Has the Mining Outlet been Converted from Bitcoin Computing Power to Hard Disk Capacity?
Early Bitcoin mining has allowed many ordinary people to achieve rapid growth of their wealth, but with the upgrading of mining equipment and the increase in mining difficulty, it is no longer suitable for ordinary miners. In the past two years, because of the emergence of the star projects like Filecoin, the scale of hard disks invested in the field of capacity mining has been very large. With the advantages of low threshold, energy saving and decentralization, will hard disk capacity mining become the new outlet after Bitcoin?
Zhu Fa, the co-founder of Biyin and Inbit and Alex, the founder of HPool are invited to give an in-depth interpretation of the issue of hard disk capacity mining.
Q1: Firstly ask a question about mining motivation. There is a saying that mining is better than buying coins, so what is the difference between them? Why are people willing to participate in mining constantly and why is it so attractive?
Alex: Mining or buying coins is actually a game between risk appetite and strategy.
For buying coins, you will make a profit only when the price rises. While mining can hedge the secondary market and continue to carry out arbitrage during the mining process. As long as the computing power has not increased sharply, miners can make profits no matter the coin price rises or remains stable or even falls slowly for a period of time. Therefore, people with low risk appetite tend to mine.
But those with high risk appetites may think buying is better than mining. Take Bitcoin as an example, the same cost of 1 million was used to purchase graphics cards for mining and buy coins directly in 2011, and the profit of buying coins must be higher in the end.
The logic of buying coins is belief or value investment, while the logic of mining is to achieve long-term stable profits through arbitrage.
Besides, from the perspective of large institutions, when they need to deploy digital currency assets, the channel of depositing large amounts of fiat currency into gold directly is blocked, and mining will be a good tool for them.
Zhu: Firstly, the pricing strategy of mining machine is to ensure that the mining revenue is no less than buying coins. Then taking operation expenses into consideration, take Bitcoin as an example, if the electricity price is low, mining will have higher returns than buying coins, and if the electricity price is high, buying coins will have higher returns. And for those who have not realized the difference between mining and buying coins, buying must be more appropriate.
Q2: Everyone says that this year is the year of halving. As the return cycle of PoW mining represented by BTC becomes longer, is it an opportunity for the rise of PoC? And how do you consider the field of hard disk mining?
Zhu: The recent halving of Bitcoin and other currencies has led to some embarrassment in the pricing model of mining machine vendors. According to the original pricing, mining is not profitable now, causing mining machine buyers to generally wait and see. The second reason is that some fluctuation appears in the internal governance of mining machine vendors, which has caused users to distrust the vendors. These two reasons have caused some PoW funds to migrate to the hard disk field. In recent time many of my PoW customers are seeking opportunities of IPFS and PoC, so I myself have tended to invest some resources in related fields.
Alex: Seen from the micro perspective, mining machine manufacturers are the largest miners in PoW mining regardless of the early graphic cards or the later Asic. Mining machine manufacturers treat the buyers as a complete set of guarantees. When they expect the mining machine to bring them greater profits, they will keep the machine for their own mining, and they will only sell the mining machine when they expect the mining profits to be lower than the price of the machine. This is the contradiction of PoW mining — the suppliers are the biggest competitors of miners. For example, S9 was priced 8000 when it was launched, and if you could buy the spot, it took only 10 days to pay back based on the static revenue, but you must not be able to buy it. The reason was that mining machine manufacturers chose to mine by themselves.
Besides, from the perspective of power structure, mining machine production and the electricity monopoly have challenged the security of PoW. In theory, Bitcoin is decentralized, but the computing power is getting more and more concentrated in reality, in which the risk of human nature will be more and more prominent.
If the equipment becomes universal, the monopoly of mining machine manufacturers can be reduced, and if the dependence on electricity is reduced, the degree of resources monopoly can be decreased as well, which is more friendly to ordinary miners. This mechanism is not to remove large holders, but to make resources and opportunities in equal proportions. Assuming that the resources investment of two miners are 100:1, their chances should also be closed to 100:1 instead of 1000:1. At this time the security of the network returns to that in the early days of Bitcoin, and this is PoC. The meaning of PoC is more like fixing the engineering problems of PoW, and although it is imperfect, no mechanism has been found closer to the original idea of PoW than PoC so far.
HPool has always believed that PoC will be a part of the future development roadmap. The PoC technology has been constantly iterating from the earliest Burstcoin to BHD and then to MASS incl,uding Filecoin. As we study further, we found that Filecoin and PoC projects are highly unified at the mining level: I think a more accurate definition of Filecoin projects is to customize storage for storage proof, while PoC projects like MASS provide non-customized storage for storage proof. Essentially, they both provide storage proof for mining.
Q3: Many people may confuse Filecoin and PoC mining. In fact, except for the need of hard drive, there is a big difference in mechanism. In terms of mining, what are the advantages and disadvantages of Filecoin and PoC? And which one is more optimistic?
Zhu: For Filecoin, miners will be punished by the system if the operation and maintenance are not good enough, or the hardware assembly is unreasonable, and the penalty can be quite serious. Comparatively, the threshold of PoC is lower. The advantage of Filecoin is its high popularity, but considering the currency and machine price, I am still not clear about it.
Alex: Bitcoin has realized the privatization of the ledger, and Filecoin hopes to realize privatization of data. Now our data on the Internet does not belong to ourselves, but probably belongs to some companies or the IDC operators. But on Filecoin, the data completely belongs to the owners of the private keys, and it has its own application scenarios. Filecoin aims to be the decentralized IDC based on the blockchain, which is more technically difficult.
PoC is more of a supplement to PoW, as well as a public chain facility. For example, MASS is to build a public chain infrastructure. When it comes to mining, it will be easier for PoC to popularize and expand than Filecoin.
Whether it is MASS, BHD, or Filecoin, they are essentially mining with effective capacity. When participating in mining, miners must first plot their disks, that is, to write full data on the hard disks, and verify the effective capacity by the system before participating in the explosion.
If the difficulty of BHD plotting is defied as 1, and the difficulty of MASS plotting is 10 (similar to Filecoin, it requires some calculations), and then the difficulty of Filecoin plotting is as high as 400. Now we need only 10%-20% of the equipment to calculate when mining BHD and MASS. For example, if a cost of 1 million is spent, only 200,000 of which are spent to do the calculations, and 800,000 of hard drives can be quickly filled. Most of the Filecoin devices on the market now only shows the capacity parameters, but if they are not equipped with enough computing devices, it may take as long as 5 or even 10 years to turn 1T hard disk into effective capacity. If you want to complete the plotting in 40 days, for every 50,000 RMB of hard disk, you must configure 950,000 RMB of computing equipment. Therefore in the stage of plotting, Filecoin is more like PoW, requiring a large number of computing devices — CPU and graphics cards.
Besides the threshold of equipment, the economic model of Filecoin is the most complicated in history, and the difficulty of operation and maintenance is so high to reach a professional level close to Alibaba Cloud.
In addition, Filecoin will be faced with many difficulties in data storage. Filecoin hopes to store data which is valuable to humans, however it cannot be judged by algorithm whether the data is valuable to humans. Therefore, the storage content can only be specified in a centralized way, such as maps, museum data and Wikipedia data, which has led to new contradictions. The original purpose was to hand over the control of the network to the consensus, but now it is equivalant to taking back the control to the project party and becoming semi-centralized. However, it will lead to another paradox if not doing so. Miners will write a lot of garbage data for mining, which is no different from PoC, and even waste a lot of computing and electricity resources.
Of course, we need to be tolerant to new technologies. Filecoin has brought huge traffic to the industry, which is beneficial to the industry.
Q4: MASS is a rookie in the field of PoC and has attracted a lot of attention. In addition to capacity consensus, it also contains a binding and staking mechanism. How can we understand this unique economic mechanism?
Alex: The advantage of PoC is that the market value of mining equipment and the coins are basically 1:1. The market value of Bitcoin mining equipment is about 1 trillion, and the market value of coins is probably tens of billions, between which there is a large gap. The ratio of the benefit to cost of attacking PoC is closed to 1, while that of PoW is much higher than 1. Therefore, the PoC network is more secure than PoW in theory.
Besides, it is difficult to cold start PoW projects. An increase in the computing power in one project means that the computing power of another project decreases, which is a zero-sum game. And the low computing power of the entire network may lead to network insecurity, and overall unfriendly to new projects, which will lead to a lack of diversity
The economic model is the catalyst, and the key is that the underlying technology must be valuable and meaningful. A well-designed economic model can accelerate the ecological development and operation. The earliest PoC project, Burst, has no economic model, and its subsequent development is not so good. When the coin is generated without any cost, price storage is difficult to price. In MASS, staking mining can help lock a part of the incentives so that the model can run better. And in mining, the saved costs of hardware and electricity are offset by staking and binding. In addition, if the block rewards are 100% obtained by bare hard disk mining, the network will be easily attacked.