Author: Jessy, Golden Finance

On April 20th, Beijing time, Bitcoin ushered in its fourth halving.

Halving represents an increase in mining difficulty, which has a profound impact on the mining industry. Undoubtedly, the mining industry is closely linked to China and Bitcoin.

At its peak, China once accounted for over 70% of Bitcoin's mining power, with Bitmain alone owning over 50% of the power. Such high mining power was enough to launch a 51% attack on Bitcoin.

After the Chinese government forcefully expelled the mining industry in 2021, a large number of mining farms left China. Bitcoin's mining power in China even dropped to zero. With Chinese mining machines going overseas, mining power has been restored, and the big overseas mining farms still have Chinese backers. According to statistics from chainbulletin, in 2023, China still holds 21% of Bitcoin's mining power. The roaring mining machines are still operating day and night in areas that have not been integrated into the national grid.

China has played a significant role in the development of the Bitcoin mining industry. The fate of leading figures in the mining industry fluctuates with the industry's changes, and the life of the former mining overlord, Wu Jihan, reflects the development of the mining industry in China.

The Unique Mining Overlord

In China's Bitcoin development history, one prominent figure is Wu Jihan, who translated the Bitcoin white paper into Chinese, was an early evangelist, and is best known as the founder of Bitmain.

At Wu Jihan's peak, in 2018, Bitmain's self-mining accounted for over 50% of Bitcoin's mining power, which was enough to launch a 51% attack on Bitcoin. At that time, Bitmain was indeed riding high, and mining power equated to power. In the battle between big and small blocks of Bitcoin, Wu Jihan led Bitmain and miners to fork Bitcoin, resulting in the creation of BCH.

From another perspective of the fork event, China at that time had a high degree of influence in the crypto industry.

In 2018, eight of the top ten mining pools were located in China. Mining farms that sprang up near small hydropower stations in Sichuan and coal-fired power plants in Inner Mongolia made a group of Chinese mining farm owners wealthy. At that time, local governments turned a blind eye to mining activities, as the taxation from large mining farms was a source of fiscal revenue, and surplus electricity had nowhere else to be used. Some local officials even participated in it.

A reporter from Golden Finance once visited a mining farm planned to be built in Inner Mongolia in 2018 and directly discussed cooperation on electricity discounts with the local leader.

The amount of mining power is just one aspect. At that time, China still held the center of the crypto industry. Many projects made pilgrimages to the East. Without Eastern funds, perhaps Ethereum would not be what it is today.

In June 2021, China completely banned mining, causing Bitcoin to plummet. Along with the tightening of China's Bitcoin policies, most mining farms moved out of China. Mainland China, which once held over 70% of Bitcoin's mining power, gradually lost its influence in the development of Bitcoin. Bitcoin's mining power in China even dropped to zero at one point. By early 2022, most of China's mining farms had completed their migration overseas, with the United States, Russia, and Kazakhstan becoming the largest recipients of mining power migration. The United States also became the dominant force in mining power.

Coincidentally, in the year that Bitcoin's mining officially "exited" China, Wu Jihan left Bitmain. His departure stemmed from internal strife within Bitmain. Afterward, Wu Jihan became more low-key, which seemed to be related to China's policy towards virtual currency.

Wu Jihan's Twitter account has been inactive for a long time, with his last tweet dating back to 2018. His Twitter bio still reads "Co-founder of BITMAIN."

After leaving Bitmain, Wu Jihan, while not completely hiding in the industry, no longer stands in the spotlight. He deliberately keeps a low profile and rarely attends important industry conferences or media interviews.

The mining industry has essentially left China, but behind the overseas mining enterprises and some mining pools, Chinese figures still abound. Wu Jihan took Bitdeer, which was separated from Bitmain and focused on overseas markets, to the Nasdaq.

Leaving Bitmain, but Not Leaving the Mining Industry

In early 2021, Wu Jihan resigned as CEO and chairman of Bitmain. His internal conflict with Micree Zhan also came to an end. Bitdeer, Bitmain's cloud mining business, and overseas mining farms were separated and became Wu Jihan's assets.

Looking at the separated business, Wu Jihan at that time was either smart or lucky, as he acquired the cloud mining and overseas mining business. Shortly after the separation, the Chinese government began to clear out mining farms.

Bitdeer is a platform that provides mining machine sharing services to users, saving them from the complex process of purchasing, installing, and hosting mining machines. In 2023, it helped Wu Jihan realize his dream of ringing the bell at Nasdaq, becoming a unicorn in China's mining industry. Bitmain, which has revisited the IPO, has yet to go public.

The founding and success of Bitdeer are also the result of continuous changes in mining technology and business models. In recent years, not only has there been continuous iteration of mining hardware, but there has also been a shift from individual mining to collective mining, and the popular cloud mining model has emerged. This model allows everyone to participate in mining cryptocurrencies such as Bitcoin without needing to own or manage mining machines, simply by paying to rent the computing power of an institution.

Bitdeer mainly has three business operations: self-mining, where the company mines cryptocurrencies for its own account; computing power sharing, providing solutions in both cloud computing power and computing power markets; and in the computing power market, the company acts as an intermediary connecting third parties (such as miners or mining farm owners) with customers in need of computing power, and only charges a service fee.

According to Bitdeer's financial report for the fourth quarter of last year, the bulk of its revenue still comes from self-mining income. It is currently the world's second-largest holder of self-owned computing power, with its mining farms located in the United States, Norway, Bhutan, and other places.

It is evident that Wu Jihan, after leaving Bitmain, has not left the mining industry. He quietly set up mining farms overseas to make money.

The path of Wu Jihan's mining farms going overseas is what conventional mining farms are doing. On the other hand, mining has not completely disappeared from China.

In areas not integrated into the national grid, mining is still quietly ongoing in private hydropower stations. According to statistics from chainbulletin, in 2023, Bitcoin's mining power in China accounted for approximately 21.1%, second only to the United States. According to industry insiders, some miners may evade domestic monitoring by using foreign proxy servers, conducting small-scale secret mining in remote areas, and even using off-grid power generation to evade electricity monitoring.

Policies of expulsion cannot kill the mining industry, and it can still thrive in adversity. When leaving Bitmain, Wu Jihan also took the digital asset financial services platform Matrixport. It is more like a private bank in the Web3 world. Although there are many financial platforms on the market, Matrixport's biggest feature is its compliance, with licenses in Hong Kong and Switzerland, targeting high-net-worth clients and institutional clients. Matrixport is also well known in the industry for frequently publishing market research and analysis.

POW Lives On, Mining Industry Persists

It cannot be ignored that the narrative of POW is gradually losing its appeal. The main reason behind this is its high energy consumption, which is not environmentally friendly. Ethereum has also transitioned to POS for this reason. Mining is no longer the main narrative of the industry.

To cope with the reduced income brought about by halving, mining groups are also working together to find solutions.

The chill of the mining industry was bone-piercing. In the last bear market, some mining enterprises filed for bankruptcy, and in this bull market, a cruel reality has emerged: the rise and fall of mining stocks have decoupled from Bitcoin. As Bitcoin continues to break new highs, mining stocks are falling instead of rising.

An analyst from Galaxy Mining wrote in a research report: In the short term, institutions seem to prefer going long on Bitcoin ETFs and shorting mining stocks. We have seen this trend since early 2024.

For traditional investors, they used to be able to invest in the coin circle through mining stocks, but now they have a new choice—Bitcoin spot ETF.

This is a double-edged sword for the mining industry. Therefore, last year, Mingwen became the new favorite of miners. They made a lot of money because, due to their interests, mining groups are the biggest supporters behind Mingwen. The biggest beneficiaries of issuing assets on Bitcoin are undoubtedly miners. From this perspective, after the halving, there will undoubtedly be a constant stream of "innovations" like Mingwen and Furen that can increase miners' income.

To cope with the increasing costs, not only is it necessary to open up new sources of income, but it is also necessary to reduce costs.

According to a mining report released by CoinShares, the average production cost of each Bitcoin is expected to be $37,856 after the halving in 2024. As mining costs continue to rise, self-developed mining machines have become one way out. After the halving, as mining difficulty increases, the performance requirements for mining machines also become higher. Self-developed mining machines also help to reduce costs and increase efficiency. Bitdeer announced the self-developed mining machine earlier this year and has already purchased chips from TSMC.

Looking at the development process of the mining industry and its trajectory in China, we can see that as long as POW does not disappear, miners can always find ways to survive and even make enough money. Just as Wu Jihan, who has experienced the peak, turmoil, palace intrigue, and low-key behavior, can still flexibly contribute the strength of the Chinese people to the mining industry.

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