Ethereum’s 8-year mining era is over: Buterin, China Mining and Nvidia

“We have sold all our graphics cards, and there is no panic.” In BlockBeats’ conversations with multiple miners, this view represents the majority of Ethereum miners.

Compared with the sudden restrictions of the Bitcoin mining policy in June last year, and the passive choice of all China’s Bitcoin miners having to wait for the shutdown to stop losses, Ethereum’s miners are obviously in a much better mood. They have nearly a year to come. Digest about not being able to mine.

The most traditional mining in the crypto world relies on the computing power of machines to perform extremely complex calculations. Bitcoin is the originator of mining, and Ethereum is also a grandfather. Many people have heard of Bitcoin’s large-scale mining industry in China. The 24-hour roar of mines, mining machines, and machines in the valley’s flowing water, and Ethereum is not bad. For example, the former Spark mining pool was built by Ethereum. The world’s largest mining pool.

But these are no more. China’s Bitcoin computing power, which once accounted for 75% of the world’s computing power, completely disappeared under the policy last June, and Ethereum also abandoned computing power mining with the complete transformation of its own mechanism. In theory, with the transformation of the Ethereum consensus mechanism, the two largest network mining in the world have completely disappeared in China.

The end of 8 years of Ethereum mining is also the end of China’s mining industry. In this field, people advocate computing power and resist the increase in entropy, creating a super unicorn with a single quarter profit of 1.1 billion US dollars. Graphics giants like Nvidia have had to redesign their pricing strategies. We want to use these words to record a piece of history that all Web3 people should know.

prehistoric

One night in May 2010, a hungry programmer traded 10,000 bitcoins for two pizzas worth $30, and bitcoin had its first price — $0.003. This invisible and intangible protocol has had real value since then, and what followed was a bull market full of rich myths and the rise of crypto mining.

Early Bitcoins had no value, few people participated in the network, and only one computer CPU was required for mining. Hal Finney was one of the earliest miners at the time. He mined thousands of bitcoins with his computer within a week or two. Later, the mining software was turned off because the CPU was too hot and the noise of the computer fan was annoying. .

But the $0.003 denominated deal changed everything. Seeing that Bitcoin mining is profitable, more and more people are participating in the network. Soon, geeks from all walks of life began to write their own GPU graphics card mining programs, set up targeted mining machines, and also It is the mining machine we are now familiar with.

Soon, this technology boom spread to domestic geek forums, causing heated discussions among a small group of people. It was around this time that Wu Jihan, a student of the Department of Finance of Peking University, established the earliest bitcoin forum in China, Babbitt, and began to talk about how to mine on the forum. Zhang Nangeng, who studied integrated circuit design at Beihang University, became famous for making FPGA mining machines and was called “Pumpkin Zhang” by netizens. In addition, there is Xigua Li, a software engineer from Guilin, who developed the “Watermelon Miner” which was very popular.

Just when GPUs became popular, a small company called Butterfly Labs in the United States began to announce that it would develop a machine specifically for Bitcoin mining-ASIC. This machine ditches all other computer functions and is specialized in Bitcoin’s SHA-256 algorithm, much faster than GPU miners.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Butterfly mining machine, the picture comes from the Internet

After the concept of ASIC mining machine spread to China, some people took action soon. In addition to the aforementioned “Pumpkin Zhang” Zhang Nangeng, there is another legend in the mining circle, the roast cat Jiang Xinyu. Roast Cat entered the University of Science and Technology of China at the age of 15, and then went to Yale to study for a doctorate in computer science. When he first heard about Bitcoin, he was attracted by its concept. Before he finished reading the book, he ran back to China and became a miner, becoming the second person in China to develop an ASIC mining machine after Zhang Nangeng.

At this time, on the other side of the ocean, our protagonist Vitalik appeared.

In major overseas Bitcoin forums, Vitalik appeared frequently and began to write and share popular science articles about Bitcoin. Because he had no money to buy bitcoin, he reached an agreement with a blogger to pay 5 bitcoin per article (the bitcoin was only $0.8 at the time). Although Vitalik was also interested in bitcoin at that time, he did not participate in the trend of making wealth in bitcoin mining. For him, the decentralization story of bitcoin was even more fascinating to him.

Talented since childhood, Vitalik entered the school’s “genius class” very early, but because of his fast speech, it was difficult for others to communicate with him. When he was 10 years old, Vitalik’s father gave him an important gift – an IBM computer. Since then he has opened up a new world, while other children are playing outside, he is addicted to writing computer games.

When Vitalik was 13 years old, “World of Warcraft” was born. Like many people, he became an Internet addict, playing games day and night. Later, because of Blizzard, he weakened his hard-trained full-level warlock. Emailed Blizzard engineers. Vitalik was heartbroken after his repeated requests were rejected, and later wrote on his blog: “That was the first time I woke up crying while sleeping.” That is, because of Blizzard’s revision, Vitalik realized the hegemony brought about by centralization. “Developers can change the game as soon as they say it, but players can only accept or give up.”

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Vitalik playing with IBM as a child, picture from Vitalik blog

In 2011, Vitalik’s father heard about Bitcoin by chance at the company, and when he got home, he was excited to introduce the novelty to his son. Soon after, his father sold his software company to start a blockchain incubator. Under the influence of his father, Vitalik also took action. In September of the same year, the 17-year-old Vitalik founded the now well-known Bitcoin magazine “Bitcoin Magazine”. He wrote and edited himself, and made the magazine bigger and bigger. Acquired by BTC Media in 2015.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Bitcoin magazine journal, the picture comes from the Internet

But although his magazine was already well-known, Vitalik had not yet entered the public eye at this time.

Birth: Chinese Mining and Ethereum

Mining Mecca

Look back at home. In August 2012, Roast Cat established a company in Shenzhen and conducted an IPO on the Internet, issuing 160,000 shares at the price of 0.1 bitcoin per share, with the code ASICMINER. After that, he opened a mining farm in Shenzhen with the funds from crowdfunding, and used his own mining machine to mine Bitcoin. It is rumored that he earned 200 million yuan in three months.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

One of the few public photos of the roast cat (left), the pictures are from the Internet

17 days after the announcement of Roast Cat’s ASIC prototype, Zhang Nangeng also formed his own Avalon team to complete the delivery of the first mining machine Avalon 1. Just as Roast Cat and Zhang Nangeng were developing rapidly, another competitor also ran into the field. In the first half of 2013, Wu Jihan established Bitmain and launched 3 computing power chips in just 13 months, forming a tripartite relationship with Roast Cat and Zhang Nangeng. After the winter, Bitmain’s Antminer S1 swept a large number of competitors, allowing its mining machine agents to make a lot of money.

Roasted cats and Zhang Nangeng are also hard to find, their business is booming, and the era of Bitcoin ASIC mining machines is roaring.

The huge wealth effect has attracted countless entrepreneurs to enter the game, and produced a variety of Bitcoin mining machines, including chrysanthemum mining machines, Xiaoqiang mining machines, and silver fish mining machines. Manufacturers are competing with each other, and the iteration of mining machines is getting faster and faster, so that there is a crazy scene of early pre-ordered futures mining machines, which will become outdated when they get them. Later, the manufacturers discovered that their own mining machines were still on the production line, and their rival customers had already obtained mining machines with better performance. Companies such as Bitmain, which entered the game early, have begun to deploy larger-scale computing power in units of P. Since then, more than 70% of Bitcoin’s computing power has been firmly rooted in China.

On the other hand, under the leadership of geek miners, a large number of gold diggers have poured into China’s bitcoin market. Driven by the “Chinese Aunt”, the price of bitcoin has skyrocketed. After breaking the 4,000 yuan mark, it approached 7,000 yuan within a few days. At the beginning of the year, bitcoin was less than 80 yuan. In just a few months, about 10 billion yuan of capital has been put into the market, and China has become the world’s most enthusiastic market for mining and trading Bitcoin.

In the past 13 years, Bitcoin has created one wealth myth after another, and Li Xiaolai is the most typical one. This early New Oriental English teacher, who bought 100,000 bitcoins in 2011, is now China’s “Bitcoin richest man”. He not only founded the Bit Fund, but also established Yunbi.com. Lao Mao is another example. A 10-year-old cat was on a business trip with his boss and saw a report on Bitcoin in a newspaper on a newsstand, which changed the trajectory of his life.

“99% of the people in the domestic bitcoin circle missed this opportunity”

This is what Lao Mao wrote in a later article when he recalled the early investment opportunities of Ethereum. In the early stage of Bitcoin development, the grasp of opportunities in the Chinese capital circle established the unshakable position of Chinese people in the blockchain world, and it can even be said that they have the ability to control the future development of this industry. But under such conditions, most of the elites in the circle still missed the early opportunity of the next big trend of encrypted gold.

In 2013, Bitcoin was also very popular in the United States. Vitalik’s Bitcoin magazine also held an exhibition in California. This exhibition allowed Vitalik to experience not only the active online community, but also offline people’s interest in Bitcoin, Strong interest in blockchain. Vitalik, who was still in college, decided to drop out and go to the rest of the world to see how the Bitcoin community and the crypto industry are growing.

While traveling in Israel, Vitalik met two crypto companies that were trying to develop a set of Bitcoin-based smart contracts to issue their own tokens and run financial contracts. Vitalik immediately became interested. As one of the developers of Bitcoin 2.0, he immediately proposed a new idea to the Mastercoin community who was studying the scalability of Bitcoin: to develop a smart contract platform for Bitcoin, so that users can easily Quick and easy scripting to create your own applications based on Bitcoin. But because all of Bitcoin’s improved technology at the time revolved around payment and security properties, Vitalik’s proposal was quickly rejected.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Vitalik’s Ultimate Scripting proposal, image via Vitalik Blog

Vitalik, who was rejected, quickly decided to start anew. In December of the same year, he began to share a white paper he wrote, in which he explained in detail the shortcomings of the Bitcoin system and the idea behind his new project: a Turing-complete, Programmable general-purpose blockchain, based on smart contracts, making it the ultimate platform for decentralized applications. In the white paper, Vitalik named his project Ethereum.

“Ether is ether, and the root of eum means factory.” Cancer recalled to BlockBeats, “I finally decided on the Chinese name of Ethereum.” The two predecessors, Cancer and Gulu, worked together to translate the Ethereum white paper, allowing Chinese For the first time on the Internet, the vision of this smart contract network was recognized, and Cancer finally determined the translation of Ethereum as “Ethereum”, representing the historical positioning of this platform-based public chain. The translation of Ethereum seems unparalleled to us now, but there were also dissatisfied voices back then. “If it wasn’t for the name you translated, I would have invested in this project.” An investor said this to Cancer at the time.

At the beginning, Vitalik only sent the white paper to a few of his closest friends. After reading it, they found it interesting and sent it to other community members. Just like this, Vitalik’s idea of ​​Ethereum quickly exploded in the Bitcoin community. Many people were so excited about this avant-garde idea that they came to Vitalik to discuss and discuss in person. Among them, the most active Yes, it was Gavin Wood, the founder of Polkadot later.

Dr. Gavin Wood has strong C++ programming skills and was one of the first people to contact and support Vitalik, and he also became the co-founder and CTO of Ethereum. Later, Vitalik wrote on his blog: “The Ethereum protocol at the time was entirely my own creation. However, from here, new players started to join. By far the most prominent on the protocol side is Gavin Wood, He reached out to me via an about.me message in December 2013. … Also credit to Gavin for a subtle change in Ethereum as a building for a programmable platform, which started with a subtle change in terminology, with This influence has become stronger with the growing emphasis on the ‘Web3’ system, which sees Ethereum as part of a suite of decentralized technologies.”

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Email from Gavin Wood to Vitalik, image via Vitalik Blog

Coincidentally, for his outstanding contributions to the development of Bitcoin 2.0, Vitalik received a $100,000 Thiel scholarship from Peter Thiel, founder of Paypal and an early investor in Facebook. Vitalik, who got the money, did not stop for a minute, and began to develop Ethereum full-time with Gavin Wood.

In February 2014, Vitalik first publicized the Ethereum project at the Bitcoin Miami Conference. In April of the same year, Gavin Wood published the Ethereum Yellow Paper, expounding the technical description of EVM, which became the technical bible of Ethereum. According to the specific instructions in the Yellow Paper, Ethereum is compatible with 7 programming languages ​​such as C++, Go, Python, and Java, making Ethereum more optimized in development and programming.

On the issue of Ethereum’s consensus mechanism, Vitalik also has a very novel idea. He wrote in the Ethereum white paper:

“The Bitcoin mining algorithm (Proof of Work) is vulnerable to two forms of centralization attacks. First, the mining ecosystem is specially designed to be thousands of times more efficient on the particular task of Bitcoin mining. ASICs and computer chip control. This means that Bitcoin mining is no longer highly decentralized and egalitarian, but requires the effective participation of huge amounts of capital. Second, most Bitcoin miners are no longer in fact Complete block verification locally; instead rely on centralized mining pools to provide block headers. This problem can be said to be serious: at the time of this writing, the two largest mining pools indirectly control about 50% of the computing power of the entire network, although The fact that miners can switch to other pools when a pool or consortium attempts a 51% attack mitigates the problem.”

It is not difficult to see that Vitalik wrote these words precisely because he saw the phenomenon of “extreme involution” in Bitcoin mining, especially China’s Bitcoin mining industry. In his opinion, PoS proof of stake (Proof of Stake) would be a better choice for Ethereum.

In fact, the PoS consensus mechanism was proposed on the BitcoinTalk forum as early as 2011 and has been the most popular PoW alternative. Therefore, in the earliest Ethereum white paper, Vitalik hoped to adopt PoS as the consensus mechanism of Ethereum. However, when discussing with Gavin Wood and other development members, the Ethereum team also realized that the PoS technology at the current stage is not yet mature, and everyone does not have a good understanding of PoS, which cannot guarantee the security of Ethereum. At the same time, the entire blockchain industry is still in the early stage, and there is not so much capital involved. Therefore, PoW is still the best choice to ensure the growth of Ethereum.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Vitalik, Andreas M. Antonopoulos, and Gavin Wood working on Ethereum. Image via Vitalik’s blog

After several trade-offs, the team still adopted PoW. However, Vitalik did not give up the pursuit of PoS. He always believed that PoW would only make the entire network more expensive and less efficient. Therefore, after deciding to adopt PoW as the consensus mechanism, Vitalik and his team immediately started Set out to develop plans for Ethereum to move to PoS in the future.

Ultimately, the plan was divided into four extremes: Frontier (new frontier), Homestead (homeland), Metropolis (colonial metropolis), Serenity (serenity) .

The main purpose of Frontier is to introduce miners to ensure network security. It adopts the PoW model familiar to the Bitcoin community, including an interface for mining Ethereum and some simple ways to upload and execute contracts. Homestead is mainly to make the Ethereum network run safely and smoothly, such as adjusting mining incentives, providing a wallet with a graphical interface, etc. Metropolis will provide a relatively full-featured user interface for a wide range of users, and the team also expects to release a dApp store and several well-designed projects at this stage to demonstrate the capabilities of the network.

The Serenity stage will realize the final conversion of Ethereum PoW to PoS. In the introduction article on the four stages of Ethereum development released in 2015, the tone of Ethereum developer Vinay Gupta was full of expectation and hope. At that time, no one in the Ethereum team thought that the road of PoS of Ethereum would take a full eighth Years have been accompanied by various winds and frosts along the way.

Towards the Frontier: Chinese Mining Meets Young Ethereum

According to the established development route, Vitalik started the publicity and development of Ethereum. The first step in launching and securing the Ethereum network is to attract development funds and miners, and the first place Vitalik thought of was China.

Unfavorable encounter with Ethereum

“The first time I came to China was in May 2014. At that time, I only saw miners and trading platforms. They were already strong, Huobi and OKcoin already had more than 70 people, but there were not many interesting companies other than these few companies. thing”.

This is Vitalik’s most profound influence on China’s encryption industry in 2014. In order to promote the pre-sale of Ethereum, Vitalik came to the world’s largest encryption market. On the first stop, I visited Du Jun of Huobi and introduced him to the goals and concepts of Ethereum, hoping to get funding from Du Jun, but was dismissed as a “liar”.

Later, at a blockchain community event in Shanghai, Vitalik gave a speech for more than an hour to Da Hongfei, Chu Xiahu, Xu Yiji and other bigwigs who were sitting off the field with the theme of “The Opportunity of the Second Generation of Digital Cryptocurrency”. . As a result, half of the bosses were drowsy, and the other half were busy trading, and gave roughly the same conclusion to the 19-year-old “Little V” in front of him: This little brat is a liar, just to make money. During the group photo, Vitalik was not only pushed to the back row, but his face was half covered.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Group photo of event attendees, Vitalik is in the back right corner, the picture comes from the Internet

It is not surprising that Vitalik encountered such a cold reception. The Chinese encryption market in 2014 is undergoing rapid changes, and no one has time to pay attention to this young man who appeared out of nowhere.

At the beginning of this year, Wu Gang, the founder of Good Bitcoin, and Wu Jihan from Bitmain made a 10-bit bet: Can the computing power of Bitcoin exceed 1000P by the end of the year? Wu Jihan thought it was impossible, Wu Gang thought it was possible. At that time, the global Bitcoin computing power had just broken through the P level, and it was unrealistic to want to break through a thousand. But after a whole year of soaring prices, everyone in the circle is full of confidence, capital talents are running into the market one after another, and the mining machine business continues to heat up. It seems that nothing can stop the pace of Bitcoin.

In May, the Bitcoin mining machine conference organized by Bao Erye Guo Hongcai was held in Shenzhen. Zhang Nangeng, Li Lin, Xu Mingxing, Xie Jian and other bigwigs in the circle were present. The atmosphere of the conference was very lively, and the whole market was full of vitality. At this time, in the Chinese crypto market, the mainstream voice is Bitcoin mining and trading. They have no knowledge of Ethereum, which is new to the market. Many people even suspect that Ethereum is a project started by Hangzhou people, and Vitalik is an actor hired by them.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

The 2014 Bitcoin Mining Machine Conference, Bao Erye Group’s “Hanzi Bureau”, the picture comes from the Internet

In July 2014, Vitalik, who had run into a wall in China, moved the team to Zug, Switzerland, which was later known as the “Encrypted Silicon Valley”, and created the Ethereum Foundation here to be responsible for the development and management of Ethereum. Because there was no money to run the project, the team even put a sticker on the gate saying “Everyone is welcome to sponsor a cup of coffee”.

In order to obtain development funds, the team quickly conducted an Ethereum IC0 pre-sale, and 1 Bitcoin can be exchanged for 2,000 Ethereum. The whole process lasted for 42 days. The total amount of Ethereum sold exceeded 60 million, and a total of 31,531 bitcoins were raised, which was equivalent to about 18.43 million US dollars at the price at that time, which exceeded everyone’s expectations. Although the proceeds from the sale were quickly used to pay off mounting legal debts and pay developers salaries, the fundraising still caused quite a stir in the country, and people began to ask: what exactly is Ethereum? What’s going on? There is also the regret of the old cat that “99% of the people in the domestic bitcoin circle have missed this opportunity”.

Meanwhile, the crypto market is undergoing a subtle shift.

negative market

At the end of 2013, the central bank issued the “Notice on Preventing Bitcoin Risks and the Impact of the Tulip Bubble”, and the wind direction of the entire market began to change. After the crazy skyrocketing, the crypto industry ushered in its first winter baptism, a 3-year bear market that brought Bitcoin back to 900 yuan from the sky-high price of 8,000 yuan. Due to the plummeting price, many people’s beliefs collapsed, and the crowd that once flooded in like a tide began to exit quickly. Amid the wailing, the Chinese bitcoin market began to experience earth-shaking changes.

As the currency price fell, the demand for miners to purchase mining machines dropped sharply. The rapidly shrinking market made it difficult for mining machine manufacturers to continue. Silverfish mining machines and Litecoin mining machines disappeared one after another. The lucrative mining machine business suddenly suddenly It was turned into a massacre with rivers of blood and corpses everywhere. Xiaoqiang Mining Machine, which was once brilliant, also shut down the mine in the second half of 2014 due to continuous losses. According to the founder Xie Jian, “the investment of 6 million at the beginning of the year is now only 2 million.”

The trading platform is also not good-looking. In order to retain investors in the bear market, various companies have begun to look for potential opportunities other than spot trading. In the second half of 2013, Li Lin founded Huobi from the group buying website Renrenzhe, and Xu Xingxing left the position of CTO of Douding.com and founded OKCoin, the predecessor of OKex. In the second year, He Yi, the host of Travel TV, and Changpeng Zhao (CZ), a researcher of Bloomberg Futures, joined OKCoin and formed the famous “iron triangle of currency circle”. Everyone should know what happened next.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

OKex founder Xu Mingxing and two Binance founders He Yi and CZ, the picture comes from the Internet

At that time, in order to retain users, OKCoin and Huobi, which successfully completed financing in 2014, successively announced the launch of financial leverage tools such as bitcoin futures services and peer-to-peer lending in order to achieve new growth.

These new ways of playing worked quickly. Prior to this, there was no leveraged trading in the Bitcoin market, and the dominance of price trends was mainly in the hands of mining machine manufacturers. After the emergence of new financial leverage tools, it immediately attracted a large number of speculative funds to re-enter the market to seek arbitrage opportunities, and the price of Bitcoin gradually broke away from the control of manufacturers and began to be priced by the market. This also directly threatens the living space of mining machine manufacturers.

In the second half of the year, the price of Bitcoin was still falling all the way, breaking through a new low, and the competition among miners has entered a white-hot stage. When the living space is shrinking and the sale of mining machines is in a deadlock, Bitmain and Roast Cat have started cloud computing business. In early September, Bitmain took the lead in announcing the launch of the cloud computing service platform “Hashpower Nest”, and the number of user registrations exceeded 10,000 within 30 days. And Xie Jian of Xiaoqiang Mining Machinery has reached a cooperation with Roast Cat to jointly promote the cloud computing power project AMHash. However, the platform soon broke the door of fake computing power, and then the roast cat disappeared, investors lost all their money, and AMHash also became a “pyramid sales scam”.

In the end, Wu Jihan won the 10-bit bitcoin bet, but at this time his mood was much different from the beginning of the year.

Ethereum genesis block mined

On the Ethereum side, development is still going on. At the end of 2014, the first Ethereum developer conference, Devcon-0, was held in Berlin. This conference brought together Ethereum developers from all over the world to discuss various topics of Ethereum technology and some things that can make Ethereum more reliable. , safe plan. In May of the following year, the last test network of Ethereum, Olympic, was launched. In order to better complete the network test, the team launched the “Vgrants” program, and everyone who participated in the test network would receive Ethereum rewards.

After nearly two months of rigorous testing, on July 30, 2015, the first-phase version of Ethereum, Frontier, was released, the first Ethereum block was mined, and the “Infinite Machine” officially began to operate.

The primary version of the Ethereum network was not secure. V began to walk around giving speeches, inviting Ethereum enthusiasts to contribute code, and inviting miners to join the Ethereum network to increase network security while earning ether. With the efforts of Buterin, the Ethereum community has become active. The early Ethereum was very easy to mine. Some Internet cafe owners used idle equipment to mine Ethereum, and some of them accumulated tens of thousands of ETH.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Vitalik has dinner with early Chinese developers such as Shentu Qingchun, the picture comes from the Internet

Although Frontier looks like a public beta at best, it has far exceeded expectations in terms of introducing miners. Because of the strong incentives, miners all over the world began to enter the Ethereum network to mine, including many domestic Bitcoin miners, who improved the computing power of the Ethereum network and the ability of the network to resist attacks. The release of Frontier is the first milestone in the history of Ethereum development.

However, due to the implication of the Bitcoin market, the price of Ethereum has also been very low for a long time, and some investors have not seen returns for a long time, and even questioned Ethereum. At that time, Wanchain founder Lu Xujun went against the mainstream consensus and believed that Ethereum was the future of blockchain technology. The loyal fans of the currency, they all laughed at me, I didn’t dare to say that I invested in Ethereum at that time.”

The low price affects not only investors, but also the Ethereum development team itself. Seeing that the foundation was running out of money, Vitalik came to China again to try his luck.

At this time in China, both the mining circle and the currency circle were overwhelmed and mourning, and Vitalik’s financing in China still encountered great difficulties. But by chance, Vitalik met Xiao Feng, CEO of Wanxiang Blockchain Lab and partner of Fenbushi Capital. As one of the first investors to accept blockchain technology, Xiao Feng immediately purchased ether worth $500,000 at the time. Square. Vitalik said in a later interview: “Wanxiang’s $500,000 at the time became the lifeblood of Ethereum.” The timely rain sent by Xiao Feng gave Vitalik enough funds to pay for developers and continue to develop the Ethereum platform.

In addition to the $500,000 grant, Xiao Feng also leveraged his huge influence in investment and politics to bring broader investment and community connections to Vitalik and Ethereum, and help them communicate with Chinese regulators. Under his promotion, Shen Bo, a partner of Fenbushi Capital, invited Cancer and Gulu to translate the Ethereum white paper. Under the influence of Wanxiang, Xie Jian, the founder of Bitcoin Xiaoqiang Mining Machine, established Ethfan, the largest and earliest Ethereum community in China, in Hangzhou, and contributed a lot of computing power to the early Ethereum.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

In October 2019, Dragonfly hosted the Encryption Summit. Dragonfly founder Feng Bo, Meituan CEO Wang Xing, Vitalik and Wanxiang Xiao Feng, pictures from the Internet

From November 9th to November 13th, 2015, the first DEVCON-1 developer conference held by Ethereum was held in London. There were more than 100 speakers and more than 300 developers from all over the world participated. What really benefited Ethereum from this conference was the presence of major companies like SoftBank, IBM, and Microsoft. It is the moment when blockchain technology becomes mainstream, and Ethereum represents the cutting-edge technology of blockchain.

Stabilize the homeland and open up the land: community division, IC0 wave, NVIDIA entry

In the second half of 2015, some domestic trading platforms began to launch Ethereum, among which Li Xiaolai’s Yunbi was the earliest. At that time, Lao Mao, the person in charge of Yunbi, called Li Xiaolai to persuade him to buy more Ethereum, but Li Xiaolai replied that he would not buy it. In his eyes, Ethereum is too complicated, and a complex system means that it is not secure enough, so he feels that Ethereum does not meet his investment logic. At that time, the total market value of Ethereum was less than 70 million US dollars, but after just 3 months, its market value reached 1.1 billion US dollars.

Ethereum roller coaster

After entering 2016, Ethereum gradually ushered in its own spring.

On March 14, 2016, on the day of Pi Day, Ethereum successfully entered the second phase Homestead. Compared with Frontier, Homestead has no obvious technical milestones, but has made improvements in the stability, security and usability of network operation. The release of the Homestead version also means that Ethereum has truly become a safe and reliable network.

At the same time, at this stage, Ethereum began to provide a wallet with a graphical interface, and the ease of use was greatly improved. Ethereum is no longer exclusive to developers, and ordinary people can easily experience and use Ethereum. In addition, in order to prevent miners from boycotting the upgrade of Ethereum from PoW to PoS in the future, the team introduced the difficulty bomb (Difficulty Bomb), which has been mentioned many times in the future, in the mining difficulty design.

After the initial stabilization of the ecology, Vitalik began to pursue the Decentralized Organization (DAO) dream that he hoped to realize as early as in the white paper. In May, The DAO, the first DAO organization in history, launched a public fundraising, raising a record-breaking $150 million in a 28-day crowdfunding, making Ethereum once again the focus of the media in the circle.

Perhaps it was the big tree that attracted the wind, and Ethereum, which had just stabilized its new home, immediately ushered in a blow.

On June 16, The DAO was attacked. Hackers exploited a loophole in the contract code to allow the system to allocate funds repeatedly, stealing more than 3.7 million Ethereum, amounting to about $60 million. After the news came out, the price of Ethereum fell, which directly caused the market value to evaporate by 500 million US dollars. The fact that the contract has not yet allowed users to withdraw their own ether has bought the team time to develop a response. After a brief discussion, the team came up with two options: close The DAO, and everyone including the hacker will bear the loss, or roll back the block through a fork to compensate the DAO investors.

As the leader of Ethereum, Vitalik clearly favored the latter solution, but it also caused fierce quarrels in the community, and the Ethereum community was severely divided. Those who oppose forks insist on the principle that the blockchain cannot be changed, and believe that forks will kill Ethereum, because as long as this fork is passed, new forks may appear at any time in the future. Those who support the hard fork believe that the behavior of hackers has caused harm to many people and allowed them to succeed, which is morally unjustifiable.

Vitalik finally decided to let everyone choose freely. People who insist that the blockchain cannot be changed will stay to maintain and manage the original Ethereum, and those who agree with themselves will accept the fork and modify the security loopholes of the current Ethereum. A few days later, the hard fork plan was announced, and more than 85% of the miners’ computing power supported the hard fork. On July 20, the hard fork was successful, and the Ethereum network and community were split in two, with what is now Ethereum (ETH) and Ethereum Classic (ETC).

Later, it turned out that the fork did not kill Ethereum, and after the fork was completed, the Ethereum community regrouped and quickly got back on track. But those who questioned the fork were not wrong, and this fork did buy another ticking time bomb on Ethereum’s development path.

On September 19, 2016, the reinvigorated Ethereum held the third developer conference DEVCON-2 in Shanghai. Directly sponsored by Microsoft, the conference discussed some of the network’s upgrades and updates in March, including smart contracts that allow developers to freely create dApps on Ethereum, and later a far-reaching new token standard, ERC20. The arrival of ERC20 has provided great convenience for the blockchain team to issue coins for financing, and its huge potential has far exceeded the expectations of the developers participating in this conference.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

DEVCON-2 promotional poster, the picture comes from the Internet

The king of IC0 has become Nvidia’s revenue-generating hero

On May 19, 2017, the price of Ethereum broke through the $100 mark for the first time, and a new round of crypto bull market was imminent. In this bull market, the most impressive thing is the prevalence of IC0.

IC0 (Initial Coin Offering) corresponds to the IPO (Initial Price Offering) in the stock market, and is the main way of financing blockchain projects in the early years. With the help of the ERC-20 standard, IC0s on Ethereum have mushroomed, bringing a large amount of OTC funds to the crypto market. In 2016, there were only dozens of IC0 projects on Ethereum, and the total financing amount was only more than tens of thousands of US dollars. After 17 years, both the number of IC0 and the financing amount have more than doubled. Hundreds of blockchain projects use the Ethereum platform for financing, and 94% of the top 100 crypto projects by market capitalization are built on Ethereum.

In the frenzy, the price of Ethereum rose again and again. At the end of May, Ethereum was launched on domestic first-line trading platforms such as Huobi. All kinds of chaos out of control. Not only do blockchain projects issue coins, but even traditional Internet and various listed companies have to issue coins. Coin issuance has not only become a channel for institutional financing, but has also become a money-making machine for pyramid schemes scammers. During the bull market, the price of an article in the media introducing the IC0 project reached 50,000 or even 100,000. Packaging IC0, operating the community, and acting as investment agents became the wealth code of speculators.

Despite this, IC0 has given many people a deeper understanding of smart contracts, and the number of users of Ethereum has also exploded, with the number of addresses increasing from 1 million at the beginning of the year to 18 million at the end of the year. Vitalik has also been promoted from “Little V” to “V God”, and is often invited to participate in various domestic conferences, round tables and AMAs.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Vitalik speaks at the event of the Chinese community, the picture comes from the Internet

At the same time, the loyal group of Ethereum in China is also growing. In addition to Ethfans, ECN, Sparkpool, one of the largest mining pools in Ethereum, and imToken wallet, which was popular in China at the time, were all continuing to contribute to Ethereum. Among them are miners, traders, and early “DeFi missionaries”. They regularly translate Vitalik’s articles and spread them in the Chinese community, hold offline gatherings to study the latest topics of Ethereum, and even help Vitalik solve problems on WeChat technical issues. Once again, the Chinese community has provoked the development of the Ethereum ecosystem, providing it with safe computing power and abundant funds.

On the other side of the ocean, the attention and enthusiasm for the blockchain are equally high. Bitcoin, Ethereum, and IC0 have become the focus of daily reports by the financial media, for fear of missing new content and trends. However, in Silicon Valley, which is not far from the crypto arena, the media spotlight ignores an important person who seems to have nothing to do with the blockchain. He also tasted the sweetness of the take-off of Ethereum in this bull market.

From 2016 to 2018, Nvidia’s market capitalization grew from $14 billion to $175 billion, and the value of the Silicon Valley giant has more than doubled in two years, shocking all investors. In 2017 alone, Nvidia’s operating income reached $9.714 billion, a month-on-month increase of 40.58%. As CEO, Huang Renxun was very satisfied with the company’s performance, so he even got a new tattoo on his left arm.

At first glance at the above data, you may not associate it with 17 years of Ethereum or even the crypto market, but in fact, after a closer look, we can find an unusually close connection between the two. It is no exaggeration to say that the 17-year crypto bull market has brought considerable returns to Nvidia.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

In 2018, Nvidia CEO Huang Renxun showed his new “Nvidia tattoo” at the graphics card conference, the picture comes from the Internet

Here we need to first understand the difference between Ethereum mining and Bitcoin mining.

Bitcoin uses the SHA-256 encryption algorithm. When mining, the competition is computing power. Therefore, in order to increase the computing power, ordinary CPUs and GPUs cannot meet the competitive needs of miners, and ASIC miners with a higher degree of specialization soon dominated the mining machine market. After seeing such vicious competition in Bitcoin mining, Vitalik believes that the PoW mechanism of Ethereum should allow ordinary users to conduct a certain amount of mining activities through their desktop or laptop computers, in order to remove the need for centralized mining pools. needs.

Therefore, Ethereum uses the Ethash encryption algorithm. During the mining process, it is necessary to read the memory and store the DAG file. Since the bandwidth of the computer to read the memory is limited each time, and it is difficult for the existing equipment to make a breakthrough in this technology, no matter how the miners increase the computing power, the mining efficiency will not be significantly improved. Make Ethereum’s PoW mechanism “ASIC-resistant”.

The difference in encryption algorithms makes Bitcoin and Ethereum very different in terms of mining equipment and computing power. Bitcoin’s ASIC mining machines are basically monopolized by several manufacturers, and miners can only buy them from the market. Although Ethereum’s graphics card mining machines are also produced by specialized manufacturers, most of them are still DIY by miners according to their own needs. Buy accessories and then assemble.

In other words, the world’s largest decentralized development network has created an incomparably huge market for Huang Renxun’s graphics card sales.

As the absolute leader in graphics card production, Nvidia will not miss this big and sweet cake. In 2017, seeing the increasingly active Ethereum trading and mining, Nvidia immediately launched a GTX 1060 6GB graphics card with no output interface for Ethereum mining. The first batch of supply was 300,000 pieces, and later even stopped the normal output. Graphics card market supply. At the end of the year, the performance of the graphics card was optimized in a targeted manner, and a series of professional “mining cards” with stronger computing power and lower prices were launched, such as P106 and P104. This series of graphics cards did not even have an IO output interface, and users could not even Use it to play games.

In order to seize the chip supply in the mining market, Nvidia even cooperated closely with its arch-enemy AMD to accelerate the development and production of “mining products”. However, contrary to the coquettish operation on the production line, Nvidia has tried to distance itself from Ethereum in terms of finance and public relations. Of the huge revenue of $9.7 billion in 2017, 5.5 billion came from game marketing, accounting for more than 50%.

But in fact, the proportion of revenue contributed by gamers has begun to decline in 2016. According to the latest hardware report of Steam in August 2022, this graphics card GTX 1060, which was born in 2016, is still the graphics card with the most users on the platform, accounting for 6.6% of the total users of the platform. In other words, in its own financial report, Nvidia put all the revenue from miners’ purchase of graphics cards into game marketing.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Steam June 2022 Hardware and Software Survey, image via Steam

But smart people still debunked Huang Renxun’s little trick. Shortly after the 2017-18 financial report was announced, Susquehanna lowered Nvidia’s share price expectations on the grounds that virtual currency-related revenue accounted for more than 10% of revenue. In May 2022, the SEC even issued a statement saying that Nvidia had not disclosed sufficient information on the impact of encrypted mining on the company’s gaming business graphics card sales, and settled with Nvidia after the lawsuit. Of course, these are all for later.

It was not until 2018 that Nvidia CFO publicly disclosed the fact that he made money by selling “mining cards”, while Huang Renxun revealed his “interest” in the mining industry in his words: “Nvidia actually buys GPUs from users. The use of it is controlled… We must pay attention to its existence (users buy graphics cards to mine) and ensure sufficient inventory to deal with it.”

But the good times didn’t last long. Not long after Nvidia entered the market, the crypto market ushered in another cold winter.

On January 14, 2018, the market value of cryptocurrencies peaked, the price of Ethereum reached $1,418, the daily trading volume was nearly $10 billion, and the market value increased from $1.1 billion at the beginning of 2017 to $135 billion. But one morning shortly afterward, the entire market began to plummet, and has since languished. By April 18, the price of Ethereum had fallen by $400.

Once again, miners sold graphics cards and ran away. The oversupply of graphics cards on the market resulted in a backlog of inventory and prices were much lower than the normal selling price. At this time, the P104 graphics card specially designed for miners has no one to buy, Nvidia has to turn the chip to the consumer market, and the pricing system of the product line and next-generation products has been severely impacted. The company’s fourth-quarter earnings reported a waterfall, and the stock price fell to $160 at one point. Nvidia got its first taste of the crypto winter.

The PoW problem is emerging, and the network upgrade is repeatedly delayed

Compared with Nvidia, which still has revenue, the situation for Ethereum is even more dire.

Under the bear market, the price of Ethereum dropped to a minimum of $80, and it was even lower than XRP in the market value ranking. The market was full of doubts. During the bull market in 2017, a dApp game CryptoKitties appeared on Ethereum that once detonated the market. Although there were only some simple operations, this game overwhelmed the Ethereum network, making other applications basically unusable, and the gas fee was also high. became outrageous. Since then, there has been a lot of talk about scaling Ethereum, but the team’s planned Constantinople upgrade has been repeatedly delayed.

The Constantinople upgrade is a key step in Ethereum’s entry into the third phase of Metropolis. In order for Ethereum to successfully enter the Metropolis stage, the team designed a two-step plan, implemented through two hard forks in Byzantium and Constantinople. The first Byzantine plan successfully completed the fork on October 16, 2017. It mainly adjusted the block difficulty evaluation formula, reduced mining rewards, and delayed the detonation of the “difficulty bomb” by one year. The second Constantinople fork was supposed to be completed in early 2018, but it has not been implemented due to various factors such as the market. Faced with this situation, Vitalik has also been accused of being an Ethereum “promoter” who does not focus on development.

In September 2018, Bitcoin core developer Jeremy Rubin published an article on TechCrunch titled “The Crash of ETH Is Unavoidable”, saying that Ethereum cannot carry a large number of decentralized applications, and even if the Ethereum network survives, it has no value. . This remark immediately caused the price of Ethereum to fall further, and many projects on Ethereum even began to transfer to the ecosystem of public chains such as EOS and TRON. Under the influence of price, the computing power of the entire network of Ethereum also began to shrink, dropping by nearly 20%.

This article by Jeremy also sounded the alarm for the Ethereum community.

In response to Jeremy’s Reddit blog, Vitalik acknowledged the problems with Ethereum, writing: “If Ethereum doesn’t change, what Jeremy Rubin said could come true”. Then, in December, Vitalik called on Twitter that future blockchains using PoS sharding technology would be “thousands of times more efficient.”

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Vitalik’s reply to Jeremy’s Reddit blog, pictures from the Internet

Finally, at the core developer conference in late 2018, members of the Ethereum development team agreed on the activation time of the fork. After several delays, the Constantinople hard fork was successfully triggered at block height 7,280,000 on February 28, 2019.

The Constantinople upgrade kicked off Ethereum’s “Ice Age”, where the difficulty of creating blocks on the Ethereum network began to increase continuously until it slowed to a complete stop. At the same time, the team reduced the block reward for mining again and delayed the “difficulty bomb” by 5 million blocks. The top priority of this upgrade is the block reward reduction. With the decrease of mining revenue, the opportunity cost of mining machine manufacturers and miners increases. The team hopes that the price/performance ratio of mining on Ethereum will gradually be lower than that of other currencies, thus forcing Ethereum miners to switch to mining ETC Wait for the PoW public chain.

After the successful upgrade of Constantinople, the team no longer stopped, and successively formulated the plan to enter Serenity, that is, our plan for Ethereum 2.0 today, which will be divided into “Istanbul” as before (this step is also included in the three phases of Metropolis ) and “Ethereum 1.X” in two steps. The Istanbul hard fork was successfully completed on December 8, 2019. The key words of this upgrade are cost and speed, reducing gas cost and increasing the TPS cap to 3000.

The successful upgrade of Istanbul means that the Metropolis “Metropolis Phase III” has been successfully implemented, and Ethereum has taken an important step in the transition to 2.0.

Restlessness before tranquility: the return of the king, what’s next?

The story of Ethereum entering 2020 is very familiar to us. The arrival of DeFi Summer has set off another round of strong bull market in the crypto market. In a few months, the total locked volume of DeFi on Ethereum has reached 30.5 billion US dollars, and various protocols and applications such as lending, DEX, insurance, and wealth management have appeared. With the explosion of NFTs such as NBA Top Shot and BAYC, the transaction volume of Ethereum continues to expand. This is followed by the successive growth of multiple tracks such as Layer 2 and DAO.

Ethereum itself has also ushered in new expansion opportunities. On November 4, 2020, the Ethereum 2.0 deposit contract was officially deployed, and then Lido and other Ethereum 2.0 liquidity pledge agreements attracted a large number of pledged assets to the Ethereum PoS network. In August 2021, the upgrade of Ethereum London was completed, including 5 protocols such as EIP-1559, which further optimized and improved the participation experience and mechanism of the Ethereum network, weakened the income of miners again, and prepared for Ethereum 2.0 .

What is interesting, however, is that the closer the “closer to tranquility” is, the louder the community’s agitated voices. Undoubtedly, the turmoil is still starting from the graphics card mining market.

Nvidia is starting again

With the start of a new round of bull market, Ethereum has also ushered in the second mining wave. Nvidia has once again dispatched to develop the CMP series of mining cards for graphics card miners under the pressure of the global shortage of cores and the demand of players. In order to obtain the highest mining efficiency, CMP directly abandons the graphics processing function. Later, under pressure, it was announced that the newly launched GeForce RTX 30 series graphics cards would limit the mining performance, making the graphics card prices soar again. What’s more interesting is that although the newly launched Lite Hash Rate graphics card limits the mining performance, NVIDIA released a developer driver in March 2021. In less than a year, various versions of LHR graphics cards have been affected to varying degrees. cracked.

Ethereum's 8-year mining era is over: Buterin, China Mining and Nvidia

Huang Renxun shows the RTX 30 series graphics card, the picture comes from the Internet

At this point, the price of Ethereum is approaching $3,000, and PoS mergers are no longer seen as a potential threat in the face of rising prices. Huang Renxun has become a full-fledged advocate of cryptocurrency, publicly expressing his long-term optimism about the market boom and the value of blockchain. The miners also bought it, and the graphics cards were sold out. According to insiders, some large mining farms even took delivery of goods directly to NVIDIA without going to the primary and secondary markets.

For a time, the rise in the price of graphics cards has become a content repeatedly reported by CCTV and self-media. According to the agency report, in 2021, Nvidia will generate about $3 billion in revenue by selling graphics cards to miners. In the same year, Nvidia’s market value exceeded $500 billion, and in its fiscal year financial report in February of the following year, the company’s annual revenue hit a record of $26.9 billion, a year-on-year increase of 61%, achieving seven consecutive quarters of revenue growth. .

But by May, the situation had changed dramatically. On May 19, the crypto market dived again, and the market began to turn bearish. This month, Nvidia released the first quarter financial report of the latest fiscal year, but its profit fell by 46% month-on-month. In the second quarter financial report released in August, the revenue of mining chip CMP-related business dropped by 66% year-on-year. In 2022, Nvidia has once again received the “involvement” of the encryption market.

Soon, a large number of second-hand graphics cards entered the market, directly competing with new products, and destocking became a headache for Nvidia. For this reason, Nvidia has rarely lowered the official price of RTX30 series graphics cards. What caught Nvidia most by surprise was that the goods directly supplied to the mine were transformed into discrete graphics cards by merchants and flowed back to the market to impact the inventory sales of existing graphics cards.

The main reason for this graphics card sell-off, in addition to the price drop, is the upcoming Ethereum 2.0, which means that the once huge graphics card mining market will no longer exist. It is estimated that more than one-third of the consumer graphics card market will disappear completely after Ethereum switches to PoS.

As the Ethermine mining pool, which accounts for 33% of the total computing power of the Ethereum network, announced that it will end the Ethereum PoW mining pool business, the golden age of GPU graphics card mining has also come to an end. Ethereum miners began to find their own way, some laying on the sidelines, some sold all the graphics cards in their hands at a discount, and some began to transform into Web3 applications with the benefits of mining.

next 8 years

The importance of PoS conversion to the Ethereum network is self-evident, but is this the final form of Ethereum? of course not.

Ethereum still has a series of problems that have not been solved, such as the censorship resistance of PoS, which is the foundation of the blockchain, and is now being questioned; such as performance, to what level can Rollups improve the performance of Ethereum; such as whether there is still a need for Rollups Sharding technology and so on, these are all issues.

Ethereum wrote in its white paper in 2014 that it would transform PoS. Who would have thought that the first wait would be 8 years, and the above problems require every ecological member to explore little by little to look forward to the next 8 years.

Ethereum PoW is a thing of the past, and Vitalik, the Ethereum development team, and the miners have gone through eight years of merit and demerit. We write it down, and then move on.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/ethereums-8-year-mining-era-is-over-buterin-china-mining-and-nvidia/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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