, which is not easy to store and has no pipeline transportation, it can only be used for power generation, which makes Iran's electricity very cheap, only one dime per degree, and even if you spend money to build your own power station locally, it is only a few cents per degree. Due to US sanctions, Iran urgently needs foreign exchange and is quite supportive of mining, and Iran is also a major miner.Speaking of this, another friend chuckled and said that your arguments are all fallacies and heresies. The essence of China's miners and the coastal processing industry is the same, which is low-end production capacity. The ones who are in charge in Europe and America are the big guys.

Then they started to argue.

In addition, some people began to wonder if it's worth consuming so much production capacity just for some electronic numbers.

Others would say that this thing can be exchanged for US dollars, US dollars can be exchanged for RMB, and RMB can be used to buy a house. Moreover, you work hard every day for RMB, so is it worth it or not?

There are also topics like money laundering that everyone has talked about to death, so I won't say more. Anyway, now Bitcoin, along with traditional Chinese medicine and genetically modified foods, has become a topic that many people avoid discussing with friends. Don't casually talk about it with people around you, or it may lead to conflicts between friends and even between parents and children.

The strangest thing is that many people didn't believe in this thing at first, but when they saw others making money, they were so envious that they bought one (there are also many people who only have 0.01), and then they became believers, arguing with those who doubt Bitcoin every day, forgetting that they used to hate this thing as well. This may be the case where your position determines your thoughts.

However, the attitude of the country is now very clear. It wants to regulate this thing. Inner Mongolia has already made it clear that it is not allowed to mine, and it is only a matter of time before the whole country does not allow mining. The impact on family workshops may not be great, but large mining farms basically have no way to escape. A period of cyberpunk-like mining history may be about to come to an end.