Author: Cobo Fish; Source: Cobo Global
During the 2024 Hong Kong Web3 Carnival, Cobo partnered with Antalpha Prime, BounceBit, SYS Labs, and Rollux to host the “BTC Friends” offline event on April 7th in Hong Kong, with the support of Tether Gold. Bitcoin old miners and BTC Layer2 advocates gathered together to discuss the glorious years of early Bitcoin miners and look forward to the future of the BTC ecosystem.
During the dinner, Cobo co-founder and CEO, Fish, shared interesting stories of early Bitcoin miners and the challenges they faced when going global. He also shared his views on BTC Layer 2 and AI, as well as Cobo’s involvement in these areas.
We have summarized Fish’s sharing and would like to share it with Cobo users and partners.
Introduction of Old Miners
Hello everyone, I am Fish, an old miner, a veteran in the crypto industry, an NFT collector, and a victim of on-chain inscriptions. Over the past decade, I have experienced the ups and downs of the industry, from the early days of GPU mining, the birth of ASICs, China’s first mining pool, the first halving of Bitcoin, Mt. Gox… We have come a long way to the ICO of Ethereum in 2017, which brought smart contracts and the issuance of new assets; in the previous cycle, we experienced DeFi Summer and the explosion of NFTs; a year ago, we experienced a boom in the Bitcoin ecosystem, with the emergence of many inscriptions from the bottom up, including various Layer 2 solutions and sidechains that have been hot in recent months.
Over the past decade, we have witnessed the development of the entire crypto industry from scratch. Fortunately, today in 2024, Bitcoin has reached a turning point. The launch of the Bitcoin ETF in January 2024 signifies that Bitcoin has officially appeared as a mature financial asset in front of the public.
Standing here in 2024, we can see the infinite possibilities of the future of blockchain very clearly. The core problems that have plagued the blockchain industry for a long time are now basically clear. What we are going to face next is a wave of growth in the entire industry, making blockchain truly popular and even allowing end users to use blockchain technology seamlessly and securely. I believe that this can be achieved on a large scale in the next one or two cycles.
The Opportunity and History of Institutionalized and Professional Mining
One interesting aspect of this industry is that it grows through cycles, through continuous iterations and lessons learned. The story of institutionalized mining began in late 2014 and 2015 during a bear market. At that time, the price of BTC plummeted rapidly, and ASICs were already in small-scale production. The profit margin suddenly dropped dramatically. The initial payback period for Bitcoin mining was 3 to 6 months, which later became 1 to 2 years. In a rapidly declining bear market with the price of BTC staying at the bottom, miners had to optimize their electricity costs and move towards company-scale and large-scale mining. Otherwise, the marginal profit became very low, and their ability to withstand risks became very poor. This market situation forced miners to relocate from well-equipped mining facilities.
You may not believe it, but my first large-scale mining facility was located in the center of Nanjing, only two kilometers away from Wanda. The conditions were very good, using IDC central air conditioning, and the mining machines were very valuable. In that mining facility, we mined over 20,000 BTC and over 100,000 ETH. But when the bear market came, we couldn’t mine anymore because the electricity costs were too high. Although the conditions were very good and the living conditions were excellent, the mining machines had to be moved to places with a competitive advantage in electricity costs.
At that time, these miners traveled to different places in China with a provincial power grid map, searching for idle electricity resources. They drove along the Dadu River in a mudflow environment, inspected one hydroelectric power station after another, and negotiated to build mining facilities.
During that period, the cryptographic hash rate of the entire crypto world began to scale and concentrate. At that time, 70% to 80% of the global hash rate was concentrated along the Dadu River, and in winter, it was near the power plants in Xinjiang. The power consumption was not as high as it is now. The development of this scale was due to the prolonged bear market, which forced everyone to optimize costs and improve efficiency.
Challenges and Barriers Faced by Miners Going Global
Initially, everyone was interested in mining overseas and wanted to make a big impact. However, after arriving in the United States, they found that there were many obstacles: from the early legal framework, tax planning, to later mining farm operation, repair efficiency, and uptime; there were also many unstable factors such as electricity costs and the need to shut down in special events. In the end, the comprehensive cost was very high, and the efficiency was very low. Many miners found that the United States was not an ideal market and started looking for other markets, such as South America and Africa. South America and Africa have their own problems, such as political stability and security. In this process, people still miss the rapid infrastructure development and relatively good environment in China, where there are relatively fewer obstacles.
Currently, another situation overseas is the resources of new players. Especially, the political resources of sovereign countries’ funds have started to enter the mining industry. They don’t even care about the payback period, which leads to very low profit margins for everyone.
It has been a difficult journey for these miners going global, and there are only a few mining facilities that can run and operate stably.
BTC Layer 2 Projects and Cobo’s BTC Ecosystem Layout
The recent prosperity and development of the Bitcoin ecosystem in the past year or two have seen the emergence of new asset issuances and types from the bottom up. In the process of Bitcoin’s ecosystem development, the mainnet has been congested for a long time, and eventually, these demands overflowed. To explore solutions for these overflowed demands, many projects and entrepreneurial directions have emerged recently, focusing on building Layer 2 networks and sidechains on top of the Bitcoin ecosystem.
In this process, the biggest difference between Bitcoin and EVM is the limited support for smart contracts in Bitcoin. In the short term, to quickly solve this problem, Bitcoin’s assets can only be mapped to Layer 2 networks or EVM through bridges. How to solve the security and decentralization issues of these bridges? In the short term, there can only be some compromise solutions.
Cobo provides a solution based on MPC (Multi-Party Computation), similar to multi-signature solutions. This solution allows the project party to hold a fragmented private key, Cobo holds another fragmented private key as a co-manager, and the third fragmented private key is backed up by a third-party security company or insurance company selected by the project party. This solution can effectively avoid the risk of a single point of failure and enhance the security of the entire bridge through collaboration among multiple entities. In this process, Cobo can only assist in the risk control specified by the project party and cannot decide the destination of the funds.
At the same time, we have also seen some new technical solutions, including updates and iterations at the Bitcoin Opcode level and cross-chain communication solutions. In the long run, I believe that this problem will gradually be improved and solved. Therefore, in this process, we strive to provide a relatively safe and reliable solution in the early stages to ensure that we have the opportunity to experiment and observe its further development in this ecosystem.
Cobo’s AI Layout
The development of AI has brought significant changes to individuals. Many of our workflows and information flows can be solved by AI, reducing about 40-50% of daily work pressure and greatly improving efficiency. From the perspective of companies, we have also been thinking about AI, especially when the accuracy of AI agents has greatly improved, whether it can be combined with the blockchain industry. From the current perspective, because the native information flow and asset flow of the blockchain are transparent and open on the chain, if AI agents have high accuracy and execution efficiency, they should interact with the blockchain.
We can imagine a scenario: for example, two AI bots representing two different entities can deploy corresponding smart contracts on the chain, and they can interact and trade with each other. Our envisioned scenario is that after solving the performance issues on the blockchain, the on-chain costs will be significantly reduced. The ultimate state may be that a large number of AI agents will conduct direct transactions and use on the chain, including smart contract technology. Humans may only provide simple risk control and define rules for these AI agents to execute on their own. It is expected that in the next three to five years, we may see some mature prototypes.
Based on this vision, Cobo, a company focused on the secure management of wallet private keys and good risk control, is working hard to unify the underlying infrastructure and risk control of our various wallet product lines, and provide a standardized API to integrate with AI agents. We hope to see the massive deployment and application of AI technology in the blockchain field in the future.
We expect the prototype of this product to be available in the second half of this year, and we welcome everyone to try it out.
