On October 31st, it has been 15 years since Satoshi Nakamoto published the Bitcoin whitepaper "Bitcoin: A Peer-to-Peer Electronic Cash System" on the P2P Foundation website. The Bitcoin network was officially launched on January 3rd, 2009, with an initial trading price of 0.0008 USD.

According to market data, the current price of Bitcoin is $34,429.09 USD, with a total market value of $672.9 billion USD. Today, Bitcoin has increased in value by over 43 million times since its launch. Let's go back to the beginning of the birth of cryptocurrency and commemorate the release of the Bitcoin whitepaper.

一切的起点

translates to

The Starting Point of Everything

In November 2008, a paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System" was published online, signed by Satoshi Nakamoto. The paper detailed how to create a "trustless electronic transaction system" using a peer-to-peer network.

The background of Satoshi Nakamoto creating Bitcoin is exactly the original intention for which Bitcoin was created. On September 15, 2008, with the bankruptcy of Lehman Brothers as the beginning, the financial crisis broke out in the United States and quickly spread to the world.

After the bankruptcy of Lehman Brothers, in order to cope with the crisis, the US Treasury launched an unprecedented large-scale rescue, using an astonishing amount of public funds to save two major housing loan companies, Fannie Mae and Freddie Mac. At the same time, the Federal Reserve adopted a quantitative easing policy and released a large amount of water, trying to stimulate the US economy by over-issuing currency. Not only in the United States, but the whole world also suffered together. The US dollar in the hands of various countries shrank sharply, causing a series of butterfly effects such as exchange rate fluctuations and stock market crashes. In a moment, the global economy was deeply trapped in the quagmire of recession and unable to extricate itself.

Out of disappointment with the current monetary system and a desire to protect privacy, Satoshi Nakamoto created Bitcoin. In the traditional monetary system, all currency is issued by central banks and recorded and confirmed by banks during transactions. Bitcoin, however, breaks this traditional model, allowing for peer-to-peer transactions without the need for intermediaries such as banks or other financial institutions. Due to the limited quantity of Bitcoin, with a total of 21 million coins, it will not continuously inflate over time like traditional currency, thus protecting the value of the currency from inflation erosion.

At a time when the traditional financial market was in chaos, Bitcoin caught the attention of cryptography enthusiasts. After two months of development, Satoshi Nakamoto officially launched the Bitcoin system on January 3, 2009. Following the launch of the Bitcoin network, the first open-source Bitcoin client software was released. Nakamoto used this software to "mine" the first Bitcoin "block" (also known as the genesis block) and received the first batch of 50 Bitcoins. Initially, the value of Bitcoin transactions was negotiated among users on the "bitcointalk" forum, including the exchange of 10,000 Bitcoins for a whole pizza.

Whenever Bitcoin enters the mainstream media's field of vision, mainstream economists are always invited to analyze Bitcoin. Earlier, these analyses were always focused on whether Bitcoin was a scam. Nowadays, the analysis is always focused on whether Bitcoin can become the mainstream currency of the future. The focus of the debate often centers on Bitcoin's deflationary characteristics.

The Bitcoin network generates new bitcoins through "mining". The so-called "mining" is essentially solving a complex mathematical problem with a computer to ensure the consistency of the Bitcoin network's distributed ledger system. The Bitcoin network will automatically adjust the difficulty of the mathematical problem, allowing the entire network to receive a qualified answer approximately every 10 minutes. Afterwards, the Bitcoin network will generate a certain amount of bitcoins as a block reward, rewarding the person who obtained the answer.

Many Bitcoin players are attracted by the fact that Bitcoin cannot be easily increased. In contrast to the attitude of Bitcoin players, economists have polarized views on the fixed total amount of 21 million Bitcoins.

Keynesian economists believe that the government should actively regulate the total amount of currency and use the looseness or tightness of monetary policy to timely accelerate or brake the economy. Therefore, they believe that Bitcoin's fixed total currency sacrifices controllability, and worse, will inevitably lead to deflation and harm the overall economy. The views of Austrian economists are completely opposite. They believe that the less government intervention in currency, the better. The fixed total amount of currency caused by deflation is not a big deal, and even a sign of social progress.

丝绸之路

translates to

Silk Road

in English.

Compared to the glory of Bitcoin today, its birth was insignificant.

In January 3, 2009, Satoshi Nakamoto created the first block - the genesis block of Bitcoin, on a small server located in Helsinki, Finland, and received the first 50 bitcoins as a reward generated by the system. Thus, the first Bitcoin was born.

For a long time afterwards, the world did not pay attention to this new invention - what was the use of this thing? Satoshi Nakamoto was recognized as a genius, but he did not answer. In December 2010, Nakamoto left his last message online and has not been seen since.

In the first year or two after its birth, Bitcoin remained at 0.1 US dollars per coin. The famous story of 10,000 Bitcoins being exchanged for pizza happened during this time. Bitcoin has a genius-like design, but it is a useless design.

Satoshi Nakamoto, like Shakespeare, wrote a perfect script, but no one could perform it. Until Bitcoin met another "genius".

Ross Ulbricht, born in 1984, has been involved in the drug trade since college. The US government has strict control over drugs, and Ross has always been unable to expand his drug business. It wasn't until 2010 that Ross heard about the existence of Bitcoin from a customer, which became a turning point for him.

Ross Ulbricht

The core of the government's crackdown on illegal activities is the regulation of funds - and the core behind this is the banking system, which is firmly controlled by the government. Bitcoin, on the other hand, is a payment tool that operates outside of the banking system - and to this day, banks and Bitcoin continue to operate independently.

In January 2011, Ross, who was only 26 years old, founded a "deep web" commonly known as the dark web. Ross named this website Silk Road, which symbolizes a place for trading goods.

All illegal transactions are gathered on the "Silk Road". In the end, even Ross himself was deeply involved. He once hired a hitman with a high deposit to kill a Canadian user who invaded a seller's computer and extorted him.

With the rise of the Silk Road, Bitcoin finally found its first use case as a payment tool for illicit transactions. Data shows that the Silk Road once circulated over 9.5 million bitcoins, accounting for 80% of the circulating supply at the time.

Silk Road website screenshot

In August 2013, Ross was arrested at a public library in San Francisco. He was sentenced to life imprisonment by the court in 2015 and is not eligible for early release.

Black demand, is demand. Just like the consensus of fools, it is also a consensus. Driven by criminal transactions, Bitcoin experienced its first surge, reaching $31 in June 2011. And two months after Ross's arrest, Bitcoin rose to $1,100 per coin.

Speaking conclusively, Ross Ulbricht is an extremely important figure in the history of Bitcoin development. At a time when Bitcoin was about to be ignored by the world and its history as a toy was coming to an end, he gave it real-world significance by using it to facilitate criminal activities.

"Criminals are the most embracing of new technologies," summarized Xu Zhihong, a partner at Biyou. However, in the long-term struggle, the police have mastered the tracing technology of Bitcoin. More black transactions have turned to more difficult-to-track digital currencies such as Monero. Bitcoin has opened a long bearish journey for several years.

Block Size War

At that time, Wu Jihan's Bitmain controlled more than 60% of the computing power of the Bitcoin network, and was also considered the "only person with a chance to destroy and control Bitcoin" at that time.

Forking is a common upgrade in the open source software field. Usually, in blockchain, a soft fork can be compatible with both new and old versions, while a hard fork cannot be compatible with both new and old versions. A hard fork in Bitcoin means that Bitcoin will be split into two incompatible versions, new and old.

"I can promise you anything else, but not this one." Chang Ha rejected his request straightforwardly. Wu Jihán may not have expected Chang Ha to refuse his request in this way. After all, he had helped Chang Ha during the most difficult time at Babite, and he may have hoped that Chang Ha could help him out of old feelings.

Finally, Chang Ha and his Babite remained neutral in this Fork Century War.

On February 20th, one year before the fork, the location was Cyberport in Hong Kong. The atmosphere at the meeting was tense, as representatives from China's Bitcoin mining community and the United States' Bitcoin development community engaged in 18 hours of intense debate in a small conference room. Everyone was exhausted but excited, and no one knew what impact the conclusion reached in this room today would have on the world of cryptocurrency. However, they knew that this was the first true "fork" that Bitcoin had faced since its inception.

At 3:30 am on February 21st, the debate in the meeting room came to an end, replaced by a moment of silence. The tense representatives finally breathed a sigh of relief because they reached a consensus on the expansion of Bitcoin, which is also known as the Hong Kong consensus.

If you were previously worried about Bitcoin splitting into two currencies, leading to a collapse in the currency's value, you can now rest assured. The two opposing sides have de-escalated from a potential military conflict that could have led to national division, to a parliamentary conflict, greatly reducing the danger.

Wu Jihan, who usually appears with a baby face, round glasses, jeans, and sneakers, has been frowning these days. However, in the photo taken after signing the Hong Kong Consensus Agreement, he finally showed a happy smile. The reason why the entire Bitcoin industry is so excited about the Hong Kong Consensus is that the Bitcoin community has been in a three-year dispute and division due to the "scaling debate". This time, the controversy can finally be set aside for joint development.

In 2013, the Bitcoin network began to face a tricky problem. As the number of Bitcoin users grew, the block capacity designed by Satoshi Nakamoto was no longer sufficient. Bitcoin transactions became slower and the required transaction fees became higher. This caused unprecedented concern within the entire Bitcoin community. If this continued, Bitcoin would become as mediocre as bank card transactions. People began to debate how to solve this issue.

Just a month before the Hong Kong Consensus Conference, Bitcoin developer Mike Hearn announced his departure from the Bitcoin industry and declared it a "failure." As a result of this negative news, the price of Bitcoin dropped from $440 to $360.

After the Hong Kong Consensus Meeting, Bitcoin Core claimed that all developers who promised various changes at the meeting were programmers without the authority to modify the Core source code. None of the five people who have the right to modify the Core source code attended, let alone signed.

Adam Back also stated that his signature at the conference only represents himself and cannot represent Bitcoin Core's agreement with the Hong Kong consensus. His personal attitude has made a 180-degree turn, strongly opposing the Hong Kong consensus that he signed not long ago.

The Hong Kong consensus has been rejected by Bitcoin Core.

One day in March 2017, Wu Jihan wrote on Twitter, "I believe that the majority of the economy is not important. I ignored the so-called majority when I started investing in Bitcoin in 2011." He decided to start anew and stop playing with Bitcoin Core.

On May 23, 2017, founder of Digital Currency Group, Barry Silbert, convened representatives from 58 companies in 22 countries for a meeting in New York. Digital Currency Group is a top investment company in the cryptocurrency industry.

In order to convene this meeting, Barry Silbert and representatives from major companies and developer communities in the industry have engaged in one-on-one communication to act as mediators, after putting in a great deal of effort, Barry has successfully softened the stance of all parties. At that time, Adam Back also agreed to attend face-to-face negotiations in New York in May at Barry's request.

An unexpected event occurred, Adam Back, representing Bitcoin Core, has once again postponed.

Before he left, he was strongly stopped by another important partner within Blockstream. On the eve of the meeting in New York, he announced his refusal to attend the meeting temporarily and sent a lower-level representative, Miu Yongquan, to attend the meeting instead.

Mu Yongquan joined Blockstream as CSO in April 2017. When he came to the venue on behalf of Bitcoin Core and Blockstream, he was refused entry by Barry Silbert at the door. Due to his previous disputes with many people on Twitter, Barry Silbert was worried that Mu Yongquan's arrival would make everyone unhappy.

As a defender who masters the development of Bitcoin code, Bitcoin Core can maintain the initiative as long as it does not make mistakes and continue to follow the original route. As an attacker who advocates hard fork, Bitmain needs to persuade others to support the new route with interests. After being rejected by the New York Bitcoin Core team and before the deployment of segregated witness, they proposed their own soft fork plan, although it was not implemented due to various reasons, but this behavior really stimulated the miners.

As a response to the Bitcoin Core soft fork challenge, a mining farm called MicroBT, which was invested by Bitmain, launched a hard fork solution. Eventually, on August 1, 2017, the MicroBT team mined the first block, giving birth to the forked coin BCH that competes with BTC. The capacity of BCH reached 8M, which is more than eight times that of BTC, and it is not compatible with SegWit.

On January 13, 2018, the market share of Bitcoin in the entire cryptocurrency market fell to 32.45%, reaching a historic low. At that time, many people thought that Bitcoin being replaced was only a matter of time.

For Wu Jihan, computing power is his biggest advantage and weapon. He hopes that the forked currency BCH, which he leads, can replace BTC. However, BTC holds the orthodox and naming rights of Bitcoin, as well as 9 years of user accumulation and industry ecology. After the birth of BCH, it has always faced a serious challenge, which is that no one recognizes it.

In addition to the opposition from the Bitcoin Core camp and the neutrality of most industry companies, after the BTC fork, most BCH was sold by users as candy, and the price of BCH was only over 200 US dollars when it first came out.

After the fork, Wu Jihan attracted miners to mine BCH by raising its price and continuously selling BTC, causing BTC's price to become unstable. As a result, "many miners will choose to continue mining BCH, leading to a decrease in Bitcoin's computing power, a more congested network, more people losing confidence and selling Bitcoin, and ultimately more miners shifting to BCH, forming a vicious cycle that leads to the collapse of Bitcoin."

So Wu Jihan's first attack choice was to pull the plate. The price of BCH continued to rise, and less than 20 days after the fork, on August 20th, the price soared to $898, more than tripled. Miners saw the profitability of BCH, coupled with the shrinking of BTC's computing power and more congested transactions; more and more people began to switch to BCH, which further led to the rise of BCH prices, and so on, in a continuous cycle, the price of BCH continued to rise.

Following that, Wu Jihan launched his second attack to seize Bitcoin's computing power. In extreme cases, BCH diverted nearly half of BTC's computing power, causing significant congestion in Bitcoin's transaction processing. However, in November, BCH's computing power reached twice that of BTC, but its price remained only one-third of Bitcoin's. Eventually, BCH's computing power rapidly collapsed and never surpassed that of Bitcoin again.

For a long time, the price of BCH has been artificially anchored at 7%~10% of BTC.

In May 2018, the CoinGeek Hong Kong conference was held, and major mining pools, exchanges, and developers came to Hong Kong to celebrate the first anniversary of BCH, which has had an "exciting" development over the past year. Roger Ver, founder of bitcoin.com, Jiang Zhuo'er, founder of the Litecoin mining pool, and Jiang Jiazhi, a core developer of BCH, took a photo together at the event, representing public opinion, mining pools, and development, to celebrate the first anniversary of Bitcoin Cash's birth.

During the entire bear market in 2018, Bitmain heavily invested in the BCH track and exchanged all of the company's Bitcoin and cash for BCH, resulting in heavy losses. Since then, BCH has roughly maintained a 1:20 ratio with Bitcoin in terms of both price and computing power. Due to the overexposure to BCH, Bitmain was questioned for relying on selling BCH to generate income during its Hong Kong IPO in 2018.

Butterfly mining machine, image source from the internet

Roasted cat (left) is one of the few publicly available photos, the image is from the internet.

17 days after the release of Kao Mao's ASIC prototype, Zhang Nangeng also formed his own Avalon team and completed the delivery of the first mining machine, Avalon 1. While Kao Mao and Zhang Nangeng were rapidly developing, another competitor also entered the field. In the first half of 2013, Wu Jihan founded Bitmain and launched three computing chips in just 13 months, forming a three-legged stance with Kao Mao and Zhang Nangeng. In the winter, Bitmain's Antminer S1 swept a large number of competitors, making a lot of money for its mining machine agents.

Kaomao and Zhang Nangeng are both facing a shortage of machines and thriving business as the era of Bitcoin ASIC mining machines approaches.

The huge wealth effect has attracted countless entrepreneurs to enter the game, producing various types of Bitcoin mining machines, such as Juhua mining machine, Xiaoqiang mining machine, and Yinfish mining machine. Manufacturers are competing fiercely, and mining machines are iterating faster and faster, leading to a crazy scene of early pre-ordered futures mining machines becoming obsolete upon arrival. Later, manufacturers found that while their mining machines were still on the production line, their competitors' customers had already received better-performing mining machines. Companies like Bitmain, which entered the game early, have begun to deploy larger-scale computing power in units of P, and from then on, more than 70% of Bitcoin's computing power has firmly taken root in China.

On the other hand, under the leadership of Geek miners, a large number of gold diggers have flooded into the Bitcoin market in China. With the promotion of "Chinese moms", the price of Bitcoin skyrocketed, approaching 7,000 yuan within a few days after breaking through the 4,000 yuan mark. At the beginning of the year, Bitcoin was worth less than 80 yuan. In just a few months, about 10 billion yuan of capital has been invested in the market, making China the world's most enthusiastic market for mining and trading Bitcoin.

In 2013, Bitcoin created one wealth myth after another, and Li Xiaolai is the most typical one. This former New Oriental English teacher bought 100,000 Bitcoins in 2011 and has now become the "Bitcoin richest man" in China. He not only founded BitFund but also established Yunbi. Lao Mao is another example. In 2010, Lao Mao changed his life trajectory after reading about Bitcoin in a newspaper at a newsstand while on a business trip with his boss.

Related reading: "The end of Ethereum's 8-year mining era: Vitalik Buterin, Chinese mining, and Nvidia."

Migration

On June 20th at midnight, all Bitcoin mining farms in Sichuan were forced to shut down under the instruction of a policy document. Prior to this, from Inner Mongolia, Qinghai, to Xinjiang and Yunnan, domestic Bitcoin miners had been constantly moving their machines under the drive of policy documents, and Sichuan became the last gathering place. However, the issuance of the shutdown document in Sichuan completely shattered the miners' hopes and also marked the end of mining farms in China. The Chinese mining power, which once accounted for 75% of the entire Bitcoin network, will completely disappear from the map.

After that unforgettable night, Chengdu, the capital of China's cryptocurrency mining industry, is filled with miners who are struggling and lost.

On June 22nd, at a jazz bar on the top floor of a five-star hotel in Chengdu, a group of serious-looking young men sat together in twos and threes, smoking and talking. Their T-shirts were printed with slogans such as "Bitcoin" and "To Da Moon", which are popular in the cryptocurrency industry. The conversation was filled with keywords such as "mining machines", "going overseas", and "connecting with overseas resources". In the hallway outside the bar, there were always a few scattered people, making phone calls to sell mining machines and pacing back and forth, smoking one cigarette after another.

On the same day, another five-star hotel in Chengdu hosted the "Global Mining Resources Connection Conference" in a low-key manner. Miners from all over Sichuan who had already experienced power outages came here to systematically learn about the process of going overseas from introductions by various outbound companies, hoping to find the "Noah's Ark" that would take them to the other side of the ocean through collective warmth and wisdom.

From the state of the miners, it is not difficult to see that the suspended Chinese Bitcoin mining industry has fallen into confusion and panic.

Located 50 kilometers away from Chengdu, Dujiangyan, the majestic Minjiang River rushes down. In the era of the Warring States, Li Bing and his son witnessed the world-famous hydraulic engineering project from the surging waters. Today's Bitcoin miners see the power resources that their mining machines rely on.

The miner Lao Wu's mine is located in the mountains of Dujiangyan, covering an area of about 1000 square meters. It relies on the impact of water flow to maintain the daily and night-time roar of tens of thousands of mining machines.

Bitcoin mining farm in the deep mountains, picture from miners

When the policy to shut down mining sites in Inner Mongolia and Xinjiang was introduced in May, I wasn't worried," said Lao Wu to BlockBeats. Having been in this industry for a long time since 2013, there has been a crackdown on mining policies every one or two years, especially in Inner Mongolia, which relies on thermal power generation. "We are used to it.

Therefore, when the mines in Inner Mongolia were shut down one after another, Lao Wu continued to purchase second-hand mining machines online and attracted more machines to be hosted in his mine. At that time, he calmly said to his friends during a chat, "Don't panic."

As we enter June, even Lao Wu can't sit still. The mine is located in a local area and has received wind from various channels, but Lao Wu still holds hope. "Sichuan, Inner Mongolia, and X province are different. There is a large amount of abandoned water and electricity here, which are completely clean resources. If we don't use these resources, they will be wasted."

Disturbing news first emerged from Ya'an. On June 17th, market rumors claimed that Ya'an, Sichuan had implemented a "one-size-fits-all" policy for mining farms, requiring all of them to shut down within 25 days, including those using consumed electricity and abandoned water electricity. On June 18th, a notice was circulated in the community, jointly issued by the Development and Reform Commission of Sichuan Province and the Energy Bureau of Sichuan Province, calling for the shutdown of 26 suspected virtual currency mining projects by June 20th.

On the evening of the 19th, Lao Wu finally gave up his luck and exclaimed "I have to change my career again". He turned off the constantly roaring mining machine and began to prepare for the transfer of the mining farm.

Compared to miner Lao Long, Lao Wu is considered lucky, as Lao Wu's mine has been in operation for several years and the profits from the previous years are still considerable.

In March of this year, I started building a hosting mining farm in Garze Prefecture. It was completed in May with a capacity of 50,000 kilowatts and can accommodate more than 30,000 mining machines. However, it was blocked by policies on the eve of construction," said Lao Long to BlockBeats. The total investment in this mining farm is close to RMB 20 million, and it can be said that there is no return on investment. "After all, the profit of hosting mining farms comes from the difference in electricity prices and hosting management fees.

Bitcoin mining farm that has been cleared out, image from miner

This time, the government's policy was swift and powerful, and the country's attitude was resolute, which made Lao Long feel a bit hopeless. "I've been in this industry for 5 years, and every one or two years there will be a policy crackdown, but this time it's too severe. Mining farms, miners, and mining pools, all mining communities have been affected."

In the mining circle, Old Dragon's experience is not the worst. "I have a friend who also runs a hosting mining farm, which has already been put into use. His mining farm has invested 160 million yuan, and the total value of the mining machines has reached 400 million yuan. However, after the policy was introduced, not only did the mining farm lose power, the mining machines also stopped working, and the road in and out of the mining farm was blocked. The machines couldn't even be transported out, which was really frustrating."

In the face of mining disasters, selling mining machines has become a forced choice for many miners.

Unlike the famous mining machine sales point "Sega Building" in Shenzhen, although Chengdu is an important city where miners gather and is known as the "Zhongguancun" of Chengdu, the computer city has not seen a scene of selling mining machines with great enthusiasm.

BlockBeats found during a field visit that there were no booths related to mining machines in Chengdu Computer City. When further inquiring with the merchants, it was found that they were not unfamiliar with mining machines. "There are very few Bitcoin mining machines flowing out through offline channels, and we also need to inquire with the supplier. On the contrary, there are more graphics card mining machines," a salesperson at the computer city told BlockBeats.

Currently, there are approximately over 10 million mining machines with a load in Sichuan that need to go overseas. Ah Hao told BlockBeats that if they remain stagnant in China, the owners and financiers of these mining machines will face significant financial costs. Similar to using leverage to speculate on real estate, the mining industry also has miners who use borrowed funds to purchase machines and build mining farms, carrying the pressure of hundreds of millions of yuan. "They have to replenish funds every day and are very anxious," said Ah Hao.

Faced with the demand for going global, mining machine companies that have long-term layouts overseas have seen business opportunities and designed customized "offshore module containers" for miners' difficulties, which include equipment such as cold and hot isolation, fans, networks, monitoring, and distribution cabinets, which are equivalent to a mobile mining farm built by containers.

Such a design naturally comes with a high price tag. Taking BitDeer as an example, the minimum unit price for each container is 142,000 yuan, which can accommodate 180 units of the 19 series mining machines. Given the current scale of domestic mining farms, which often have thousands of mining machines, a small to medium-sized mining farm would need nearly a million yuan just for the cost of shipping a container overseas, while a large mining farm would need tens of millions of yuan.

Another relatively inexpensive option is Kazakhstan. The region has abundant energy resources, is closer to China, and has lower labor and construction costs and much lower tariffs than the United States. However, the degree of legalization is not high, the business environment needs to be improved, and like China, policy is the biggest risk.

The road to going global is long and arduous. On the journey to "retrieve the true scriptures," there is no "Sun Wukong" to protect and assist, and one may encounter countless pitfalls.

In legal countries such as the United States and Canada, building factories overseas faces extremely high costs. Ah Hao told BlockBeats that building a 10,000 load mining farm domestically requires approximately 3.5-5 million yuan. For the same scale, foreign countries require 18-40 million yuan. Currently, Bitmain's quote is 18 million yuan, and BitDeer's quote is 40 million yuan.

Related reading: "The Last Bitcoin Miner in China".

Since the comprehensive ban on Bitcoin mining activities in mainland China in June 2021, the Bitcoin computing power center has shifted from China to North America.

Behind this transformation is the continuous rise of mining companies in North America. Since 2020, leading North American mining companies such as Core Scientific (NASDAQ: CORZ), Riot Platform (NASDAQ: RIOT), Bitfarms (NASDAQ: BITF), and Iris Energy (NASDAQ: IREN) have been purchasing large quantities of mining machines and listing on North American stock exchanges, embarking on a path of compliant operations.

Bit Digital (NASDAQ: BTBT) went public in February 2020.

In November 2021, Iris Energy will go public.

In January 2022, Core Scientific will go public.

Bull market conditions from January 2021 to May 2022. Source: Coingecko

It's not just Bitmain, Core Scientific is even more exaggerated, operating over 200,000 Bitcoin mining machines in five states in the United States. In June 2022 alone, it produced more than 7,000 Bitcoins. In addition, Core Scientific has received a $54 million investment from Celsius and signed a $100 million equity investment agreement with investment bank B. Riley.

However, due to its highly leveraged business nature, the sudden bear market caught these mining companies off guard.

First up is Marathon Digital, which recorded a net loss of $686.7 million for the entire year of 2022; Riot Platform had a net loss of $509.6 million in 2022; Bitfarms had a net loss of $239 million in 2022; and Core Scientific had a net loss of over $1.7 billion in the first 9 months of 2022, leading to the company being on the brink of bankruptcy by the end of 2022 (source).

According to a report from Hashrate Index, the collective debt of mainstream centralized mining companies will exceed $4 billion by the end of 2022. Core Scientific has the highest debt, owing creditors $1.3 billion as of September 30, 2022. Marathon Digital owes approximately $851 million, but most of it is in convertible notes. The third debtor is Greenidge Generation, owing $218 million.

Source: Hashrate Index

Many institutions believe that the development of centralized mining enterprises is highly correlated with the price of Bitcoin. Therefore, the "business model of financing to purchase Bitcoin mining machines for mining" is a severe test of the company's cash flow management ability in a bear market and is also prone to the risk of insolvency.

Related reading: "The Bitcoin RWA paradigm shift, with a market far exceeding $9 billion, is underway".

Regular Army

In 2017, during the bull market, the cryptocurrency industry spread the seeds of Bitcoin to the world. On the other side of the ocean, in China, a Bitcoin trading platform called OKcoin quietly emerged. This exchange, known as the Huangpu Military Academy of the Chinese cryptocurrency community, was founded by Xu Mingxing, who came from the internet industry and was previously the CTO of DouDing.com.

There are a large number of people who are doing the same thing as Xu Mingxing. They are committed to addressing another fundamental need - how to make it easier for ordinary investors to buy Bitcoin.

Miners need to pay for electricity, mining companies need to develop more advanced machines, and development teams need to be maintained, all of which require money. Bitcoin needs more support from the fiat world, and this is a matter of life and death.

After the first bull market of Bitcoin, cryptocurrency exchanges began to flourish. Exchanges such as OKcoin, Huobi, Binance, Coinbase, bitFlyer, BitMEX, Bitfinex, etc. began to rise.

Cryptocurrency exchanges have built a bridge, allowing investors to easily buy Bitcoin as if opening a stock account. For a considerable period of time, cryptocurrency exchanges were even the only place for the public to purchase Bitcoin.

No matter how Bitcoin rises or falls later, wealth from the fiat world continues to flow into the world of digital currency, supporting the trading price of Bitcoin, and various innovations in the field of digital currency can continue.

Bitcoin ATMs make it easier for investors to buy Bitcoin and are one of the main directions of innovation in the world of digital currency.

In February 2021, when the price of Bitcoin broke through $50,000, Wang Xing, the founder of Meituan, made a statement on Fanfou on February 16. Satoshi Nakamoto is widely recognized as the father of Bitcoin and owns 1.12 million Bitcoins. Just two months after Wang Xing's statement, the price of Bitcoin rose by 30%, exceeding $64,000.

The myth of Bitcoin's wealth creation is far from over. On Wednesday, Coinbase, the largest digital currency exchange in the United States, went public and closed at $65.4 billion on its first day, surpassing China's largest brokerage, Citic Securities.

Over the past decade, Bitcoin has been the highest-performing asset class globally, rising from $0.1 to $64,000. Unfortunately, this investment has been ignored for a decade, and almost all investment institutions around the world have missed out.

"The biggest restriction for institutions to participate in Bitcoin investment currently is the financial regulations of various countries," said Yuan Yuming, CEO of Huo Chain Technology. In 2018, Yuan Yuming, who was still the chief analyst of TMT at Xingye Securities, caused a sensation in the industry when he announced his move to join Huobi China."

MicroStrategy, Silicon Valley and Wall Street

There are also American companies like Micro Strategy that are buying Bitcoin.

During these three years, precious metals with "safe-haven properties" have experienced varying degrees of decline, while mainstream US stock indices have risen by nearly 10% per year. Bitcoin, on the other hand, has taken the lead with a 145% increase, leading to significant profits for MSTR, which heavily invested in Bitcoin, and a more than 200% increase in its stock price.

According to the financial report released earlier this month, MicroStrategy recorded holding 152,800 bitcoins as of July 31, with a total cost of 4.53 billion US dollars and a unit cost of 29,672 US dollars. The current bitcoin price is also fluctuating in this range. CoinMarketCap data shows that the bitcoin price was 29,340 US dollars before the deadline, slightly lower than MicroStrategy's average holding price. However, even so, MSTR still rose nearly 200% in this year's bitcoin rebound market as a "bitcoin concept stock".

Related reading: "MicroStrategy's BTC buying strategy 3rd anniversary: CEO boasts big profits, first batch of Bitcoin purchased at only $11,653!"

Other than MicroStrategy, there is another American asset management company that has broken the boundaries between the world of digital currency and traditional finance - it is generally referred to as Grayscale Fund in the industry.

Gray fund founder Barry Silbert

For a long time, grayscale funds have been growing steadily at a rate of 2,000 bitcoins per day, rapidly expanding in size. Its innovation is also very simple, setting up a trust fund for holding cryptocurrency assets, with investors holding trust shares and trading them on the secondary market.

In the United States, the management fee for trust funds is generally between 0.3% and 1.5% per year. However, the management fee for Grayscale products varies from 2% to 2.5% per year. Even if Grayscale funds do nothing, they can still extract tens of thousands of bitcoins in management fees every year.

Gray funds are typical of all Bitcoin startups. They make it easier for more investors to hold Bitcoin and earn huge returns. The profit-seeking behavior of these financial institutions has brought a steady stream of investors to Bitcoin, driving its continued rise.

"Trading Bitcoin is an 'extremely inefficient way' and consumes a staggering amount of energy to process these transactions." US Treasury Secretary Yellen once criticized Bitcoin, saying that "Bitcoin is often used for illegal financing, and investors should be careful."

Nowadays, top global asset management institutions such as Bridgewater and BlackRock are eager to try. As long as they can receive management fees, financial institutions can use your money to buy any assets.

Jack Dorsey, the founder of Twitter, is a well-known technology leader in the United States. He is also a more staunch supporter of cryptocurrency than Musk. He believes that cryptocurrency will become the "single currency" of the world.

Although Twitter is well-known, it is not the most successful commercial company founded by Dorsey. Dorsey's Square is a pioneer in the Bitcoin innovation field, with a current market value of $120 billion, twice that of Twitter. If Grayscale Fund is like a pump, pumping fiat currency into the Bitcoin world, Silicon Valley technology companies have invented new tools to gradually eat away at Bitcoin inventory like ants moving house.

In January 2018, Square's Cash App launched a new feature that allows users to purchase Bitcoin. "In 2020, a total of 3 million people purchased Bitcoin through Cash App, and in January 2021, an additional 1 million people were added," according to data disclosed by Square CFO. This indicates that Bitcoin is entering the wallets of the general public in various ways.

Under pressure from competitors, in October 2020, PayPal, the world's leading online payment tool, announced support for purchasing digital currencies such as Bitcoin and Litecoin.

A study shows that the amount of Bitcoin stored in exchanges has decreased from 3 million to 2.2 million in the past year, a reduction of 800,000. The amount of Bitcoin stored in exchanges continues to decrease.

In February 2021, Tesla announced that it had purchased $1.5 billion worth of Bitcoin and that Bitcoin could be used to purchase Tesla cars. The price of Bitcoin instantly surged by 10%.

Tesla is not the first technology company to try something new. In 2020, Square invested about $50 million to purchase 4,709 BTC. This move by Square marked the first time that Bitcoin appeared on a publicly traded company's balance sheet in the United States and was recognized by accounting standards.

Limited supply of Bitcoin and increasing demand are creating an increasingly serious supply-demand imbalance.

On June 16th of this year, BlackRock, one of the world's largest asset management groups, submitted a filing for a physical Bitcoin ETF to the US SEC through its subsidiary iShares. According to the filing, the ETF is named "iShares Bitcoin Trust" and its assets are primarily composed of Bitcoin held by the trustee on behalf of the trust, with the trustee being held through custody on the Coinbase cryptocurrency trading platform.

As an asset management company with assets under management exceeding $10 trillion, BlackRock's assets under management even exceed Japan's GDP of $4.97 trillion in 2018. BlackRock, Vanguard Group, and State Street Bank are even known as the "three giants", controlling the entire index fund industry in the United States. Therefore, BlackRock submitted a filing for a spot Bitcoin ETF to the US SEC.

BlackRock's application for a spot Bitcoin ETF was not without warning. As early as the beginning of 2021, BlackRock CEO Larry Fink publicly stated that he "is optimistic that Bitcoin will become a global market asset," and Rick Rieder, the firm's Chief Investment Officer for Fixed Income, subsequently stated that BlackRock has already begun to get involved in Bitcoin.

In the same year, BlackRock announced that its global allocation fund had obtained some Bitcoin exposure through CME's Bitcoin futures issuance. Two BlackRock fund companies, the BlackRock Global Allocation Fund and BlackRock Funds V, stated in their investment prospectus (497 Prospectus) submitted to the US Securities and Exchange Commission that some of their funds can participate in Bitcoin-based futures contract trading. The prospectus also stated that not all Bitcoin futures contracts are available for investment, but only those registered with the US Commodity Futures Trading Commission (CFTC) and settled in cash.

Source: BlackRock Funds V 497 Prospectus

Related reading: "Why is the crypto community generally pessimistic about applying for a Bitcoin ETF under the high regulatory pressure of BlackRock?"

Ark Investment Management and 21Shares have collaborated to launch the ARK 21Shares BTC ETF, which has been seeking approval since 2021. This year, including BlackRock, 8 large financial institutions have submitted Bitcoin ETF applications to the US SEC.

GrayScale Sues SEC

According to court documents, a three-judge panel in Washington overturned the US Securities and Exchange Commission's (SEC) decision to block the Grayscale ETF. The court stated that "rejecting Grayscale's proposal was arbitrary and capricious because the SEC failed to explain its differing treatment of similar products."

New Ecology

This year, the Bitcoin ecosystem has gained some unexpected gameplay, such as BRC20, ordinals, and Bitcoin NFT. Yuga Labs, Degods, and even real-life supercar brands such as Bugatti have all laid out their plans. The related infrastructure is rapidly developing, including trading markets (Magic Eden, Gamma, Ordswap, Ordinals Wallet, etc.), wallets that support Bitcoin NFT (Hiro, UniSat, Xverse, etc.), aggregators (bestinslot.xyz), and more advanced browsers (OrdinalHub, ordiscan).

As of October 8th, according to Dune data, the total number of Ordinals Inscription minted by the Bitcoin NFT protocol has exceeded 35 million, reaching 35,274,213. The current total transaction fee is 2,121.1597 BTC (approximately $59,385,414).

The emergence of these gameplay methods has led to a surge in Gas fees. From the perspective of miners, this is undoubtedly a good thing, as from the summer of 2021 to early 2023, the Bitcoin block space is almost a wasteland, and miners' income is very low. But for some people who cannot afford high Gas fees, this is not a good thing. "I mainly work in Africa. They don't have the privilege like you to pay these high fees. They really need BTC, while you guys are just playing," Bitcoin educator and Anita Posch wrote on Twitter.

When it comes to the Bitcoin ecosystem, this "resistance to industrial culture" seems even stronger, with many Bitcoin OGs completely denying the legitimacy of NFTs on the Bitcoin network and stating that "This is Not What Bitcoin is Built For".

Blockstream CEO Adam Back, Bitcoin Core developer LukeDashjr and others believe that this will cause the Bitcoin blockchain size to rapidly expand, requiring a significant increase in the requirements for devices running full nodes, leading to a decrease in the number of full nodes on the network and a decrease in censorship resistance. At the same time, unexpectedly large transactions and blocks will impact the ecosystem facilities such as wallets, mining pools, and browsers, causing some facilities to malfunction, such as certain transactions failing to be parsed correctly. In addition, mining pools or miners may choose to mine without downloading or verifying such transactions and blocks in order to reduce synchronization and verification time, which brings security risks.

They even harshly criticized the Taproot Wizard's behavior, stating: "This is an attack on Bitcoin. Bitcoin blocks have a 1MB limit, and the Taproot Wizard's 4MB data is put on the chain through the witness, bypassing the 1MB limit on blocks and transactions. From this perspective, this is not innovation, but an attack on vulnerabilities!"

Udi's response to this is that he himself owns a large amount of BTC, and he did this to make it stronger. Like anything that can withstand pressure, something that doesn't kill it will make it stronger. He wants to prove a point: the vitality around Bitcoin has stagnated, and he wants to change this. He knows that if people like him really pose a threat to Bitcoin, then Bitcoin should fail.

Just as no one can decide whether Bitcoin will fork, no one can decide the development path of Bitcoin based on one person's words. It is known that Bitcoin has no CEO, and its governance structure is composed of users who pay transaction fees, miners who build the Bitcoin blockchain, and node operators who verify transaction ledgers. This decentralized structure to some extent ensures the security and decentralization of Bitcoin, but also brings challenges to governance.

Behind these debates, it's not just about technical differences, but more deeply about the purpose of Bitcoin and its underlying philosophical principles. Governing decentralized open-source projects remains a challenge.

However, fifteen years have passed, and one thing is certain: the spirit and culture of Bitcoin will never wither due to community disagreements. Each of us is not only a witness to this history, but also a participant deeply involved in it. Bitcoin has been changing the world for fifteen years and is still doing so.

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