During the 2024 Hong Kong Web3 Carnival, Cobo and Antalpha Prime, together with BounceBit, SYS Labs, and Rollux, held an offline theme event "BTC Friends" in Hong Kong on April 7 with the support of Tether Gold. Old Bitcoin miners and BTC Layer2 newcomers gathered together to discuss the glorious years of early Bitcoin miners and look forward to the future of the BTC ecosystem.
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During the dinner, Cobo co-founder and CEO Shenyu shared with the guests the interesting reorganization of early Bitcoin miners, reviewed the various problems encountered by miners when going overseas, and shared his views on BTC Layer 2 and AI as well as Cobo’s layout in them.
Self-introduction of an old miner
Hello everyone, I am Shenyu, an old miner, an old leeks, an NFT collector, and a victim of on-chain inscriptions. Over the past decade, I have experienced ups and downs in the industry, from the earliest GPU mining, the birth of ASIC, China's first mining pool, the first Bitcoin halving, Mt. Gox... Along the way, in 2017, Ethereum's ICO brought smart contracts and the issuance of emerging assets; in the last cycle, we experienced DeFi Summer and the outbreak of NFTs; a year ago, we experienced a boom in the Bitcoin ecosystem, and many inscriptions emerged from the bottom up, including the various second layers and side chains of Bitcoin that have been very popular in recent months.
Over the past decade, we have witnessed the entire process of Crypto from scratch. Fortunately, Bitcoin has completed its early turning point today in 2024. The launch of the Bitcoin ETF in January 2024 means that Bitcoin has officially debuted in front of the public as a mature financial asset.
Standing in 2024, we can clearly see the infinite possibilities of blockchain in the future. The core problems of the blockchain industry that have troubled us for a long time are basically clear today. What we have to face next is the final wave of growth in the entire industry, making blockchain truly popular, and even allowing end users to use the convenience and security brought by blockchain technology without feeling. I believe that this can be achieved on a large scale in the next one or two cycles.
The Opportunity of Institutionalized and Professional Mining and the Past of Mining
One very interesting thing about this industry is that it relies on the power of cycles, continuous iterations and pitfalls to drive the growth of the industry. The story of institutionalized mining was first born in the bear market at the end of 2014 and 2015. At that time, the price of BTC fell too fast. At that time, ASIC had already grown to a small scale, and the profit margin suddenly fell dramatically. The payback period for Bitcoin mining was 3 months and 6 months at first, and later it became a payback period of one year or even two years. When in a rapidly falling bear market and the price of the currency has been maintained at the bottom, miners must optimize the cost of electricity costs and must corporatize and scale mining, otherwise the marginal profit will become very low and the ability to resist risks will be particularly poor. At that time, this market situation forced miners to relocate from the mines that had very good conditions at the beginning.
You may not believe it, but the first large-scale mine I owned was located in the center of Nanjing, two kilometers away from Wanda. The conditions were very good, and IDC central air conditioning was used. The mining machines were very valuable. We mined more than 20,000 Bitcoins and more than 100,000 Ethereums in that mine. But when the bear market came, we couldn't mine anymore because the electricity cost was too high. Although the conditions were very good, the living conditions were very good, and the mine was well decorated, there was no other way. The mining machines had to be moved to a place where the electricity cost was competitive.
At that time, the miners came from all over China with provincial power grid maps to look for spare power and redundant power resources. They drove along the Dadu River in the mudslide environment, inspected each hydropower station, and then negotiated and built a mine.
During that wave, the crypto computing power of the entire crypto world began to develop in a large-scale and centralized manner. At that time, 70 to 80 percent of the global computing power was probably concentrated along the Dadu River, and in the winter near the pit power stations in Xinjiang. The power consumption was not that high at that time. The root cause of this large-scale development was that the bear market was too long, and everyone had to optimize costs and improve efficiency.
Problems and barriers faced by miners going overseas
Everyone was very interested in overseas mining at the beginning and wanted to do a big job. After arriving in the United States, I found that there were so many pitfalls: from the early legal structure and tax planning to the later mine operation and maintenance, repair efficiency, and online rate; finally, there are many factors such as unstable electricity prices, 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 such an ideal market, so they began to look for other markets. The remaining markets may be South America and Africa. South America and Africa are issues at other levels, which are issues of political stability and security. In this process, everyone still misses China's rapid infrastructure and relatively good environment, and there are relatively few pitfalls.
Another situation overseas is that the resources of new players, especially political resources, are very good. Many sovereign funds have already started to enter the mining market, and they don’t even care about the payback period, which leads to very low profit margins.
Looking back on this journey, I feel that this wave of miners going overseas also has a very difficult time. There are only a few mines that can finally get up and running and operate stably.
BTC Layer 2 Project and Cobo’s BTC Ecosystem Layout
The Bitcoin ecosystem has prospered in the past two years, and the underlying underlying asset issuance and types have emerged from the bottom up. In the process of Bitcoin ecosystem development, the entire Bitcoin main network has been in a state of long-term congestion, and these demands have eventually overflowed. Around these overflowing demands, everyone is exploring some side chain and second-layer network solutions. In addition, with the development of modular blockchain technology on the EVM side in the past few years, these technologies are relatively mature, so we have recently seen a rapid emergence of a number of projects and entrepreneurial directions that attempt to build a second-layer network on the Bitcoin ecosystem.
In this process, the biggest core difference between Bitcoin and EVM is that Bitcoin's support for smart contracts is relatively limited. In the short term, the only way to quickly solve this problem is to rely on the bridge to map Bitcoin assets to the second-layer network and EVM in some way. How to solve the problem of asset security and relative decentralization of the bridge? In the short term, there can only be some compromise solutions.
Cobo provides a solution based on MPC, which is similar to multi-signature based on multi-party computing. This solution allows the project party to hold a private key shard, Cobo as the co-manager also holds a private key shard, and the third private key shard 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 single point failure, and at the same time allow multiple entities to collaborate to enhance the security of the entire bridge. In this process, Cobo can only assist in some risk control specified by the project party, and cannot determine the destination of the funds.
At the same time, we have also seen some new technical solutions, including some updates and iterations at the Bitcoin Opcode level, and some cross-chain communication solutions. In the long run, I think this problem will be gradually improved and solved, so in this process we strive to provide everyone with a relatively safe and reliable solution in the early stages to ensure that we have some trial and error opportunities in this ecosystem and can observe its further development.
Cobo’s AI Layout
The development of AI has brought great changes to the individual level. Many of our workflows and information flows can basically solve 40% to 50% of the daily work pressure through AI, and the efficiency is greatly improved. From another dimension, we have been thinking about AI at the company level, especially whether AI Agent can be combined with the blockchain industry after the accuracy rate is greatly improved. From the current perspective, because the original information flow and asset flow of the blockchain are open and transparent on the chain, if the subsequent AI Agent has a relatively high accuracy and execution efficiency, it should interact with the blockchain.
We can imagine a scenario: for example, two AI Bots represent two different personal entities. They can deploy corresponding smart contracts on the chain, and the two AI Bots can interact and trade with each other. One scenario we imagine is that after the blockchain solves the performance problem, the cost on the chain will be greatly reduced, and the final state may be that there are a large number of AI Agents on the chain to initiate and use transactions directly, including smart contract technology. Humans may only do some simple risk control for these AI Agents, set some rules for them, and let them execute in a certain way and method. It is expected that in the next three to five years, we may see some relatively mature prototypes.
Based on this vision, Cobo is a company that focuses on the secure management of the underlying private keys of wallets and uses good risk control. We are working hard to unify the underlying and risk control layers of our entire wallet product lines, provide a set of standard APIs, and access the capabilities of AI Agents. We hope to see the large-scale 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 everyone is welcome to try it out then.
