On April 17, the “Supercomputing · Fusion, 2021 Global Blockchain Computing Power Conference” officially opened in Chengdu, Sichuan Province, China. This conference is co-sponsored by Babbitt, ChainNode, and Poolin. WuSaidBlockchain is co-organized and 360Power is the general title sponsor.
In 2021, “carbon neutrality” will become a national plan, and China is facing the urgent need to transform from traditional energy to clean energy. On the other hand, enterprises and countries are carrying out digital transformation, and the demand for computing power in modern society is increasing. Increasing computing power means consuming more energy. Under such a background, how can computing power be “cleaned and energized”? Can clean computing power and energy-efficient computing power be obtained at the same time?
In the afternoon, Arthur Lee, the founder of SAI, was invited to give a speech at the conference, “A Century of “Carbon Neutral” Plan, How Can Sustainable Clean Energy be Applied in the Mining Field?” I believe it can bring some enlightenment.
The following is the full text of the speech compiled by Babbitt:
Hello everyone, I’m Arthur Lee, the founder of SAI. First of all, thank the organizer for the invitation and let me have this opportunity to share my views on the impact of carbon neutrality on the field of computing power that the public has been paying more attention to recently.
First of all, I would like to introduce SAI to you. We were established in 2019 and have been committed to solving the problem of energy costs of computing since our establishment. Today, I would like to take this opportunity to introduce our next development plan, and to discuss with all of you about energy cost, efficiency and sustainability issues in the current carbon-neutral environment and the future development of the computing industry
How to become the Coinbase of the computing power industry?
A few days ago, when Coinbase went public, it caused a lot of waves. As a compliant exchange, Coinbase’s IPO means that traditional capital recognizes emerging industries. The entire blockchain industry can be divided into two main tracks, one is trading and the other is computing power. The main concern on the trading track is the exchange, and the key word is compliance. Therefore, the successful IPO of Coinbase as a compliant exchange is of extraordinary significance to our industry. We think about how to become the Coinbase of the computing power industry?
The most important and arguably the biggest cost in the computing industry is energy. I believe that many miners and people in the mining industry face the problem of energy costs. Our company has been dedicated to solving the energy cost problem of computing with technology since the beginning of our company. After continuous exploration, we have accumulated more experience. In terms of the company, we have received investment from Bitmain and some domestic headquarter institutions. Our customers are mainly domestic and overseas large funds, and our business is mainly to help B-side customers to carry out computing power asset allocation and computing power hosting services.
How can clean energy be applied in the field of mining under the current carbon-neutral market demand?
Let’s start with the positioning of our company. I’m a great admirer of Elon Musk, who is a great entrepreneur. When he defined Tesla, he used a very simple structure, which is clean energy + cars. He has always insisted on this concept. He believes that Tesla is the world’s first company to vertically integrate renewable energy, from electricity production to storage to consumption. Tesla is currently ranked in the top 10 in terms of market capitalization and is the only company in the top 10 market capitalization list that has clean energy as its core concept. I believe it will have the same significance as the Coinbase’s IPO a few days ago, bringing us into a new era.
We learned from Tesla’s philosophy and combined our knowledge of the industry to establish SAI’s positioning. Our core structure is clean energy + chips, dedicated to solving the problem of computational energy costs. SAI is positioned to become the world’s first horizontally integrated clean energy technology company, serving customers around the world from computing power to electricity to heat.
Why did we choose to enter the energy track of the computing industry? Looking back at the development history of several industrial revolutions, we will find a rule. From the first industrial revolution, heat was first used on a large scale instead of manual work, to the discovery and application of electricity in the second industrial revolution, which could drive industrial production more efficiently, and then in the third scientific and technological revolution, the computing industry has greatly shortened the time and space barriers of the physical world through computing power. The whole society is getting higher and higher from the perspective of energy efficiency. In other words, the value created by each kilowatt-hour of electricity is getting higher and higher. In this process, we discovered that the energy efficiency improvement process in the carbon-based world (that is, the physical world of human real life) can be understood as the improvement of atomic energy efficiency. For example, sending our paper letters from one city to another requires energy to move atoms, and the cost may be very high. But in the silicon-based world, it is possible to complete the fast and efficient way of transmitting information by sending WeChat through the movement of electrons. Similarly, the transfer of value in the silicon-based world can also become more efficient through the global network of digital finance and crypto assets. In the silicon-based world, the efficiency of value and information transmission is mainly improved by continuously improving electronic energy efficiency. With the development of human society and the advancement of science and technology, this trend will further accelerate. From the evolution of the carbon-based world to the silicon-based world, and the evolution from atomic energy efficiency to electronic energy efficiency, it can be said that the essence of human social progress is the continuous evolution of energy efficiency.
We believe that all developments in the silicon-based world must be based on computing. So what is the core cost of computing? Miners are very familiar with these, one part is the chip cost, the other part is the energy cost. If you stretch the timeline, you will find that energy costs will account for a greater proportion.
In essence, computing can be understood as an activity of entropy reduction from a physical point of view, that is, to turn disordered data into order, and there must be an input of energy. In other words, as many computing requirements as there are, as many chips are needed and how much energy is consumed. So we will see that whether it is traditional computing, such as Alibaba Cloud, Amazon or Bitcoin mining, all computing is based on energy and requires a lot of energy. Thus, solving energy costs becomes more and more important to the computing industry. Here we also have a deep understanding of the characteristics of each computing industry, and combined our accumulation in the energy industry and our knowledge of this market, we have summarized our own development strategy.
SAI Development Strategy
The first overview of the current state of the market is divided into two dimensions: the value chain and the industry chain.
In terms of value chain, we divide computing into two categories: traditional computing and advanced computing. According to publicly available data, the market size of traditional computing is larger. Last year, the market size was about 3 trillion, and it is expected to grow to almost 10 trillion by 2025. Advanced computing includes high-performance computing such as artificial intelligence, crypto supercomputing, and edge computing. In 2020, its scale was about two trillion. However, data predicts that the advanced computing market may grow to 20 trillion or even 30 trillion by 2025.
According to incomplete statistics, the scale of IDC (Internet Data Center) in traditional computing, China’s stock load was 23 million kilowatts in 2019. The current load of the mining industry is about 10 million kilowatts. In terms of electricity bill contribution, IDC contributes about 70 billion electricity bills every year. Bitcoin mining and crypto supercomputing contribute nearly 40 billion in electricity bills every year. From the data point of view, Bitcoin and crypto supercomputing took a short period of about ten years, reaching one-half of the scale of traditional computing, and the growth rate may accelerate further. Therefore, from the perspective of the value chain, we believe that advanced computing has a faster development speed and more space for development.
From the perspective of the industrial chain, the industrial chain is divided into many links. The first link is the energy link, which is also the focus of our speech today.
The focus on energy of computing had been relatively low before, or the society had not widely recognized its importance. According to incomplete global statistics in 2020, about 5% of the total global power generation was used for computing. However, according to official forecasts, 15% to 25% of global power generation will be used for computing by 2030 . In other words, among all the global power generation, the computing industrial power consumption will rank in the top two in the proportion of the entire power industry.
Because of the common mission of carbon neutrality, traditional industries are now paying attention to the replacement of fossil energy and the promotion and use of clean energy. In the computing industry, more and more people will also focus on whether the computing power uses clean energy, and whether the process of generating computing power meets the requirements of environmental friendliness and sustainability. Therefore, we will see that in the energy link of the computing industry chain, on the production side, wind power, hydropower, and photovoltaics power will gradually replace thermal power. On the consumer side, liquid cooling, energy storage, power consumption and power adjustment are getting more and more attention.
The second link in the industry chain is infrastructure, that is, data centers. According to incomplete statistics, the traditional domestic computing is about 23 million kilowatts. According to the backward projection of crypto power, the advanced computing load is about 10 million kilowatts. The demographic dividend of traditional computing has gradually disappeared, and advanced computing is constantly increasing, which shows an exponential growth trend.
In the chip sector, the ASIC field has a significant lead. The mining machines of companies such as Bitmain use the most advanced chip manufacturing process. For CPU and GPU, due to the influence of factors such as the international situation and production capacity, development will have some limitations. In the algorithm link, advanced computing still has the leading advantage of continuous iteration based on the scale of data. In addition, in the user link, advanced computing still has a large space for growth at the user level, after all, there is a huge demographic dividend. In general, traditional computing and advanced computing have great opportunities from a strategic point of view. Among them, traditional computing mainly focuses on domestic large cycles, and advanced computing requires domestic and international double cycles.
In from the perspective of clean energy business, SAI has four main business segments: SAIHEAT(chip waste heat utilization), SAIWATT(clean power consumption), SAIBYTE (computing cloud network system), and SAICHIP (new computing chip). SAIHEAT, by providing the server with liquid cooling + waste heat utilization, collects the waste heat generated by computing and reuses it, which can greatly reduce the electricity cost, and replace the traditional heat source to provide clean heat services at the same time. SAIWATT(clean power consumption) is to use idle energy such as hydropower, wind power, and waste gas power to do consumption and peaking through the electricity consumed by computing, so as to reduce costs and increase efficiency for energy owners and reduce the cost of computing power for us. In addition, computing power cloud services and new chip materials are our main directions to jointly reduce the cost of the computing industry.
Speaking of specific business, we currently mainly provide customers with clean energy-based computing power custody services. Also, at an appropriate time in the future, self-built clean and sustainable computing power will also be launched.
Through our clean energy-based SAI computing and energy center, combined with waste heat utilization technology and power consumption technology, we can reduce the computing power cost of customers by about 30%, while reducing the cost of heating power, and saving power supporting investment. This enables SAI to greatly increase our profit margin while reducing the cost of our three-party partners in computing power, electricity, and heat. In the future, we will establish SAI computing and energy centers around the world to provide services to more customers.
Finally, I would like to introduce the original intention of SAI.
The prosperity and development of every industry must break through many difficulties. In such a fast-developing industry, we believe that even if everyone and every company buys BTC, ETH, Filecoin, etc., it will not necessarily make the world a better place. However, we hope that through our own efforts, we can use technology to reduce the core costs of computing power, electricity and heat, which are the core costs of the silicon-based world, and provide sustainable computing, electricity, and heat services based on clean energy, so as to form a green circular economy, which can realize the vision of Mᴱake World ₿etter.
Thank you for your attention. If you have the right opportunity or have any business needs, you can also actively contact us.
As a continuation of the series of articles “The Underlying Logic of SAI”, I have previously established a framework of basic principles including theories of Computing and energy, Computing and energy parameters, Computing and energy theorems, wealth blocks, energy efficiency acceleration, etc. Based on this framework, this article will propose how we should judge computing and energy industry trends and find out a strategic development path. Also, part of it is my post-reading reflection on Mr. Huang Qifan’s new book “Structural Reform”.
I. Fundamental Aspects of China’s Computing Industry
1. Industry chain
a. Electricity: China is the world’s largest power generation country, with low power generation and transmission costs and relatively perfect infrastructure; 5%-8% of global annual power generation is used for computing, and this percentage is expected to increase to 15%-25% in 2030.
b. Infrastructure: China’s traditional data center load size is about 23 million kw, concentrated in user-rich areas, i.e., first- and second-tier cities and their surrounding areas, with a scale CAGR of 15%+, accounting for more than 30% of the global scale; China’s supercomputing data center load size is about 10 million kw, concentrated in energy-rich areas, i.e., thermal power and hydropower-rich areas such as northwest and southwest, dominated by the encryption supercomputing industry, with a scale CAGR of Growth rate of 30% +, accounting for more than 70% of the global scale.
c. Chip: subject to U.S. technology sanctions, SMIC and chip production-related industries are still in full catch-up, CPU and GPU class servers face technical barriers and development bottlenecks; ASIC chips and servers have a comprehensive advantage, the world’s top five ASIC supercomputing server manufacturers such as Bitmain are from China, the product market share of more than 95%, light Bitmain a Market share of more than 60%, and become TSMC’s global top six, Asia’s second largest customer, products continue to use the most advanced chip process with Apple, Samsung, Nvidia and so on.
d. Users: In the field of traditional computing, China has the largest number of Internet and mobile Internet users in the world, with huge population and traffic dividends in the early stage, and the current population and traffic dividends tend to be saturated but will still maintain huge scale advantages; in the field of supercomputing, AI supercomputing has scale dividends and huge development potential by taking advantage of China’s data base, and encryption supercomputing has huge development potential by taking advantage of China’s electricity, infrastructure and chips. In the field of supercomputing, AI supercomputing has the scale dividend and huge development potential by taking advantage of China’s data base, and crypto supercomputing has the advantages of electricity, infrastructure, and chips to become the center of serving global computing power demand.
2. Value chain
a. China’s traditional computing industry, which contributes about RMB 70 billion to the annual electricity bill, with total data center assets of more than RMB 1 trillion, and the scale of the radiated telecom and Internet industries of more than RMB 15 trillion.
b. China’s supercomputing industry, AI supercomputing is still in its initial stage, and several unicorn enterprises have been born; crypto supercomputing contributes about RMB 40 billion to the electricity bill annually and is growing rapidly, the total asset size of crypto supercomputing centers exceeds RMB 200 billion, and the scale of global crypto asset industry served exceeds RMB 5 trillion.
3. Supply chain
a. China’s traditional computing industry, the core output value areas including chip server and underlying operating system are monopolized and restricted by other countries, so it needs to invest heavily in independent research and development and spend at least 5-10 years to catch up; the infrastructure of computing industry including data center, telecommunication network and other core supply chain is well supported, users have large demand based on Internet, mobile Internet and telecommunication business, and the scale of data is large, so it has The basic advantages of rapid development.
b. In China’s supercomputing industry, AI supercomputing is yet to be observed in terms of core algorithms and commercial application scenarios; crypto supercomputing has a comprehensive leading edge, with crypto supercomputing servers and crypto supercomputing centers in a leading leading position in the world in terms of technology and scale, and the trading volume of crypto asset trading service platforms accounting for more than half of the global scale.
II. Traditional Computing Dominates the “Major Domestic Cycle”
1. vigorously promote the new infrastructure
Service computing infrastructure is the foundation of industrial Internet and digital economy. The service object of traditional infrastructure is the traditional economy and human’s daily life, while the new infrastructure service is based on big data, cloud computing, artificial intelligence, blockchain digital economy.
The supply-side structural reform proposed by the country is centered on the five major tasks of removing production capacity, removing inventory, removing leverage, reducing costs and replenishing short boards. The vigorous development of new infrastructure can realize the effective upgrading and utilization of backward and idle energy production capacity, and find a new power point and breakthrough point for local governments in the environment of real estate overdevelopment, while it can lay a high-quality foundation for further reducing the running cost of computing industry and digital economy.
2. Chip / algorithm to make up for the shortcomings
At present, China’s main shortcomings in the traditional computing industry in chip manufacturing and software operating systems, such as photolithography, windows, android & ios, etc. are monopolized by other countries, and the leading edge of hardware and software in the 5G industry is also suppressed by the global market and supply chain. Therefore, at the national and enterprise levels, we are already doing our best to increase research investment and support, and strive to break the “neck” technology one by one.
3. Digital economy internal circulation
The double blow of the trade war and the epidemic has forced China to re-examine the international pattern to seek new power points, so the country has proposed a “domestic circulation-based”, of which the digital economy provides a huge support force for the domestic economic circulation. Including a large number of applications and services of the Internet and mobile Internet, effectively linking online and offline services, more efficient information transmission, product circulation, service support.
Therefore, in the next period, we still need to make every effort to promote the rapid development of the digital economy supported by new infrastructure and traditional computing industries, to promote the upgrading of the consumer Internet and industrial Internet, and to further reduce costs and increase efficiency for the domestic economic cycle.
III. Crypto-Supercomputing Plus “Domestic and International Double Loop”
1. New Infrastructure in Western Region
The traditional computing industry is mainly distributed in user-rich areas, so it is concentrated in and around first- and second-tier cities, which need to control energy consumption to alleviate power shortage and power costs. If these regions blindly catch up with the trend of “new infrastructure” and build a large number of traditional data centers, they will only face the serious problems of idle space, wasted resources and capital loss.
The crypto-supercomputing industry, with its low network and latency requirements and extreme sensitivity to energy costs, is well suited for vigorous development in energy-rich areas in the west, and the power consumption parks supported and promoted by local governments in the west in recent years are actively responding to the development trend of this market demand. The western region is rich in thermal power, hydropower, wind power and photovoltaic power resources, and there is a large amount of idle redundancy, which leads to huge pressure on peaking and consumption, and lengthens the return cycle of fixed investment. Vigorously promoting the development of encryption supercomputing industry in the energy-rich areas in the west not only realizes the full consumption and utilization of idle power resources, but also drives the de-backward production capacity and industrial transformation in remote and backward areas, realizes more local economic income with less initial investment than traditional computing, helps the western region to initially establish the infrastructure required for new infrastructure, and prepares for the full development of digital economy in the next step.
2. Computing power to serve the FTA
Traditional computing industry and digital economy mainly serve domestic market users and large domestic cycles, while the arithmetic demand of crypto-supercomputing industry is distributed and globalized, and China’s crypto-supercomputing industry dominates the world, so it can effectively use this advantage to develop arithmetic service trade.
At present, China’s service trade has huge shortcomings, one is that China has a large service trade deficit, and the deficit reached $292.2 billion in the total service trade import and export of $759.4 billion in 2018, ranking first in the world and accounting for 40% of the global service trade deficit; second, the structural efficiency is not good, and China’s service trade is mainly concentrated in labor-intensive industries, while knowledge-intensive industries, capital-intensive, resource-environment The service trade capacity of intensive industries is very weak, and they all show a large deficit.
If China’s leading edge and dominant position in crypto-supercomputing industry can be effectively utilized to drive the establishment of crypto-supercomputing centers and computing services FTAs in the western region to provide cost-effective crypto-supercomputing computing services to the world, it will produce very significant effects: 70-100 billion kWh of idle electricity will be consumed for the western region every year, adding 20-30 billion RMB to the electricity-related energy industry foreign exchange revenue; annual sales of arithmetic services to the world could reduce the service trade deficit by $25 billion, accounting for about 9% of the existing deficit; drive the digital transformation of backward production capacity and the overall economy in the western region, and pool global demand for arithmetic power to promote the rapid development of the domestic upstream ASIC and GPU server industries.
3. Offshore RMB settlement
Based on the globalization pattern of crypto asset arithmetic services and the leading edge of China’s crypto supercomputing industry, further attempts can be made to establish offshore RMB and crypto asset settlement systems in Hong Kong and Hainan to promote RMB internationalization and globalization of arithmetic service trade and attract global capital into China.
In early August 2019, the U.S. Treasury Department suddenly announced that China is a “manipulator of exchange rates”, which has never been done in the past 10 years, which shows the seriousness of this statement. In 2015, the U.S. introduced a bill that sets out punitive provisions for “exchange rate manipulators” around the world. Once a country is deemed a manipulator, the U.S. government can take ten disciplinary measures, including a series of sanctions and freezing measures in financing, credit, listing, trade, settlement, and assets. Among them, the eighth penalty clause points out that the use of the bitcoin system to help and stimulate the “exchange rate manipulation country” of enterprises and individuals to abscond with funds out of the country, for this article we argue to see, once it happens there will certainly be some domestic funds to find ways to flee the situation, but bitcoin is not the best choice, because the domestic bitcoin secondary market At the same time, in the existing world landscape, there will be more funds that are willing to enter China but are therefore hindered, as bitcoin trading has compliance channels in major developed countries and economies around the world, coupled with China’s arithmetic service advantage, which can help global funds enter China through crypto assets and crypto supercomputing services, the offshore RMB and crypto asset settlement system becomes This is especially important.
We see that the crypto asset trading platforms managed and run by Chinese teams account for more than half of the global crypto asset trading volume, among which Huobi and OKEX have successfully borrowed the main body of Hong Kong listing and relocated their headquarters to Hainan Free Trade Zone, while Hong Kong is also preparing to launch digital asset trading license, which all lay the foundation for the trade of arithmetic services and offshore settlement of crypto assets.
4. Multi-dimensional response to the financial war
It should be noted that the above ten articles for “exchange rate manipulators” basically cover all the contents of the “financial war”, either not to fight, or to fight is these ten articles, we should deal with the “exchange rate war ” “financial war” “long-arm jurisdiction war” is nothing more than the above ten.
Therefore, accelerating the new infrastructure in the western region and establishing arithmetic power to serve the FTA and the settlement system of offshore RMB and crypto assets is a systemic strategic defense system. At present, the global crypto asset industry has exceeded $2 trillion and is expected to increase rapidly to $20-30 trillion in the next 3-5 years. Currently, there are national-level compliant crypto asset trading platforms and services platforms in the U.S., Japan, Singapore, and South Korea. Take the U.S. as an example, Coinbase is the largest crypto asset compliant exchange in the U.S., and its spot trading volume accounts for more than 20% of the world; Bakkt, as a key investment project of the Intercontinental Exchange Group (ICE), is gradually becoming the largest cryptocurrency derivatives compliant exchange in the world; the U.S. Grayscale Fund has accumulated more than $12 billion in bitcoin trusts under management and is growing rapidly; Fidelity Asset is fully engaged in the crypto-asset related industry; PayPal has launched the service of buying bitcoin for tens of millions of users and supports the transaction settlement of bitcoin and other crypto assets in 28 million global merchant systems.
The U.S. is doing its best to seize the secondary market for crypto assets, while China is uniquely positioned to dominate the primary market for crypto assets in terms of arithmetic. The arithmetic power is the security foundation and value foundation of crypto assets, and the strategic significance is becoming more and more apparent as the voice in the crypto arithmetic industry can be effectively transmitted to the secondary market of crypto assets.
The crypto supercomputing industry should become one of the multi-dimensional strategies to deal with the financial war, and at the same time do a good job of supply-side structural reform of the domestic financial system and properly promote the internationalization process of RMB, so that we can comprehensively deal with the future risks and grasp the opportunities in the new era.
5. The new global monetary landscape
The U.S. debt level has reached a record high, and it is foreseeable that the new U.S. government will have to continue to increase its lending efforts in order to cope with the continuously deteriorating epidemic and economic situation, and the dollar confidence crisis will become more and more serious.
The history of the development of global currency is still clearly visible, whether it is the first industrial revolution British coal industry and industrial strength to establish the global status of the British pound, or the second industrial revolution, World War II, oil trade to help the dollar firmly lock the major currency pattern of the world today, to become a truly global currency, there must be a strong enough credit and trading ecological support. Remember that the Japanese yen, the last to attempt internationalization, collapsed at the feet of the Plaza Accord and has not recovered since.
In order to finally achieve internationalization, we need to comprehensively promote cross-border settlement of RMB, actively carry out local currency swaps between countries, build an offshore trading market for RMB, promote the clearing and pricing of RMB bulk materials, strengthen the influence of RMB in countries along the “Belt and Road”, and accelerate the construction of a global network of commercial banks with RMB as the clearing currency. The Bretton Woods System
“The collapse of the Bretton Woods system has completely decoupled the U.S. dollar from gold, and it must rely on oil trade to maintain the dollar’s power of speech. While countries are taking the initiative to increase their gold reserves, they are actively looking for more “gold-like” value storage vehicles on the one hand, and are more eager to have a credible global monetary system with an “anchor” on the other hand, and no longer want to be a victim of hyper-inflationary dollar. Crypto assets, led by Bitcoin, are gradually becoming a strategic reserve for more countries due to their anti-inflation, decentralized, anonymous and secure characteristics. The dominance of the US in the secondary market of crypto assets stems from the fact that US companies and individuals are gradually aware of the potential risk of devaluation of holding US dollar assets and want to protect their assets in this way; on the other hand, US policymakers see the huge development potential of the crypto asset market and try to control the US dollar like oil in the settlement discourse of crypto asset transactions to further enhance the status of the US dollar.
Therefore, RMB should seize the opportunity of crypto-asset market development and make full use of crypto-supercomputing service trade and offshore trading platform of crypto-asset to promote the global trading and settlement of digital RMB and crypto-asset, so as to enhance the voice and influence. On the other hand, we will make full use of the characteristics of crypto assets as the “anchor of global currency”, anchor the legal digital currency with it in a suitable way to enhance its credibility, and strengthen cooperation with other countries to lead the new pattern of global currency.
6. New ecology of energy finance
The open and cooperative stance that our country has been adhering to will be conducive to our mutual benefit and progress with countries around the world, in which we will not only solve the difficulties and problems we encounter, but also provide quality solutions for countries to solve their problems within the scope of our ability. The current world situation is essentially a confrontation between the “one America” and the “pluralistic cooperation” system. All the problems we encounter will also be encountered by other countries that adhere to the concept of “pluralistic cooperation”, and our needs to develop digital economy, realize energy transformation and prevent financial risks will also be encountered by other countries.
The crypto-asset and crypto-supercomputing industries are developing rapidly in countries around the world, from Singapore, Myanmar, Bhutan and Malaysia in Southeast Asia, Kazakhstan and Kyrgyzstan in Central Asia, to the United States and Canada in North America and Norway and Iceland in Europe, and countries are seizing new opportunities in the primary and secondary markets of crypto-assets in different ways. In particular, the crypto-supercomputing industry is becoming an important strategic layout for countries to achieve energy industry transformation and financial security. From the energy perspective, countries with rich energy resources around the world are in a position and motivated to promote the development of crypto-supercomputing industry in their countries, which can not only change their current GDP over-dependence on the export of cheap energy resources, but also give full play to the advantage of abundant and cheap energy resources to realize higher energy resource premiums, and at the same time promote the realization of digital, technological and financial transformation of the energy industry and the strategic financial security purpose.
China’s advantages in the whole industrial chain, value chain and supply chain of crypto-supercomputing industry can help us achieve the dominant discourse in the global crypto-supercomputing industry on the one hand, and realize the purpose of domestic and international double circulation of crypto-supercomputing industry services; on the other hand, we can integrate our advantages in chip servers, infrastructure, computing power operation and maintenance, and computing power trading in the crypto-supercomputing industry to export overall solutions to the outside world and help On the other hand, we can integrate our advantages in crypto-supercomputing industry chip server, infrastructure, computing power operation and maintenance, and computing power trading, export overall solutions to help other countries to quickly establish crypto-supercomputing industry, and jointly promote the development of new global energy finance ecology on this basis.
IV. SAI Empowered Computing and energy Industry Evolution
1. Industrial Internet of computing power
SAI is a global Computing and energy operator based on chip energy technology, and is committed to effectively reducing the energy cost and computing power cost of computing industry and promoting the accelerated improvement of energy efficiency of computing and energy industry through the four-dimensional technology matrix of “chip waste heat utilization + clean power consumption + computing power to improve energy efficiency + new computing power chip”.
By reducing the four core costs of heat, electricity, algorithms and chips, we are becoming the “gas pedal” of the computing industry, cooperating with the upstream and downstream of the industry to establish a global computing industry Internet, and jointly provide users with more cost-effective computing services.
2. Electricity Industrial Internet
Electricity is one of the core costs of computing industry, SAI has high quality clean power consumption solutions and global power resources. Through technology linking the power users of computing and power resources, we help computing customers to obtain cheap power resources and also help power customers to realize cost reduction and efficiency increase.
On the one hand, we reduce the additional consumption of electricity and the overall PUE of the project through more efficient liquid cooling technology to achieve energy saving and consumption reduction; on the other hand, we also provide a better solution for clean power consumption and traditional power peaking, which no longer requires expensive energy storage equipment input or generates wasted resources as before. We establish a power industry Internet with clean power as the link, forming an effective supplement to the whole traditional power industry and optimizing the allocation of resources.
3. Heat Industry Internet
SAI’s creative chip waste heat utilization solution effectively utilizes the waste heat generated by the computing industry to provide heat services, uniquely and innovatively opening up a new path to reduce the cost of the heat industry. The general trend of the future is the comprehensive and rapid development of the computing industry, which inevitably generates the heat dissipation problem corresponding to the computing power. If all the heat generated by computing can be collected and utilized, it not only essentially solves the problem of large power consumption for heat dissipation, but also realizes the reuse of energy and promotes the energy saving and greening of the computing industry.
In the actual operation scenario, SAI is gradually establishing a heat industry Internet with computing waste heat as the link, completing the heat service with lower cost and higher value, effectively making up for the defects of the traditional heat industry with limited coverage and high comprehensive cost.
To sum up, SAI will always uphold the value of “energy efficiency acceleration, heat is like cold”, focus on the top strategic development direction of China’s energy calculation industry, and make every effort to create more value for users and the market!
In 1900, Planck introduced the concept of energeticons to overcome the difficulties of classical theory in explaining the laws of blackbody radiation, which laid the cornerstone for quantum theory. Then, Einstein proposed the light quantum hypothesis in response to the contradiction between the photoelectric effect experiments and the classical theory, and successfully used the energetic subconcept in the problem of specific heat of solids, which opened the way for the development of quantum theory.
We previously proposed a macroscopic perspective i.e. understanding computing from the perspective of entropy: computing can be thought of as the entropy-reducing act of using electrical energy and raw data as raw materials to make disordered data orderly and valuable, with a one-to-one correspondence between computing demand and energy consumption.
So what does the act of computing look like in the microcosm? We divide computing into three main processes, namely, electrical energy transfer, chip computing, and heat dissipation. Based on quantum theory, we extend a new perspective.
First, the electrical energy is transferred to the chip through the wire, and this process is done by electrons. Based on quantum theory, it can actually be understood that the electrons surrounding the metal atoms are driven by energy to leap from one end of the wire to the other in turn to indirectly realize the rapid transfer of energy.
Then, the chip uses electrical energy to complete the computing task, the process of the chip’s software algorithm and hardware structure can be understood as the consumption of energy to encode, according to the encoding way to consume the electrical energy to produce a pre-desired result.
Finally, the chip will produce heat after completing the computing, the macrocosm performance is through the chip 100% of the electrical energy into more than 99.9% of the heat and a small part of the electromagnetic wave, while in the microcosm is to drive the electron constantly jumping change in the energy due to changes in the nature of the metal atoms around the electron can not continue to jump and heat in the form of energy to the surrounding environment (air) to transfer.
Based on quantum theory and relativity, we can extend many early physical concepts: the conservation of mass is the conservation of energy, various particles (atoms, electrons, photons) are different manifestations of energy, and all changes in energy tend to turn into heat and tend to stabilize.
Back to the macro world, we know that the development of society is essentially driven by energy (steam – electricity), the progress of science and technology is essentially to discover more energy and improve the efficiency of energy utilization, computing and computing power as a more efficient way to use energy will certainly play an increasingly important role in the future development of society. In the era of industrial revolution along with the discovery and utilization of oil, the largest giant ever born in the business world – Standard Oil Truss, we believe that in the future will certainly produce a similar giant to provide energy services for computing.
The current demand for energy is mainly in electricity, oil and heat, which are the basic elements to support the normal operation of society and normal human life, but what many people have not yet noticed is that our demand for computing power is now ubiquitous, and all services such as cell phones, networks and software are based on computing power, and the demand for computing power is growing exponentially, which is exactly why our country has proposed This is where the “new infrastructure” is important.
In addition to finding more energy supply (e.g. clean energy), energy as a finite and scarce resource, we have been trying to do everything possible to improve the efficiency of its use, so we see the emergence of new technologies in various fields, as well as in the field of computing: chips are also evolving to reduce the power consumption ratio. With technology and cost bottlenecks, in addition to improving efficiency, energy reuse is increasingly being emphasized. So we have seen the use of waste heat from high grade heat in industry, is there such an opportunity in computing? The answer is yes! Because people’s demand for computing power at the same time, behind the large demand for electricity and produce the corresponding amount of heat, these heat used to need to consume more electricity to dissipate heat, now we can collect them its to meet the heat demand, so that both the secondary use of energy and reduce the cost of demand from all sides.
From the perspective of quantum theory, people’s heat demand based on electricity is essentially the process of converting the electrical energy of electrons into heat energy, and chip computing is likely to be the optimal process to achieve this path because it can accomplish both the computing task and solve the heat dissipation demand of chips and people’s heating demand.
According to our previous theory of Energy Profit Efficiency (EPE) EPE = (revenue – energy cost) / time, society will evolve toward increasing energy profit efficiency. For example, the Internet and mobile Internet have been a large amount of information transmitted through the network, which not only saves the cost of information transmission and shortens the transmission time, but also the huge computing power can quickly process the massive amount of data to get more valuable information, which has undoubtedly greatly improved the efficiency of energy profit.
If we want to further improve the efficiency of energy profits, how should society evolve? In contrast, the pain points of our real life are mainly manifested in two aspects: 1. time and space is still the biggest limitation of human activities; 2. the growth rate of computing power is still unable to meet the exponential growth of computing needs.
From horse-drawn carriages to high-speed trains and airplanes to spaceships, the space and displacement speed of human activities have increased greatly, and the time required to move has been gradually shortened with the progress of technology, but airplanes are still late, and it still takes half a day to travel from Beijing to New York; the Internet links and stores a huge amount of information around the world, and powerful search engines can let you know almost everything that happens around the world at any time and anywhere, but AlphaGo can beat human Go masters, but it still can’t calculate the mystery of the entire 3 billion base pairs of genetic sequence and the countless stars in the universe. Technology, especially medical advances, has greatly extended the average life expectancy of contemporary humans, but everyone still faces aging and death, and once dead, all the information and consciousness in the brain will not be stored and perpetuated.
From the biological point of view, the processing process of human brain is similar to that of a computer, which is a process of different signals (visual, auditory, tactile, taste, smell) input to the brain, processed according to different compilation programs (logical thinking), and the result output, and this processing can be detected with instruments to detect the changes of different electrical signals; similarly, a small DNA stores a huge amount of biological information, and with enough Similarly, a small DNA stores a huge amount of biological information, which can eventually be compiled and expressed as a complete conscious human individual with sufficient energy support. Just like the plot in the movie “The Transcendentalist”, we can’t help but think that if there is strong enough computing power and advanced enough brain-computer interface technology, can human beings transfer their consciousness, thus breaking through the time and space boundaries of carbon-based life, and based on more powerful computing power to travel infinitely in the silicon-based world?
Back to the present, we have to consider, even if such a parallel world can one day become a reality, what are the necessary elements to drive its realization? In our opinion, whether it is the further evolution of the real world or the eventual realization of the parallel world, there are three basic elements necessary:
1. computing power. As time goes on, we will continue to generate sky-high amounts of data, requiring increasingly powerful computing power to process that data and generate more valuable information. Computing power is enabling a full range of traditional alternatives: information processing (manual to computer), information delivery (cart and horse to network), and value delivery (gold fiat to digital assets). Powerful computing power can process larger amounts of data in the same amount of time, while reducing the time and energy consumed to process the same amount of data. The computing power is so powerful that it can instantly simulate the entire planet in full detail, down to a single grain of dust on the windowsill of one of its inhabitants, and can calculate the full range of possible directions of change including where this grain of dust should float down.
The computing power is based on electricity and heat, the chip and its integrated computing power is like a compiled energy usage instructions, using electricity to process the data in a set way and feedback the results, while the electrical energy is all converted into heat and emitted into the air.
2. Electricity. The clean and sustainable nature of electricity, easy storage and transmission, and high energy density make it the most promising secondary energy source. From Internet messaging to electric cars and robotic arms, electricity is both the source of power for the digital world and is gradually becoming the core driver of the real world. The world is concentrating on promoting the full popularity of clean power generation and electric power substitution, and photovoltaic power, wind power and hydropower, as clean and sustainable power generation methods, will gradually become the main way of power generation.
According to the current development trend, electricity will become the most core end-consumption energy, and at the same time, as the basis of arithmetic power, the growing computing power must consume more electricity, so each link related to electricity production and consumption (power generation, transmission, storage and consumption) has a lot of space for further optimization.
3. Heating power. Theorem of thermodynamics is extended, we will find that human beings have been solving the problem of heat since the beginning: human beings draw carbohydrates from food and decompose them into energy in the body to maintain the continuation of life; in ancient times, the heating by fire makes protein easier to digest and absorb, and promotes the improvement of primitive human intelligence; biological survival needs heating and hot water, and the use of heat extends the boundary of biological survival in cold areas. Crops can continue to grow in the heated hut in winter, and humans can even soar in the space of the universe close to absolute zero; thermal power generation is the use of heat generated by fuel to promote the rotation of the turbine, but also faces the serious problem of unit cooling; power transmission to reduce resistance as much as possible, too much resistance will lead to the transfer of power into a large amount of heat, both a waste of electricity and cause the risk of fire; chip computing The large amount of heat generated by the chip needs to be dissipated quickly to ensure that the chip can continue to work stably.
More efficient heat dissipation and lower cost heat supply will continue to be the way of development and progress of human society, and the way to improve energy profit efficiency.
Based on such a concept, we at SAI have been conducting technology research and commercial exploration, and have launched our product SAI Energy Calculation Center, which is based on the chip energy technology to reduce the three core costs of computing power, heat and electricity, and SAI Energy Calculation Center can realize the triple network supply of computing power, heat and electricity and form a large energy calculation network, which is distributed in various regions of cities and places around the world. We believe that through our continuous efforts, we can reduce the cost of computing power, electricity and heat for more people and create more value for the society through the SAI Energy Center. We look forward to future technological advances that will enable human beings to make great leaps in computing power, electricity and heat, so that everyone can use cleaner and more affordable computing power, electricity and heat resources, and based on which we can truly have the opportunity to realize a more perfect and superior parallel world.
I. God’s Perspective on Bitcoin’s Revelation and Driving Role
Bitcoin has been in existence for more than ten years. In a completely free market competition, it is undoubtedly the most successful case so far. Instead of discussing the price of Bitcoin, we’ll look at what Bitcoin brings to the table and what it drives from a more fundamental perspective.
1.Evaluating BTC by monetary standards – the globalization case for technology cost reduction
Bitcoin’s rapid growth is tied to the fact that it solves crucial core problems with technical means.
Issuance rules, BTC uses code to lock in the fact that the total number of 21 million cannot be increased. In contrast to the hyper-inflationary situation of fiat currencies in many weak sovereign countries, BTC uses technology to support the consensus that no additional issues can be issued.
Interchangeability, compared to traditional currencies, BTC’s interchangeability is undoubtedly superior. No third-party permission is required, and mastering the private key holds true ownership, independent of any third-party influence.
Trust costs, Bitcoin uses technology to ensure the security and verifiability of transactions, greatly reducing the cost of trust for parties who do not know each other.
Circulation costs, as a digital asset, Bitcoin has a higher flow rate and lower circulation costs than any physical currency, which creates a positive feedback mechanism that makes more transfers willing to choose Bitcoin as the path.
2.Analyze BTC mining with computing industry ideas – leading the chip computing industry
We all know that Bitcoin is mainly obtained and recorded through the act of “mining”, mining is more like a traditional industry, requiring a lot of hardware investment and construction costs and a long period of capital return expectations.
From the perspective of chips, mining is inseparable from mining machines. Let’s look back at the development history of Bitcoin mining machines. From the earliest personal computer CPU era, to the later GPU and FPGA era, to the ASIC era, the power consumption of mining chips With rapid iteration, the overall computing power is also showing an exponential increase. From the perspective of chip development, Bitcoin mining machines have promoted the large-scale application of ASIC chips and the rapid progress of the process. In the future, it is believed that Bitcoin mining machines are likely to adopt more advanced nano-processes on a large scale earlier than mobile phone manufacturers. Following the pace of Bitcoin mining machine chips, we have seen the rapid development of AI, and artificial intelligence chips have also begun to transform to ASIC, beginning to use 28nm or even 16nm for small-scale applications. I believe that with the rapid development of AI and marginal computing needs, we will also see the mass production, application and development of AI chips.
From the dimension of stand-alone power consumption, over the years we have seen the mining machine from a single several hundred watts to about 1.5kw in the 16nm era and then to 2-3kw in the latest generation, the stand-alone power consumption is getting bigger and bigger. To the current 2-3kw stage, we will see many hardware technology bottlenecks: for example, the production of a single 2-3kw large power supply stability and yield rate has been a problem, 2-3kw single power consumption of power distribution / cable have put forward a new level of requirements, cooling problems are more serious, the original air-cooled can no longer meet the current higher heat flow density of cooling needs, some manufacturers even need two sets of violent fans to ensure the heat dissipation effect. Energy costs have become more prominent, both in terms of energy consumed by computing and energy consumed by cooling, reaching a new order of magnitude, with both individual energy consumption and total industry energy consumption entering the next phase of rapid growth. All of these changes are driven by the demand for computing power, all of which has freely and rapidly evolved to where we are today. Regardless of the Bitcoin mining machine, we will find that the upcoming 5G era, 5g base stations are also developing in this direction and facing the same problem. 4g base stations have a server stand-alone power consumption very close to that of 16nm era miners, while 5g base stations now have a standalone power consumption of 3-4kw and need 3-4 times the number of 5g base stations to achieve good signal coverage compared to 4g, which means that telecom operators face huge energy consumption costs. At the same time, 5g base stations with such large power consumption pose a challenge to power distribution, many scenarios do not have the corresponding power distribution standards, changing power distribution facilities lead to higher cost investment, so we see that Huawei launched 5g base stations with a battery, which is to solve the problem of power distribution, the same large power consumption will also face serious heat dissipation problems, especially in outdoor conditions in the four seasons of the year, the ambient temperature difference may reach more than 60 degrees Celsius.
From the perspective of the data center, although the Bitcoin mining farm is currently very extensive compared to the traditional IDC computer room, which is mainly constrained by cost and policy, the total load of the Bitcoin mining farm is close to 10 million kilowatts (according to the full Bitcoin Network 100E computing power computing, considering the average power consumption of the new generation of mining machines 60w/T, the average power consumption of the whole network mining machine can be roughly regarded as 100w/T), the growth rate of this scale exceeds that of traditional IDC data centers and will grow rapidly. Similarly, with the rapid development of AI, 5G, and IoT, there will be exponential growth in computing demand and corresponding data center power load. At the same time, Bitcoin mining as a highly sensitive industry to electricity costs, the free hand of the market allows miners and mine owners to take the initiative to discover high quality and cheap power resources in the country and around the world, accordingly bringing additional revenue for owners of idle power. When a large amount of data will generate demand for edge computing and distributed computing in the future, energy consumption cost will also become a common problem for them.
In summary, we see many similarities between Bitcoin mining and traditional data centers and future trends in AI and edge computing, which is no coincidence as these can be categorized as high-performance chip computing industries and are rapidly iterating with the rapid growth of computing demand.
3.Energy perspective on the POW mechanism – energy-based liquidity premium
POW (Proof of work), the consensus mechanism of Bitcoin, plays a crucial role for Bitcoin. The above analysis of Bitcoin mining is also a category in the computing industry, let’s extend one more step to think about the nature of mining. Miners know that mining has two main costs, one is the cost of the mining machine which can also be considered the cost of the chip, and the other is the cost of electricity, which as an ongoing cost input tends to take up the lion’s share. But if we look at the cost of electricity in a different way, the cost is the essence, so the essence of mining is the production of electricity-based activities, and the role of miners is like a globally distributed workforce that uses electricity as a raw material to produce the product Bitcoin. Treating Bitcoin as a commodity, then its cost is critical, and we all know that businessmen must have an incentive to find and use lower production costs, so miners will actively seek out cheap electricity. Further, if a commodity like Bitcoin is produced with electricity as the main cost, then Bitcoin can also be seen as a high value added product of raw materials like electricity. At this point for the owner of the electricity or the corresponding energy source (coal, natural gas, etc.), is it better to choose to sell the electricity and other energy sources as cheap raw materials or to produce Bitcoin on site for higher value added?
At this point we can see Bitcoin as a high value-added product of electricity (energy). Combined with Bitcoin’s own high circulation rate and low circulation cost, it is equivalent to providing global liquidity for globally dispersed energy resources such as coal, natural gas, and electricity. In the context of globalization, energy owners will have another revenue option besides selling through trade channels.
II. High-performance Computing is The Core Driver of The Fourth Technological Revolution
1.Computing is the bridge between the physical world and the virtual world
We analyze the flow path of energy in computing activities from the point of view of physics: (To simplify our analysis, we isolate the focal part of computing activities which is the chip) 100% of electrical energy passes through the chip and is converted into more than 99% of heating energy (and a small part of electromagnetic waves, which can be neglected), while completing the task of computing. Computing, whether processing data and information or completing computation, is a way to bring order to the means of production in the virtual world, so it can be seen as an entropy-reducing activity with electrical energy as input and heating energy as output. As long as it is computing, it will definitely consume the corresponding energy. Through computing, the production materials such as energy of the physical world and the production materials such as data and information of the virtual world achieve a real correlation, and we can even macroscopically think that the result of each computing is the mapping of the energy of the physical world in the virtual world.
2.Chip is the engine of high performance computing
From the third technological revolution to today, the accumulation dimension of production materials has been extended from the previous physical world to the virtual world, data, information and other digital production materials began to accumulate in large quantities, and the next 5G, IoT, AI and blockchain development will bring exponential growth of production materials in the virtual world, corresponding to such huge production materials, need very powerful computing power to complete processing tasks, and accordingly The same amount of energy is needed as input, and high-performance computing chips are the core role.
With the exponential growth of computing tasks, the chip from the performance and number of two dimensions of rapid iterative evolution, the performance of a single chip more and more powerful, power consumption is getting lower and lower, the total number of chips is getting larger and higher total power consumption. It is foreseeable that the future demand for a large number of computing, will bring the explosive growth of the chip industry, will also lead to the explosive growth of related industries providing energy services for computing. The chip is compared to the engine, electricity is like fuel, how much fuel can run how far, to how much electricity can complete the corresponding number of computing tasks, which is consistent with the reality of our perception of the computing industry.
3.High performance computing is all about energy-based POW
Putting aside Bitcoin mining and taking a global view of the high performance computing industry, this is an industry that uses electricity as a means of production and a major cost of production, so it is also an energy-based industry. Here we look at the Proof of work mechanism, where work is defined as “workload” in the Bitcoin mining mechanism, but work itself is the concept of physics doing work. Therefore, we can completely define computing as a class of behavioral activities in which electricity does work, so from this perspective all high-performance computing can be considered as proof of work mechanisms.
4. Energy is the source of all scientific and technological revolutions
Looking back at the successive technological revolutions, the first industrial revolution of steam, the second industrial revolution of electricity, the third technological revolution of atomic energy and information technology, all achieved rapid progress in productivity after the energy change. The fourth technological revolution will have a sky-high amount of digital production materials that need to be processed by high-performance computing, and perhaps this is the core of the fourth technological revolution, that is, energy-based high-performance computing to bring about the large-scale value of digital assets production materials. In this way, it seems that energy remains the source power of the fourth technological revolution, which is consistent with the objective law.
If each technological revolution is regarded as a cycle, then the production activities in the cycle is more of a demand-determined supply, that is, energy and productivity has achieved a breakthrough, by the market demand to determine how much productivity supply is needed, and constantly optimize the cost of productivity (i.e., energy costs). In the phase of cycle change, due to the rapid breakthroughs in productivity and the rapid increase in the amount of energy, greatly liberated the original productivity constraints reduce the cost of production, so this phase is the supply determines demand, for example, in the past to deal with a certain scale of data requires several supercomputers to spend a lot of electricity to deal with a month or even a few years, while the future to deal with the same amount of data only requires a chip to consume very little electricity with less than 1 second to complete the time.
III. The Great Integration of Energy, Finance and Technology
1.Energy & Computing
As mentioned earlier, both Bitcoin mining and high performance computing integrate the two industries of energy and computing through chips, and the computing industry can be considered as a production manufacturing industry with energy as the main means of production and production cost.
Let’s analyze the energy industry separately. At present, 8%-10% of global electricity consumption is used for computing. With the rapid development of the computing industry in the future, since electricity is currently the only direct energy source for the computing industry, this proportion will rise rapidly. Related research predicts that in the next 5 years, the power consumption for computing will account for 15-20% of the total global electricity consumption. We think this is a relatively conservative forecast. We analyze from the power consumption side that the demand market for manufacturing and living purposes (lighting, heating) is an industry that is closely related to population and national development. In the future, there will be no exponential growth trend, and the computing demand market is due to 5G The popularity of technologies such as AI and AI will produce an exponential growth trend, so the proportion of power consumption in the computing market will increase rapidly. In the last round of the popularization of the Internet and mobile Internet, a large amount of storage and computing demand has pushed up the overall power consumption of the computing industry. The rapid popularization of this round of new technologies requires both the volume of data and computing tasks and the speed of generation. It is much faster than the previous round, so the growth of power consumption in this round of computing market should also be much faster than before. If we look further, then in the future virtual world as a parallel world mapped by the real world, the total scale of its digital production materials should not be smaller than the existing physical world, and the energy consumed by these production materials should be processed by computing. It should be very large, so we might as well make a bold assumption: the computing industry will reach 50% or more of the global electricity consumption in the future.
At the same time, the rapid growth of electricity demand in the computing market will also drive changes on the supply side of electricity, and how to meet the demand for such rapid electricity growth will be a critical issue. Here regardless of the need to consider the growth space of power scale, but also need to consider the cost of electricity, because the cost of electricity will directly affect the cost of computing, and eventually return to the end-user cost of computing power. On the other hand, changes in the supply side of power generation will also extend to other related energy fields, nuclear power, thermal power, hydropower and other corresponding power generation methods will participate in this fast-growing market, the upstream energy supply (including oil, natural gas, coal, etc.) will have a linkage effect, and the global energy consumption market pattern will produce a new round of changes.
If we make further guesses, the cost of computing power, i.e. energy cost, will keep falling as technology advances, but the overall demand will rise rapidly, then will it reach a tipping point where the return on energy flow to other uses starts to be lower than the flow to computing uses, then this is when more energy resources start to actively flow to the computing demand market. This situation is already reflected in the global market for Bitcoin mining, and I believe it will show up in more high performance computing areas in the future.
2. Finance & Computing
Modern finance and computing are closely related, both in the global trading markets and in the independent data centers of financial organizations, which perform a large number of computing tasks every day. With further globalization, we believe that the financial industry will rely more and more on the computing industry: the rapid growth of demand for mobile payments, trading markets, customer data, market analysis, etc. will also drive the rapid growth of the computing market.
When we look at energy through the lens of finance, we find more relevance. If we were to give finance a key word, I think “liquidity” would be one of the most appropriate. As an asset, the price of energy (roughly, price = value) can be considered to be composed of two parts, one is the use value, which is the value of the use properties as fuel, power and other usage scenarios; the other part is the subsidiary value, which includes the value of a commodity in the secondary market influenced by supply and demand and liquidity. The aforementioned Bitcoin is more like a liquidity premium for energy, which is actually a reflection of the way in which use value and subsidiary value are combined. In addition to Bitcoin, the entire computing industry is actually combining the use value of energy with the collateral value to a fuller extent, bringing out the greater value of energy.
Therefore, looking at the above relationship between energy and computing, finance and computing, we can summarize: computing brings the two industries of energy and finance together closely, and in the future development, the rapid growth of computing and finance will drive the rapid growth of energy consumption.
3.Technology & Computing
Back to computing itself, the main carrier of computing is the chip. The chip industry is currently one of the core of the global cutting-edge technology industry, almost all intelligent devices and modern services are inseparable from the chip, for example, cell phones, computers and other intelligent terminals will be directly built-in chip, large data centers, edge computing centers are through the large-scale high-density chip to provide services to end users. The surrounding industrial ecology around the chip also basically concentrates all the most advanced technologies and enterprises, from the production of wafer flow to the production of PCB version, involving hundreds of disciplines such as materials, materials, mathematics and chemistry.
At the same time, the development of computing industry will also promote and attract the evolution and gathering of the whole technology industry. More advanced materials and technologies will flow into the chip manufacturing, more and more professional talents and enterprises will invest in the research and development of the chip computing industry, and more powerful services and resources will gather in the chip computing industry.
In summary, the computing industry will promote the integration of energy, finance and technology industries, energy, finance and technology itself is the three pillar industries of modern society, which are inextricably linked to each other, while computing is more like the intersection of energy, finance and technology, and in the demand for the promotion of this intersection of the three industries in the proportion of expanding.
IV. The Great Transformation of Energy, Finance, and Technology
1.The core of the computing industry – computing and energy
In physics, the relationship between force and work can be simplified with E=a*F*t (where E represents energy, that is, the amount of work done, F is the size of the force, t is the time, a is a parameter and has different values for different forces and energies), for example, the formula for doing work in Newtonian mechanics is W=FS=F*v*t, W=P*t in electricity, the force and energy in these scenarios are can be distilled using the simplified formulas we described above.
So how do we represent computing power? A straightforward way to represent it is to define the number of calculations per second or the ability to complete them, for example, the current Bitcoin miner’s computing power is in the tens of T/s, but such a representation does not see a direct relationship between computing power and energy. As we analyzed earlier, computing is an entropy-decreasing process that must consume energy and require energy input, while computing power is a momentary state that does not represent the result of the entire entropy-decreasing process of computing. For instance, the computing power of a mining machine is determined, but the results it can produce in one second of work and in one year of work are completely different, and the energy consumed is also completely different, just like the energy consumed in real life to move different weight of bricks to different floors is also different.
What is the best way to evaluate the results of computation? Similar to the relationship and definition of power and kinetic energy in physics, we define the energy of computing to complete the task over a period of time as computing and energy. We have analyzed earlier that computing is highly correlated with energy consumption, and if we approximate the matter of computing as a process in which the chip consumes electrical energy to complete the computing, from the perspective of the first law of thermodynamics of energy conservation, then we can use the consumption of electrical energy to indirectly represent the computing and energy, so the computing and energy is equal to the total amount of electrical energy consumed by the computing.
In the actual process, a device used for computing is studied as a unit, in which the vast majority of electrical energy is used for computing of chips and other electrical components, but there is also a part used for peripheral services such as heat dissipation to maintain the stable working condition of the chip. Therefore, we know that in order to improve the utilization of electrical energy to improve the calculation of energy, we must minimize the consumption of non-computational work on electricity.
At the same time, in addition to improving the utilization of electricity, improving the efficiency of energy calculation itself is also a very worthy direction to think about. The so-called efficiency is just two parameters, namely cost and revenue, so to improve the efficiency of computing and energy should start from reducing the cost of computing power and improving the revenue of computing power. And we look more macro, want to improve the efficiency of computing and energy, we need to reduce the cost of electricity and chip power consumption ratio, improve the processing power of the chip. This thing is happening from the first day of the computing industry, chips continue to use more advanced technologies and processes to reduce power consumption, data centers are constantly looking for cheaper electricity and reduce the total power consumption of the way.
2.Computing power drives energy reform
Continuing with the concept of computing and energy, the development of the computing industry will bring three main changes to the energy industry because of its close relationship with electricity consumption: 1. the total amount and share of energy used for computing will grow rapidly; 2. lower cost and more stable energy sources will account for an increasing share of the energy required by the computing industry; and 3. more types of energy resources will be converted to electricity.
As we said before, the current electricity consumption of computing accounts for 5%-8% of the total global electricity consumption, we should not underestimate this figure, because the demand for computing will be exponential growth, so the growth of computing electricity consumption will also show exponential trend, so this figure will grow rapidly in the next 10 years. From the perspective of electricity supply, the surplus of electricity production capacity can meet the growth of computing demand, but after a certain scale, we should start to consider the redeployment of electricity demand market, and the electricity from the original low output value of electricity-consuming industries will be shifted to the high output value of computing industries. After that, the deployment of the stock power market can not meet the global demand for electricity, more primary energy will be put into power generation to drive more rapid growth of the incremental power market.
Energy cost has always been the core proposition of human society development, so the computing industry can’t escape the constraint of energy cost. From a macro perspective, the growth of computing and energy demand will bring exponential growth of electricity demand, so more cheap or even unused electricity will be utilized, while more primary energy such as natural gas and coal will be concentrated into electricity to serve the computing industry. As the operation and maintenance service provider of computing power, it will have more incentive to adopt more advanced technologies to reduce the PUE of the whole data center, such as adopting more energy-efficient heat dissipation methods to reduce heat dissipation energy consumption, and adopting better infrastructure to reduce the loss of power transmission.
To add another point here, according to the above, people should first worry about the energy cost of quantum computing while worrying about the security threat brought by quantum computing.
3.Computing drives financial reform
Due to the substantial increase in computing power, the processing capacity of digital production materials has increased significantly, and the combination of the financial industry with the computing industry has led to a significant increase in efficiency and a significant decrease in costs, so the financial industry will also evolve in this direction: through the Internet and advanced technology to reduce the cost of trust, circulation costs, and transaction costs in the financial industry, while also driving the continuous growth of computing demand in reverse. Therefore, mobile payment, e-commerce, digital finance, global transactions will remain a long time in the future rapid development of the industry, computing power will penetrate the traditional financial industry from all dimensions, which is more like a process of empowerment, not simply Internet finance, but computing and energy finance, smart finance.
4.Computing drives technology reform
The computing power itself is also relying on technological advances continue to evolve, 5nm or even 3nm process will bring more low-power high-performance chips, the development of new materials will bring better heat dissipation. At the same time, with the rapid spread of 5G, AI, the IoT and edge computing rely on the computing power of the empowerment began to highlight the value of technology will promote each traditional products will have data access and computing power, these computing power will further promote the development and evolution of computing power.
Computing power may surpass atomic energy weapons to become the the country’s core competitiveness in the future. By then, all advanced science and technology will flood into this industry. The increase in computing power demand will bring about rapid growth in related industries, which has recently been favored by capital. The chip industry, as the country’s core strategy, will get more resource tilt and rapid development opportunities for a long time, and will drive the rapid development of chip peripheral industries and computing and energy service industries.
Just as the Internet has driven the development and growth of e-commerce, giving rise to giant enterprises including Alibaba and Amazon, which serve the needs of e-commerce, the rapid growth of demand for energy and the rapid development of the chip industry will also lay a solid foundation for the possible birth of future energy service giants.
Rational survival is more important than anything else to the next ten years
The reason for writing this article can be traced back to the two books I read before and the two “thunders” that exploded recently. Two books, one is “Economic Interpretation” by Mr. Zhang Wuchang just finished yesterday, a scientific and objective economics book with strong explanatory power; the other is “Small Island Economics” by Schiff and his son. An easy-to-understand primer on economics.
Two “thunders”, one is the “thunderbolt of U.S. stocks” that melted twice this week, and the other is the “thunder of Bitcoin” that followed the 60% drop, both of which have had a huge and far-reaching impact on the global economy. Both have had a huge and profound impact on the global economy.
In my previous article “Bitcoin Price, Dow Jones Index and US Presidency”, I discovered and analyzed the high positive correlation between Bitcoin and US stocks and US presidency, breaking all the “cycle myths” of the cryptocurrency mining circle, and found that the root cause of the cyclical performance of Bitcoin price lies in the economic policies of the US president after he took office. Therefore, in order to know the future price of Bitcoin, we must judge the whole global economic situation, and in order to deduce the future economic development and possible crisis, we must go deeper into the underlying nature, in order to come up with explanatory and predictive conclusions. That is the main purpose of this paper.
II. What Is Wealth
Borrowing the story of “Small Island Economics” to make some adjustments: suppose a group of people living in a closed island, fish as the only source of food, people at first only rely on fishing for a living, then the fish in the island is the real “wealth”. Everyone fishing level is different, some people are very clever invention of fishing nets, some people are strong with a fishing net can make up a lot of fish, so there is a division of labor overall production efficiency. Later, more and more fish can not be eaten every day, that is, “wealth” has a “balance”, then some people began to operate warehouses, you can store fish to save for later. Later on, families stored more and more fish, with the clear division of labor, material materials more and more abundant, some people use 100 fish in exchange for others to build a house, and so on and so forth more and more frequent transactions, people found that the direct use of fish to move around the transaction is very inconvenient, people need easy to carry, easy to divide, stable state of the alternative, from special stones, to shells, and then to special metal; later More and more people, under the tribe to tribe competition and trade have a sense of leadership managers and credit, so the tribal leaders invented paper fish coupons, more portable and trading, and the promise of a fish coupon can be exchanged for a fish in the warehouse at any time, from then on the trade is more developed, to promote further development of productivity.
At this point in the story, we can understand how “money” is created, but we should think more deeply about what is “wealth”, “money” and ” warehouse”? To be precise, “fish” is wealth, and “money” is only the storage vehicle and unit of measurement of wealth. Continuing the view of Mr. Zhang Wuchang’s “Economic Interpretation”, wealth is a resource, and resources are “lacking”, thus generating demand, trade and competition.
III. Wealth Needs to be Stored and Measured
The story of fishing on a small island we can know that transactions create wealth, wealth also needs to accumulate and measure. In the ” Economic Explanation”, Mr. Zhang put forward a “warehouse theory”, saying that the accumulation of wealth requires warehouses, and that human life is finite, and that warehouses allow wealth to continue, and that houses, stocks, collectibles, and currency are all different forms of “warehouses”. Regarding “money”, Mr. Zhang’s view is that “the purpose of money is to facilitate transactions, so the price should be relatively stable”.
Back to reality, I think the accumulation of wealth and transactions are often integrated, for example, if you have $1 million cash in hand to buy a car at some point in the future, “cash” achieves both the “storage” of wealth and “”measurement””. Meanwhile, in the “warehouse theory”, the classification of “warehouse” is only distinguished from the perspective of infinite and limited number of warehouses and whether the warehouse itself has a rental value, and simply lists several “warehouses” such as houses and collectibles “However, these two dimensions do not cover all the characteristics of warehouses in real life. Therefore, I reorganized the types of “warehouses” that exist in reality, and proposed the “block theory”.
IV. Block Theory
1. Definition of “Block
The term “block” comes from the term Block in Bitcoin technology, which originally refers to the data of recorded transactions packaged into a data block every 10 minutes or so, and this immutable data block is the proof of wealth accumulation and transactions. I therefore invoke the concept of a block to the broad field of wealth for defining the vehicle in which wealth is stored and traded.
We classify carriers into four main categories based on whether the overall number is limited and whether the supply issuance mechanism is centralized, decentralized currency blocks (A), decentralized asset blocks (B), centralized asset blocks (C), and centralized currency blocks (D). I will first put up the most important one, the table of wealth blocks, and then slowly explain.
We have re-defined the “assets” in the market as “wealth” and the “blocks” that accumulate and measure wealth. From a macroscopic point of view, there are only three states of “fish” wealth, i.e., “constant”, “increasing” and “decreasing”. “Let’s quantify the specific numbers, for example, the initial 2,000 fish, and discuss the two basic cases of growth to 3,000 or reduction to 1,000. Assuming that each fish is the same and requires a box of the same size for storage, this “box” is the “block”; the “box” is limited by production costs and materials. Therefore, in the absence of intervention, in order to facilitate transactions, the number of fish should be produced at any time how many “boxes” to store and trade, that is, the “block A” type; of course, if there is no intervention, many businesses producing ” Boxes” will also compete to reduce costs or increase revenue, such as using better materials to store longer, or better methods to compress fish so that a box can hold several fish, this quality “box” is often limited, that is, ” Block C” type; there is also a possibility that each tribe has a designated person who can produce “boxes”, and when the transaction becomes complicated, there may be some boxes that do not contain fish and are traded in the market as “empty boxes”, i.e. “Block D” type. When D becomes risky, people start looking for block B to keep their wealth for a long time.
2. “Block” classification
We map “fish” and “boxes” to real-life “wealth” and “blocks” for storing and trading wealth. “We further categorize “blocks” as follows.
“Block A”: also known as decentralized currency block, the total amount is unlimited, the supply of issuance is not affected by the centralized role, the value is stable and conducive to trading; gold was once promoted as such a role, but the value of gold itself fluctuates greatly, and mining is slow there is no way to ensure the growth of wealth one-to-one correspondence, and small daily transactions are not convenient The silver, then the paper money linked to metal (such as the US dollar), then the paper money linked to paper currency (such as the Hong Kong dollar), then the unanchored currency (now the fiat currency of each country), then the digital currency (such as BTC), people have thought of countless alternatives to find the best choice of “block A”.
Considering the value stability, that is, a unit of block A needs to be relatively stable to buy a certain amount of fish, and the general trend of the total wealth of human society is definitely growing, then in order to achieve the stability of purchasing power, the total amount of block A must be infinite, and it can be quickly and dynamically adjusted to the amount of wealth one-to-one correspondence, and also cannot be subject to the intervention of individual will. At present, there is no perfect Class A block in the real world. The Class A block envisioned by Mr. Zhang Wuchang in his “Economic Interpretation” is the RMB that anchors dozens of basic products (such as rice) around the world and circulates freely without regional restrictions.
People holding Class A blocks (realistically limited mostly to Class D blocks) often do so to achieve the most basic and high-frequency immediate need for transactions, and partly for the purpose of storing value and obtaining the average market rental value (interest). This is also in line with the reality of the situation, there is excess wealth so that will often be in the form of fiat currency in the bank, the most mainstream transaction measurement of the carrier is fiat currency (the volume is not the largest because the C class centralized asset blocks can be leveraged to rapidly expand, making the nominal value of the block relative to the D class greatly increased).
“Block B”: also known as decentralized asset blocks, the total amount is limited, and the supply issue is not affected by the centralized role, which is conducive to long-term investment and avoiding the risk of centralized currency blocks; including gold, collectibles have this type of qualities, while Bitcoin is still in the early stage, the market acceptance is limited, but the characteristics of Bitcoin itself compared to gold and collectibles.
As a decentralized asset, Bitcoin maintains the security and stability of the entire system through computation and open source, lower mining (issuance) costs, lower circulation costs (through the network), and lower storage costs (private keys) than gold and collectibles. We know that without intervention, the market will definitely evolve towards greater efficiency and lower cost (choice), so we believe that Bitcoin will have great potential to replace gold and collectibles in the future.
Gold in also experienced a long period of imbalance between usage and mining leading to significant price fluctuations, as well as numerous centralized currencies and asset crises fueling the consensus for decentralized assets to secure wealth. Bitcoin has only been around for ten years and is still a very long way from a universal consensus, but will take less time to complete this journey than gold due to its inherent characteristics that lead to low cost of popularity.
“Block C”: also known as centralized asset blocks, the total amount is limited, favorable for investment, higher risk and higher return; the vast majority of financial assets or risk assets in the market belong to this category, including the stock market, housing market, bond market, etc., which are chosen by people who have settled their food and clothing with certain savings, and pursue investment returns higher than their savings.
Asset-based blocks are directly associated with a certain wealth (resources), and it can be said that asset-based blocks are themselves a kind of wealth. For example, stocks directly correspond to the income and intellectual property of a certain company, and property corresponds to the right to use land and space.
“Block D”: also known as centralized currency blocks, which imply force or legal power and are artificially priced by the owner in the power area to facilitate regulation; such blocks are mainly legal tender issued by countries, but of course also include mandatory points, etc., issued by organizations or individuals in their own right, whose quantity, circulation, etc., are issued by the issuers themselves The quantity and circulation are decided by the issuer.
“Parameter 1” and “Phenomenon 1”: Because block A corresponds to real wealth, parameter 1 represents the real price change in fiat currency, and because gold is given the function of decentralized currency, parameter 1 can also be understood as the fiat currency-denominated Gold price change, phenomenon 1 is the visual representation of the real world when parameter 1 changes, representing people’s choice when avoiding the risk of centralized currency.
“Parameter 2” and “Phenomenon 2”: Parameter 2 represents the change in the price of fiat-denominated asset class blocks, which is the trend of people’s choice to pursue higher returns when they satisfy their basic needs and save their wealth balances; the change in Parameter 2 that is, phenomenon 2 reflects the overall economic development and trends.
3. Conceptual distinction.
The main purpose of money is to facilitate the transaction of wealth, so it needs to be stable in value, divisible and easy to flow, so the total amount of unlimited, stable unit value of the block is conducive to improving transaction efficiency and reducing transaction costs. Money itself is not wealth (not a resource, not “lacking”, can be understood as a specific person printed out of paper), is a unit of measurement of wealth, money because there is no lack of so no rent value, that is, can be understood as the same amount of money under ideal conditions, the purchasing power of the same amount of money does not change, or the same amount of money does not generate additional revenue.
The main purpose of assets is to facilitate the accumulation of wealth. Investment, savings and consumption are one and the same thing, all are using the existing wealth as a cost (consideration) to exchange for some future demand, the total amount of assets is limited, the unit value is variable; assets need to have the ability to increase in value, and thus there will be the risk of decline, the value will be more volatile, assets have two main characteristics of liquidity leverage and borrowing leverage, will be introduced later in the leverage theory. The asset itself is often also wealth (is a resource will be missing), there are specific uses other than trading, for example, land can be built, houses can be lived in, stocks can be used for dividends, gold can be used for decoration, Bitcoin provides liquidity for energy. By giving assets the function of money, you will encounter problems such as gold, shells, and Bitcoin coin value instability hindering transactions.
Centralization and decentralization mainly lie in whether the issuance method is subject to human interference (single point of failure), while inflation and deflation are the ratio of the amount of centralized currency D relative to the real wealth (decentralized currency A), which will have both growth and decline, corresponding to the assets will produce 6 scenarios, which is why in the case of market perceived inflation, asset class blocks and currency class blocks go up and down.
Let’s continue the example of fishing, the initial state has 2000 fish as wealth, according to a certain ratio with blocks A/B/C/D storage and measurement, after a period of time the fish may grow to 3000 or may be reduced to 1000, at this time the parameters 1 and 2 is the change of the individual wealth blocks. If mapped to the real world, gold and U.S. stocks represent the global economic state, and both are denominated in U.S. dollars, we can derive the trend of change in the real world based on parameters 1 and 2.
4. Key explanation
The rise and fall in Phenomenon 1 and Phenomenon 2 are changes relative to the initial steady state, and the multiplier multiplied is the magnitude of the change. In reality, it is often one of the six states that changes to the other.
The most direct example, according to the trend of gold and U.S. stocks, we can judge that the United States in 17-19 years in the economic growth of inflation, and into the early 20 the onset of the crisis and gold U.S. stocks to verify the U.S. economy into a short-lived recession and deflation, at this time the centralized assets (U.S. stocks) from 2 times up to twice the rate of decline, is 4 times the effect of the decline, just also verified the history of the emergence of this week rare two meltdowns in U.S. stocks. We can further predict that the short-term by the epidemic and many aspects of the impact of the overall economy is still in recession, the current countries have introduced the water release policy to make the economy if the recessionary expansion state, compared to the current recessionary crunch gold will rise quickly, the U.S. stocks slowly; then the gradual recovery of the economy water release continued and the effect gradually appear, the U.S. stocks will enter a rapid rise phase.
5. Risk-averse assets
The so-called risk-averse assets, in order to avoid ambiguity, should be said to be risk-averse blocks, as to what type of risk to avoid will have to be discussed by situation.
centralized currency inflation: whether during economic growth or recession, decentralized currency blocks (gold) will rise, especially in recession will rise rapidly.
Centralized currency deflation: asset blocks (relative to fiat currencies) will fall, meaning that the purchasing power of the centralized currency will increase at this time, when cash is king.
According to the above table, we can determine what kind of wealth blocks are more suitable for hedging under different circumstances.
V. Leverage Theory
We have the wealth block table in the block theory divides the blocks into asset-based blocks and currency-based blocks. Asset-based blocks include decentralized asset blocks and centralized asset blocks, and since they are all wealth carriers with limited unit value changes in total, and the assets themselves are also wealth or directly related to resources, I will use leverage theory to elaborate on the value changes and risk sources of asset-based blocks.
1. Liquidity leverage
To give an extreme example of stocks, stocks in circulation on the exchange, issued 10,000 shares issued price of 1 yuan per share, of which 9,999 shares in my hands do not move, the other 1 shares in the market circulation transactions, then I left hand 100 yuan to sell the right hand 100 yuan to buy, at this time the display price should be 100 yuan, the market value from 10,000 yuan to pull 1 million yuan (stock market coin circle are the same, this extreme situation want to pull how much pull to (how much). But is it that I can sell all 9999 shares in my hand for 100 yuan per share to get 999,900 yuan in cash? Obviously not possible.
Real estate is actually the same, the same neighborhood on the chain of 1000 households, of which there are 5 households want to sell their houses, there is a household because of the urgent need for money to sell 20,000 yuan / square meter price, showing that the recent transaction price of this neighborhood is 20,000 yuan / square meter, at this time you also come to buy can buy this price? Obviously not necessarily. Maybe the other four sellers are not in a hurry to sell, the price listed is 40,000 yuan / square meters, if you are in a hurry and must buy now, you can only buy 40,000 yuan / square meters of the house; if at this time there are 999 households in 1,000 households to sell and are very anxious to use the money, then in the case of not many buyers can only offer lower prices, and will be lower and lower, lower to the floor.
Real life is not so extreme, but this example is showing that the asset class block itself is not 100% liquid, so the value of the liquidity leverage, want to rise without providing 100% of the corresponding funds, the rise is fast fall also fast.
Another layer of liquidity leverage is that it magnifies the imbalance between supply and demand, because not all blocks are held by everyone and not all blocks are in circulation, so when a large amount of new buying capital appears in a short period of time, there will be a price spike, and when selling demand increases the lack of buying capital, there will be a price spike.
2. Borrowing leverage
The “Economic Explanation” focuses on borrowing inflation, pointing out that historically crises brought about by borrowing inflation have hit the economy hard. The subprime mortgage crisis of ’08 was a cascading crisis caused by the inability to repay debt when the risk of overleveraging came to a head. The core reason for the surge in the U.S. stock market in ’17-’20 was the soaring stock prices due to stock buybacks (which themselves had liquidity leverage, amplifying price volatility and supply imbalances), while the epidemic and the oil price crash caused stock prices to plummet. The huge drop in Bitcoin in March 20 years came from the high leverage of lending, many people pledged their BTC for a part of USDT, then use USDT to buy BTC to pledge for USDT, and so on and so forth according to the 60% pledge rate minus the commission, so the operation down originally 1 BTC can probably be operated as 2 BTC, so once the price of the coin rises will get nearly twice the return compared to the previous; the same mining market also has lending leverage, the exchange also has lending. All of these lending levers bring excess returns on the upside and excess losses on the downside.
The right kind of collateralized lending can be used to alleviate a liquidity crisis, which can be seen formally as pledging asset blocks for currency blocks, and because the price of currency blocks is stable, the pledged asset blocks are within the margin of safety if they fall sharply at the right collateralization rate. However, if the pledged currency block is then used to buy the asset block, then there is a risk that both asset blocks will fall at the same time.
3. Borrowing leverage crisis
With regard to the leverage crisis, leverage is a false boom that doubles the cost of overdrawing one’s wealth in pursuit of excess returns, bringing in inflows of capital and rising prices. The crisis may come from a liquidity crisis of its own, such as high interest rates or failure to return the principal at the end of the contract, or from external market volatility that forces the liquidation of positions due to insufficient collateral. There are countless real-life cases where when a crisis occurs and the bubble bursts, what is lost is the wealth that has been accumulated and the wealth that will be created in the future, so it takes several times the wealth accumulation to get back to the current level of false prosperity that should not have occurred in the first place. So real-world borrowing and leverage crises all take quite a long time to recover slowly and do tremendous damage to the economy.
V. The Value of Bitcoin
1.U.S. stocks are the inevitable choice for wealth allocation in the past decade
The United States is the world’s largest economy and the past decade has been a period of economic recovery and growth after the U.S. subprime mortgage crisis, while the U.S. government’s monetary policy continues to deflate, according to the wealth block table, it is necessary to allocate wealth in U.S. dollars to avoid the risk of dollar overdraft and obtain higher returns. asset class blocks. In the U.S. centralized asset block, why U.S. stocks instead of U.S. housing and debt markets?
Because after the subprime mortgage crisis, the U.S. real estate is in a state of collapse, the main path of the U.S. government’s fiat currency over-issuance is also the U.S. stock, the U.S. stock itself also represents the world’s most recent advanced productivity (wealth), and therefore become the U.S. economic vane, but also become one of the world’s three major bubbles, so people also prefer to choose U.S. stocks in the wealth allocation when choosing asset class block, rather than property or bonds, the data also confirms this The data also confirms this fact, with the average wealth allocation of Americans accounting for 28% of U.S. stocks ranking first in the asset class block.
2. Why is Bitcoin not moving like gold but like the Dow?
We mentioned in “Bitcoin Prices, the Dow and the U.S. Presidency” that Bitcoin’s monthly K-line overlaps highly with the Dow’s monthly K-line and that there is a proportional relationship between volatility, and this week’s sharp drop once again validates that conclusion.
It was mentioned above that wealth should be allocated more to the dollar-denominated asset class block given the economic conditions of the past decade, and based on the reality, U.S. stocks are the best choice, and this has in fact been verified. The Dow Jones Index is the bellwether for U.S. stocks, with 30 constituents with a total market capitalization of more than $10 trillion, representing almost the world’s leading business enterprises. As a result, the Dow has also become a global economic bellwether and a major wealth allocation target for the asset class segment.
As mentioned earlier gold is given a decentralized currency function and will be considered more of a decentralized currency block when it comes to wealth allocation. Bitcoin, in turn, as a standard decentralized asset block, has the following similarities to the Dow Jones Index：
a. All are asset-based blocks with proven liquidity leverage and lending leverage (exchanges, lending services).
b. All are denominated in U.S. dollars, with U.S. dollar compliant fiat currency access, global capital trading, and high liquidity.
Therefore, when the market chooses to allocate its wealth to dollar-denominated asset class blocks, it naturally finds similarities between Bitcoin and US stocks and allocates more or less a certain percentage, which is why Bitcoin and the Dow move so similarly.
3. Bitcoin’s Short-Term Goal – Global Energy Technology Finance Index
The energy, technology and finance industries are major forces in global technological advancement. Asset class blocks are wealth in themselves, with energy, technology and finance stocks accounting for over 80% of the Dow Jones constituents, and Bitcoin is tied to the energy, technology and finance industries.
On the energy side, the Bitcoin system itself maintains security and stability through mining (computing). We mentioned in ” computing and energy – The Fourth Technology Revolution Driven by Computing” that computing is energy-based, so it can be assumed that Bitcoin maps globally distributed energy (electricity) and brings a liquidity premium to energy owners (higher than direct higher returns from selling electricity).
Financial aspects, and the decentralized nature of Bitcoin itself, in large cross-border transactions and anonymous security and become a major highlight of the global financial sector, itself become a high-quality wealth trading carrier, while tens of thousands of exchanges around the world 24H trading, its liquidity to exceed the U.S. stock.
Technology, Bitcoin computing requires high-performance chips, and semiconductors (chips) and is the main force driving the progress of technology in the past 50 years, Bitcoin servers to promote the rapid development of ASIC chips, the first to use the 7nm process, bit mainland also become one of TSMC head customers.
If we consider Bitcoin as a company’s stock, then this company has no centralized management team and leaders; employees are developers, miners, mining machine manufacturers, application service providers, energy owners all over the world, and users from all over the world; the value created includes: providing a liquidity premium for energy owners, providing a medium of exchange for the safe and fast flow of funds, providing fiat currency disadvantaged and financial service deficient areas To provide decentralized and inclusive financial services, to provide global investors with a high-quality decentralized asset block to fight inflation, etc.
Dow Jones 30 constituent stocks, energy, finance, technology companies with a total market value of $ 5 trillion, today’s BTC market value of about $ 100 billion, and as an asset class block itself has the circulation leverage (a large number of users influx to amplify the contradiction between supply and demand and price increases) and lending leverage (this March 20 years of lending leverage rupture will remove a lot of risk potential), the long-term future of BTC will certainly create greater value.
4. Bitcoin’s long-term goal – the largest decentralized asset class block in scale
The current market cap of Bitcoin is very small and the user participation size is not more than 50 million people, which is still very large compared to the global population of over 7 billion people. In the block theory of wealth, we mentioned that Bitcoin as a decentralized asset block has very big advantages over gold and collectibles, including lower issuance costs, circulation costs, and storage costs. Combined with the popularity of the Internet and young people’s awareness of new finance, Bitcoin is very promising to gradually surpass gold and collectibles to become the largest decentralized asset block.
VI. Rational View of Bitcoin
Recent studies and reflections have taught me to look at issues rationally and discover the essence of the problem, for example, I believe that
Bitcoin does not have a so-called halving cycle, this cyclicality, like US stocks, is derived from global (US) economic conditions, monetary policy and the frequency of water releases.
Bitcoin does not yet have currency block properties and should encourage the emergence of competing coins. On the one hand, the Bitcoin market is too small, the volume and crowd consensus is still far from gold; on the other hand, Bitcoin itself is unstable and volatile in value and slow to confirm transactions are not conducive to market trading behavior, which may be solved in the future or replaced by more decentralized currency block properties in the competition.
Bitcoin is a quality choice for wealth allocation under specific economic and monetary conditions, although of course in the long run economic growth and fiat currency overdraft is the norm.
Bitcoin should not be the entire source of personal wealth growth, it is more recommended to create and acquire more wealth through hard work and then if you really agree with the value of Bitcoin, you can choose to allocate part of your wealth to Bitcoin in asset class blocks, don’t dump it all and don’t use borrowing leverage because the wealth block table tells us that it will fall faster when we encounter a black swan (this week’s crash is a living case in point)
Bitcoin is not the freedom of de-government, is the freedom of personal perception and choice, should not be used to engage in illegal and harmful behavior (asset transfer and illegal tax evasion), do not be opposed to the government’s pursuit of freedom, freedom is always the freedom of restraint; government is also composed of people, like the company, will make mistakes in decision-making will have a variety of problems, but do not forget that the current security and stability and the world’s most impressive infrastructure is also this “From the economics point of view, the government is an inevitable choice for the market to evolve and improve its efficiency.
Bitcoin is a good tool to learn economics, do not be biased only to see the Austrian school of economics, to learn more about Keynes, Chicago, Washington and other schools of theory, economics is not a good or bad values, should be a scientific logic can have the power to explain the inference of world affairs.
This article is the original research of SAI team and does not constitute investment advice. For reprints, please contact: firstname.lastname@example.org
Many people think that Bitcoin mining is a special industry, in fact, macro view of mining it is not much different from the traditional computing industry: the cost of the computing industry mainly comes from the purchase of servers and electricity expenses, the main cost of mining is also the purchase of mining machines and electricity expenses, both are the arithmetic power or its products sold to obtain returns. Previously, I pointed out in ” computing and energy – The Fourth Technology Revolution Driven by Computing” that the computing industry is a production manufacturing industry with electricity and data as the means of production, and energy and chips are the core of the computing industry.
I. Calculation of the Cost and Return of Mining
Many people take the purchase of a mining machine as the main cost when mining and ignore the importance of energy cost; some people only focus on the cost of single-T computing power when buying a mining machine and do not pay attention to the power consumption ratio of the chip; some people may spend a higher price to buy the machine with the lowest power consumption ratio, but finally find that the return on investment is not as good as other machines. This is the problem is due to the decision is not to do a precise quantitative analysis of the target results (ROI), only based on the feeling to do qualitative analysis generated results.
1. What is the purpose of mining?
This question seems simple, but in fact many people have not thought clearly. First of all, miners choose to mine, must be to obtain BTC excess return, which is based on the long-term (1-3 years) price of BTC bearish case to make the choice. At present, there are only two ways to get BTC: buying it directly in the secondary market such as exchange and OTC, or acquiring it by mining. So we have a major premise that whether you choose to buy BTC directly or mining, it is when the price of BTC is expected to be in an upward channel. After the bull market in 2017, the bottom of the bear market at the end of 2018, and the shock reversal in 2019, the whole market is still generally believed that a new round of bull market will come after the halving in 2020 and the halving, so various funds start to prepare to enter this market in different ways. It is also in this context that we are discussing whether to mine, how to mine and which is better to mine or buy coins.
Many ordinary miners will feel that mining is a lower cost way to obtain BTC. This idea comes from a simple calculation: as shown above, taking the latest generation of miners as an example, with the current coin price of 7300USD and the electricity cost of $0.36/kWh, the ratio of the daily electricity bill payable to the revenue mined (i.e. the electricity cost as a percentage) is about 40%, thus showing that mining can be done at 40% of the market price lower cost to obtain Bitcoins.
This is obviously not true, because compared to taking a sum of money and buying Bitcoins directly, mining involves using the money to buy a miner first and being in a state of unpaid miner for a long period of time, while buying Bitcoins directly at this point is a direct net gain if the price of the coin goes up. If you think about it more carefully, you will think that the miner itself is also an asset, and selling it again will have a certain value, and if the timing is right, you can sell it at a higher price than the original one, which is equivalent to mining coins for a period of time. Not necessarily, this needs to be calculated precisely.
2. Mining ROI calculation
The operation of miners in the actual mining process is a complex process, just say sell coins to pay the electricity bill, there are many ways to operate: dig out every day and sell the electricity bill, choose a suitable price every month to sell coins to pay the electricity bill, do not sell coins to pay the electricity bill with extra fiat money, etc. Which is a better way in the end? This is to return to the premise we discussed before, that is, the BTC price is in an upward channel, eventually there should be more BTC in hand to get higher income, the early mined coins because of the low price of the coin at that time need to sell more coins to pay the electricity bill is not cost-effective, because the electricity bill is in fiat currency is a definite number, mining the annual electricity bill can be calculated, then choose to sell part of the coins at 7500-9500USD to pay the electricity bill. The best way is not to sell the coins and use the extra money to pay the electricity bill, so the number of BTC left in the end is the most.
Let’s use a simplified model to verify, with 10 million funds mining for two years, each difficulty cycle difficulty up 2% (the actual will be higher), with an average annual electricity cost of 0.36 RMB / degree, according to the S17PRO 50T 10000 RMB / unit model to calculate the final number of BTC can be obtained.
Option 1: 10 million RMB all bought into the machine, buy coins every month to pay the electricity bill. In order to simplify the calculation, the first year coin price is 7500USD, the second year is 15000USD, through the calculator, we can calculate the final cumulative number of remaining BTC is about 112.7.
Option 2: 4.46 million RMB to buy the machine, 5.53 million RMB to pay the electricity bill for two years, the final cumulative number of remaining BTC is 127.5 (as shown in the figure).
If the residual value of the mining machine is 25% after two years, the currency price is 15000 USD (the price of the new mining machine should be the net income per T of the current single day * computing power * 200 days, taking into account the halving and the increase in computing power. After two years, the computing power is likely to be double, so the daily income BTC is about 1/4 of the current number. The doubling of the currency price and the impact of machine depreciation make the remaining residual value to 25%, which is an ideal value). In the end, Option 1: Net assets of approximately $14.33 million with a 143% return on investment. Option 2: Net assets of 14.5 million, ROI 145%. However, if you buy the coins directly at the beginning, the net assets will be 20 million after two years, with a 200% ROI. If the residual value of the miner is 0 after two years, the ROI of option 2 is 15% more than option 1.
If we look at it from the perspective of a mining machine, the time stretches longer then the final residual value will be close to 0. Several transactions of the mining machine in the process are also calculated according to the price and difficulty of the coin at that time and the depreciation of the machine, so we connect the process, which is equivalent to buying a brand new mining machine until it is scrapped. According to the previous calculation we choose the model of not selling crypto coins to pay the electricity bill in fiat currency, at this time we can derive the calculation formula：
P is the coin price (yuan), mining d days, daily single-T computing power gain is α coins, single-T computing power purchase cost is A yuan, g is the chip power consumption ratio (kw/T),e is the single-day electricity cost per kw (yuan).
The trend in the number of BTCs gained per T of computing power per day α is shown in the following figure.
II. Computing and Energy Parameter SAI and Computing and Energy Theorem SAI Equation
1. Computing and energy parameter SAI
P is the coin price (Yuan), mining d days, daily single-T arithmetic revenue is α coins, single-T arithmetic purchase cost is A yuan, g is the chip power consumption ratio (kw/T),e is the single-day electricity cost per kw (Yuan).
In the above formula, the coin price and daily return α can have preliminary predictions based on the secondary market and miner production in the case of time d determination, which belong to objective unchangeable parameters; while A+d*g*e become the various parameters among them that determine the overall mining return on investment are determined by miners according to the conditions when they choose miners and mining sites. So we define the sum of arithmetic cost and energy cost per T of arithmetic power mining in d length of time as the arithmetic energy parameter SAI, or S for short, then：
With 360 days as a cycle to compare the mainstream model’s energy calculation parameter S, electricity costs at 0.37 yuan/kWh for the whole year, according to the mainstream miners first-hand spot price on December 27, the following table. From the perspective of return on investment, T17 has the highest rate of return for the smallest energy calculation parameter, but considering the residual value of the miner after one year, S17+ is definitely higher than T17, and the two energy calculation parameters are very close to each other, so S17+ is the best choice at this point in time.
2. Computing and energy theorem SAI equation
Let’s look at the BTC market from a macro perspective, if we stretch the timeline, then the demanders need to get BTC either by direct purchase or by mining to get it, and the cost of the two ways should be close. If there is a cost difference, then the market is the most real and will definitely be adjusted by the hand of free regulation. If the ROI of mining for BTC for a period of time is higher than buying coins directly, then more funds will start mining, thus squeezing the profit of mining to a level lower than that of buying coins directly, at which time the funds find it more cost-effective to buy coins directly and will start buying coins directly, thus leading to the ROI of the two ways to The return on investment fluctuates within a relatively stable range. In the real market, we will find that the ROI of mining revenue plus the residual value of the miner over a longer period of time will be close to the ROI of buying coins directly in the secondary market.
We use R1 to denote the ROI of mining, R2 to denote the ROI of buying coins directly, the computing and energy parameter is S=A+d*g*e, the initial coin price is P1, and the final coin price is P2, then according to R1=R2, it can be derived that：
After the above formula is simplified and deformed, we can get the computing and energy theorem (SAI Equation): under ideal conditions, the same time and the same amount of money chosen to mine and the same amount of BTC expected to be obtained by choosing to buy coins directly, the same return on investment is obtained, i.e.
Through the computing and energy theorem, we can determine whether it is more rewarding to choose to buy coins directly or to mine at the current time based on the current coin price and the expected change in difficulty over time.
a. We cannot speculate that the price of coins will increase based on the increase in mining difficulty and hence the decrease in return rate in the energy calculation theorem. This is a typical inversion of cause and effect, the price of coins is the most realistic response to the supply and demand relationship and expectations of the whole complex market, it will only increase because of the increase in the price of coins so more people go mining leading to the increase in difficulty, and the opposite is not true.
b. The computing and energy theorem reflects the overall macro dynamic stability of the current market and is the average level of the whole market, so the value of a specific parameter derived from the control variables is only a judgment basis, for example, there is free electricity mining, then the actual computing and energy parameters will be much lower than the current theoretical average computing and energy parameters, you can decisively choose mining.
c. In actuality, not all miners dig the miner to scrap the residual value of 0, so R1 will increase the value of the residual value of the miner. And the arithmetic energy theorem can be understood as leasing a period of cloud computing power, that is, there is no ownership of the residual value of the mining machine.
III. The Computing and Energy Theorem and the Practical Application of the Computing and Energy Parameters
1. Current mining market cost analysis
Today (December 29, 2019) the network-wide difficulty is about 12.95T, and the gain per T α= 0.00001942. According to the orders of mainstream miners in Q4 2019 and TSMC and Samsung 7nm and 8nm chip capacity arrangements, it can be expected that the network-wide computing power will reach 120-140E by May next year before halving. Therefore, after halving α may be around 0.00000600, the current coin price is 7350USD, so according to the computing and energy theorem, the current computing and energy parameter S=120. Corresponding to the current average electricity cost of 0.38RMB/kWh during the dry period and the average power consumption ratio of 80w/T across the network (simplified as 50E computing power is 100w/T for 16nm, and the other 50E is 60w/T level for new miners) , it can be calculated that the cost of arithmetic power A = -10, which is obviously not in line with the actual situation, then it proves that the final return on investment for miners who currently choose to buy mainstream new miners will be much lower than buying coins directly.
Through the above analysis of the actual situation, we will find that the computing and energy parameters in the market are higher than the current theoretical measurement, how should this be explained?
About the single T computing power cost A: a handful of new miners A is limited by the cost of production, mining machine manufacturers can not sell miners at a loss, the main cost of new miners is the cost of the chip, mining machine manufacturers invest heavily in research and development of new nano process is also the reason for reducing the energy parameters. Chip cost is mainly wafer cost, is calculated by area, smaller nano process not only lower power consumption than g, and smaller chip area to reduce A, according to S = A + d * g * e can greatly reduce the computing and energy parameter S to improve the return on investment in mining. In the secondary market, the miner is relatively free flow, plus the machine itself loss will be a single T computing power cost A is lower than the first hand with the same miner, A is also closer to the average cost calculated by the energy formula, but the miner is, after all, a physical object, it is impossible to circulate in the global trading market 24 hours a day at very low cost like BTC, so it will still deviate from the theoretical price. In the non-bull market phase, especially in the bear market, the arithmetic energy parameters of the second-hand market machines will be closer to the theoretical value of the computing and energy theorem.
About the cost of electricity e: currently in the dry period, the vast majority of new miners choose dry electricity and signed a full year, the average cost in about 0.37 yuan / degree. However, when it comes to the abundant water period, the price of bare hydroelectricity may be around 0.2 yuan / degree, when the actual calculation of energy parameters will be reduced.
About the gain per T α and power consumption ratio g: currently about to usher in the halving, halving is not only the new output of BTC production reduction, but also will eliminate a number of old computing power, the current old computing power mainstay is S9, the current network of about 40E computing power is s9, if all eliminated, then the difficulty and power consumption ratio will have a considerable impact. But the actual process should not be as drastic as imagined the whole network instantly drop computing power, because mining is originally the same competition, some people brush the frequency reduction firmware, some people change the control board to let the s9 two in one to further reduce power consumption, there are people with lower electricity costs, plus the coin price will also increase revenue. The real elimination of the s9 should be around the peak of the new bull market, in the high coin prices to promote the production of new mining machines in large numbers into operation, will bring further “metabolism” of the entire network of computing power.
2. shutdown coin price and miner elimination
Regarding the shutdown coin price, the shutdown coin price can be easily derived by using the computing and energy theorem formula.
For specific miners specific models can calculate the shutdown coin price, but the ROI has nothing to do with the shutdown coin price, and the actual operation may be a model that will not sell coins to pay the electricity bill, so the shutdown coin price has little reference significance for this type of miners. The miners who need to sell coins every month to pay the electricity bill are the ones who are more concerned about the price, but we have proven before that the ROI of selling coins every month to pay the electricity bill for mining in an upside expectation is not ideal.
With regard to miner obsolescence, with the computing and energy theorem and computing and energy parameters, we will have a whole new definition of miner obsolescence. Previously, miners would be considered by the market as needing to be obsolete because of the shutdown coin price, but it is actually the computing and energy parameters that can really decide whether or not to obsolete a miner. We take the current market 6200 a T17 42T and has been eliminated 200 yuan a 841 to illustrate, the same mining 180 days.
If you don’t consider the residual value of the miner, then the ROI of choosing 841 will be higher than T17 for 180 days from today’s mining. of course the residual value of T17 will be high after six months, but if 841 can be used for less than 0.15 RMB electricity, then the ROI of 841 will be twice as high as T17, and even close to the ROI of buying coins directly under the current price of the coin.
3. Leveraging operation of mining machine mortgage lending
Now there are richer types of financial products in the market, assuming that the initial funds are invested in mining at single T cost A1 (no coins are sold to reserve fiat currency to pay for electricity), then you can first use these funds to buy BTC at the current price P1, then pledge 60% of USDT at the current price P1 in the pledge platform, then use USDT to buy a single T cost A1 mining machine with 60% down payment, assuming that mining 180 days, after 180 days the coin price is P2, the residual value of mining machine per T computing power is A2, and the coin loan and mining machine installment payment can accept the final capital repayment and interest of 1% per month, according to the formula of energy calculation the number of BTC per T computing power can be obtained as follows：
The number of BTC that can be purchased by buying Bitcoins directly is
According to the current actual coin price and difficulty, if you use 1 million capital to buy T17, assuming that the coin price doubles after 180 days, then you can calculate that the ROI of this operation is close to that of buying coins directly. In fact, it is equivalent to doubling the leverage of mining, and the initial funds were first taken to buy coins at the current price, but because the mortgage bought the miner, and the current new miner’s computing and energy parameters are much higher than the theoretical value of the computing and energy theorem, so only the doubling of the coin price plus the double leverage formed by the mortgage can make the ROI of the funds catch up with the direct coin purchase. But this is undoubtedly a very high-risk operation, on the one hand, the trend of the coin price is not 100% certain, on the other hand, the actual loan repayment method is not likely to be the final principal and interest repayment, so the final conversion may not be cost-effective, the key still depends on the computing and energy parameters.
4. Mining returns on investment are higher than buying coins
Back to the computing and energy parameters, according to the computing and energy theorem, the ROI of mining and buying coins directly will fluctuate repeatedly within a certain range, and the market will constantly correct the difficulty, computing power price, coin price, electricity cost, chip power consumption ratio and other parameters. In most cases, since miners are not chip producers and chips are limited by production costs, the actual computing and energy parameters will be higher than the calculated value of the computing and energy theorem, but will be compensated by the multiple effects of the residual value of the miner and the coin price. Since the coin price and computing power gain are objectively uncontrollable in the arithmetic energy theorem, and it is also objectively fair to treat all participants equally, the cases where the mining yield R1 is greater than the direct coin buying yield R2 can be divided into two categories.
a. Due to the lagging nature of computing power, when the coin price rises rapidly and sharply and the computing power does not rise in time, it may lead to R1>R2 depending on the real computing power parameters of the market in a short period of time. but the probability of this is very low and the window is very short. The more important thing is that if the price of the coin has risen sharply and quickly, it probably means that the bull market has come. Historically, every bull market in Bitcoin has had a very short duration of rapid and sharp rise in the price of the coin. In addition, the actual process of mining “friction” is very large, mining machine transportation and deployment of power needs time, mining back to the capital also needs time, a high probability will miss. So it is pure luck that this situation is encountered.
b. Around the computing and energy parameters, choose the right chip (decide A and g), find lower cost energy and optimize the overall solution to reduce energy consumption (reduce e) is the overall reduction in computing and energy parameters, to achieve a higher ROI on mining than buying coins directly from the market. According to the current level of technology, although TSMC has started the trial production of the 5nm process and even started the preparation of 3nm research and development, but subject to the limitations of the technical conditions of the new generation of process than 7nm in power consumption than the improvement may only be 20%-30%, and the new process yield is not high plus to recover the cost of flow and production line, so the chip single T computing power price A will be very high, at this time the computing and energy parameters will also be very high. On the other hand, as long as the energy cost is reduced by half, it is equivalent to the next nanometer process to improve two generations, and the corresponding computing power cost A because of the maturity of the second-hand market or even face elimination can become very low, at this time the computing and energy parameters are also very low, is a high probability to achieve R1>R2.
5. Mining: the question of return capital
The reason for putting this issue so far behind is that if the miner is still considering the issue of return on capital, then he may not be suitable for mining, but still a simple analysis based on the arithmetic energy theorem, based on the computing and energy theorem, the return on capital for mining can be expressed as follows:
(where P2 is the desired coin price and A2 is the residual value of the miner)
Miners can project what conditions they need to achieve in terms of coin price and difficulty to get back their capital based on their purchased mining machine situation and hosting mine situation, and then judge based on the coin price trend and computing power growth forecast.
6. The significance of energy and mining for Bitcoin
According to the computing and energy theorem
Under ideal conditions, the total amount of BTC expected to be obtained from mining and buying coins directly is the same for the same time and the same amount of money, and the return on investment obtained is the same.
From the perspective of supply and demand, the left side of the equation can be regarded as the number of BTC available in the primary market, and the right side of the equation can be regarded as the number of BTC available in the secondary market. The validity of the equation under ideal conditions and the fact that the two fluctuate within a certain range under realistic circumstances can prove that mining is a means to dynamically regulate the supply and demand in the primary and secondary markets, and this regulation is achieved under a completely free choice.
From the entropy perspective, the act of mining has two purposes, one is to complete the bookkeeping task to obtain the bookkeeping reward of new blocks i.e. to mine new coins, and the other is to complete the bookkeeping act to obtain the fee to ensure the security and stability of the whole BTC trading network. Both tasks can be considered as entropy-decreasing behaviors, and therefore require constant energy input to maintain relative stability. The essence of mining is computing, and computing is an entropy-decreasing behavior with electrical energy as input, which perfectly fits the needs of the BTC network. Therefore, in the future, even if all the blocks are mined, the fees will become the entire source of income for miners and can still support the stable operation of the whole system.
From the perspective of liquidity, intra-exchange trading and inter-exchange moving arbitrage bring BTC extremely strong liquidity in the secondary market, while mining can regard BTC as the product of using electricity as the raw material for production, and mining confers global liquidity to electricity owners. The idle electricity resources (nest electricity, abandoned water and electricity, clean energy) around the world, which were limited by incomplete infrastructure and unable to create more value, can now be converted into BTC to obtain global liquidity and the corresponding liquidity premium, thus getting higher returns. At the same time, the cost of energy varies around the world. BTC regulates supply and demand through the price of coins in the secondary market and the arithmetic power in the primary market, and mining is equivalent to energy arbitrage for miners to motivate them to continuously search for quality energy with lower cost. The high cost supply is eliminated and the low cost supply receives more revenue to reach a new equilibrium.
IV. SAI Products & Computing and Energy parameters
1. SAI Company Introduction
SAI is the world’s leading chip energy technology service provider, with a three-dimensional technology matrix of chip-level liquid cooling, chip waste heat utilization, and clean energy generation to reduce the energy cost of supercomputing and computing power cost, and realize the vision of the era of energy-driven computing and computing-driven world.
We provide supercomputing equipment hosting and mobile cabinet sales services, and our core product SAIHUB computing and energy center has three outstanding performance of liquid cooling, waste heat utilization and mobile assembly, which can effectively reduce energy costs by more than 50%.
2. SAI products introduction
The core product, SAIHUB, has multiple product models that can adapt to a variety of scenarios and can significantly optimize the computing and energy parameters for mining, shorten the payback period, extend the life of the chip, and improve the return on investment.
l SAICAB, replaces the fixed infrastructure of a traditional mine and the heat dissipation structure of a miner with a lower cost, while having mobility and ease of transportation, and a high reusability rate. Enables miners to use lower cost bare electricity, reducing electricity costs e.
l SAICAB provides liquid cooling heat dissipation that is 20 times stronger than traditional air cooling, providing better working environment conditions for the chip, effectively improving arithmetic power, reducing power consumption ratiog and unit arithmetic cost A.
l SAICAB can collect the heat emitted by the miner, and in the heating season, it can heat the chip with waste heat to obtain additional revenue to flatten the electricity bill; in the period of abundant water, it greatly saves the power consumption used for heat dissipation, further reducing the electricity cost e.
l SAICAB is compatible with a variety of mainstream mining machines, you can choose the mining machine with higher ROI mining according to the calculation energy parameter SAI and combined with the market situation, to get the real lower cost BTC with a higher ROI than directly buying coins.
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