In the history of the blockchain industry, the mining community has always been recognized as the top of the industry pyramid. The mining community is represented by mining machine manufacturers and miners. On one hand, they are fundamental to the operation of the blockchain industry. On the other hand, their fate is totally dependent to the development of the industry. The mining community will rise and fall with the blockchain industry. It is especially susceptible to the dips and surges of coin price.
Blockchain mining machines are also constantly developing and evolving. It extends from a few initial Bitcoin mining machines to tens of millions of various types of cryptocurrency mining machines such as Ethereum mining machines and IPFS mining machines today. In terms of hardware requirements, it also extends from CPU mining to GPU mining, ASIC mining, mining pool mining and finally to cloud mining.
A brief history of mining machines
On January 3, 2009, Satoshi Nakamoto mined the Bitcoin Genesis block with a multi-core CPU. This opened up the era of CPU mining; in 2011, the first professional mining chip surfaced on the market: the FPGA mining board.
In 2013, the Avalon team launched ASIC mining machines. This product pushed Bitcoin mining power to a new height.
2014, Bitmain launched the first cloud mining platform — Hashnest.
2015–2017, The mining machine industry rebounded from the bottom. Various mining machine producers such as Avalon, Canaan Creative, and Ant Miner had seen great growth and development.
On November 21, 2019, Canaan Creative was successfully listed on NASDAQ. It became the first blockchain stock in the world.
In 2020, IPFS projects are burgeoning. Mining pools and cloud mining inaugurated the era of universal mining with low entry barriers and high flexibility.
The rapid climb of Bitcoin price catalyzed the maturation of the mining machine market. The first half of the mining history is a history of the micro developments of Bitcoin mining machines. For the second half of the mining history, the mining machine market blossomed into a much wider scope with numerous mining machine manufacturers constantly updating and upgrading their hardware to compete on mining power. As the mining industry gradually matures, the mining community gradually shifts their focus to mining services. Cloud mining is becoming a new option to stimulate the market.
Mining machine innovation: Cloud mining
Cloud mining was born in 2014. It started to prosper in 2018. The real advancement of cloud mining only began in 2020 on account of the official launch of IPFS. IPFS mining is very difficult. It has many high requirements such as hefty mining machine prices, high mining difficulties, challenging operation and maintenance complications, and many other obstacles. Many traditional miners and mining machine investors were discouraged. Under these circumstances, cloud mining has become the best choice thanks to its low entry barrier and high flexibility.
Cloud mining is a type of custodian model. Users can purchase cloud mining contracts from miners and earn cryptocurrency income throughout the contract period. Cloud mining has a few significant advantages. On one hand, cloud mining lowers the entry barrier to participation. It allows users to obtain cryptocurrency without purchasing mining machine and spending time, money, and effort on mining machine operation and maintenance. On the other hand, the mining power is split into smaller portions which users can purchase according to their actual needs. This saves money for the users and makes mining investment choices more flexible. In terms of mining machine iterations, if there is a demand for newer mining machine models, users who purchase cloud mining power also do not need to worry about upgrading the machines or renewal of mining site leases as miners will take care of all these. Users are free to exit the mining business at the end of the contract.
The pros and cons of cloud mining
Cloud mining creates a brand new business model. It makes mining accessible to everyone. However, with the influx of cloud mining service providers, many problems have also surfaced as service providers are competing on their mining sites, services, and professionalism. Currently, most of the cloud mining platforms on the market are basically centralized institutions. The platforms are in total control of key information such as mining machine information, user information, income information, and fund management. A few dodgy centralized cloud mining platforms withheld mining income from the users. Some of them even shut down the platforms and run away with users’ money. This resulted in substantial losses for both users and miners.
The authenticity of mining information is another questionable issue. Data falsification and non-transparent information plagued the industry. Many dodgy cloud mining platforms refuse to disclose the number of effective mining power and mining income information. Some of them even provide fake data. Users cannot grasp the actual situation of the mining farm. Users are also unclear about the effective mining power in their possession or the mining income. Therefore, users are prone to substantial losses. Meanwhile, cloud mining also has another shortcoming. After users purchase mining power, they cannot back out of their contract. This greatly reduced users’ asset liquidity.
To sum up, the cloud mining business model is a good progress. Nevertheless, the current cloud mining service platforms are typically undermined by weak investment security and poor services. Many organizations believe in the prospect of cloud mining services. They are actively searching for a solution. A newer form of decentralized cloud mining power financial service platform has emerged as a possible resolution. Represented by DMEX, this kind of new platform incorporates innovative concepts such as mining power NFT and DeFi, as well as the DAO governance model. DMEX could be the way out.
The cloud mining industry will certainly witness a more healthy development. Transparent industry standards and standardized operation systems can be achieved through decentralization. Cooperation with high-quality mining farms and quality services throughout the mining process will become the core competency for cloud mining platforms to win the market.
