Three major domestic virtual currency exchanges focus on compliance business and actively engage with local governments and state-owned enterprises

China Times (www.chinatimes.net.cn) reporter Ran Xuedong trainee reporter An Lingfei Beijing reports

The currency circle is facing critical moments in life and death. On the one hand, the news of the shutdown and running of various exchanges since November has been very busy, and players have been waiting for shipments; on the other hand, the mining machine manufacturer Jianan Technology broke the market last week and lay out the blockchain and AI business. Performance Under pressure.

However, many people in the industry still believe that rectification also means new life. After undergoing a series of reshuffles such as brutal growth and regulatory shutdown, companies in the current currency ecosystem chain will welcome compliance and AI business. Come a new round of growth space.

Under the guise, the blockchain industry has just begun.

Currency ring vibration

"Now it is to report peace in the WeChat group." On November 26, a currency exchange boss ridiculed himself like this.

On November 18th, CCTV's "Focus Interview" column named Qubu and other projects "borrowed money in the name of the blockchain, the fact of fraud", and stated that "the blockchain is not a 'cash chain'". After the official media reports, the currency circle supervision problem became hot again, and provinces and cities launched special rectification of virtual currencies, which caused the currency circle to shake.

On November 22, Binance, one of the three major exchanges, was closed in Shanghai after the office was raided by police. Binyi co-founder He Yi subsequently responded on Weibo that Binance had closed its Shanghai office and related businesses in 2017, and cooperated with relevant Shanghai authorities to complete a risk-free exit. A person familiar with the matter told reporters that Binance's Shanghai office is taking the initiative to let employees go home to work, eliminate everyone's punch card information, and temporarily avoid the limelight.

In addition, the official Weibos of Binance and TRON were blocked successively; a large number of employees of the second-tier exchange BiKi resigned, and the founders and employees of the BISS exchange were taken away; ICC's red chain and Qubu were filed for investigation, and many fund projects The promoters have long gone. Many domestic exchanges such as EVC and Btuex have clarified their relationships with domestic investors and announced that they will no longer provide services to Chinese users.

According to incomplete statistics of public information, since 2019, at least more than 500 people have been arrested by public security agencies for suspected virtual currency fraud, and the amount involved has exceeded 22.6 billion yuan. Virtual currency fraud cases can be broadly divided into two categories. One is to use the blockchain and virtual currency gimmicks to actually commit fraud, and the other is to use virtual currency and blockchain technology to raise funds illegally.

In fact, officials in various countries have recently issued risk warnings on cryptocurrencies, while reminding investors to always pay attention to the changing regulatory environment. On November 21, the German Federal Financial Supervisory Authority issued a warning to Bulgarian cryptocurrency broker 5Capital because 5Capital provided financial products in the country without authorization. At the same time, BaFin has banned 5Capital from operating in Germany since the company illegally offered CFDs. On November 15, the Federal Reserve released its semi-annual financial stability report, which mentioned for the first time that cryptocurrencies such as Facebook's initiatives have risks. If they are improperly designed and unregulated, they may have a negative impact on financial stability.

Risk warnings and regulations have caused the price of Bitcoin to drop significantly. On November 25, the value of Bitcoin dropped to about $ 6,500. As of November 28th, the price of Bitcoin was $ 7,500. Since reaching its latest peak in October, it has now fallen by 25%. Compared with the trading group, investors are not optimistic about the market and are ready to withdraw. The boss of the said exchange said that in the face of supervision, it is necessary to take advantage of the situation and not have to spread panic.

Blockchain, in short, is a new method of data management based on cryptography. It has the advantages of decentralization, immutability, trace retention, and traceability. It is widely used in digital currency and finance, the Internet of Things, intelligent manufacturing, and supply. There are application spaces in many areas such as chain management and digital asset trading.

Virtual currency is just one application of the blockchain, and Bitcoin is a mainstream virtual currency. As the overall value of bitcoin becomes larger and larger, the bitcoin industry chain upstream and downstream is gradually formed. The upstream provides bitcoin mining machines, such as Bitmain and Jianan Technology, mainly for the production and sales of mining machines; the midstream is a mining pool and field; the downstream is a bitcoin exchange and wallet.

Ore pressure

At present, the country's strongest regulation is the exchanges downstream of the industrial chain, and regulatory intervention has an impact on the crypto market, which indirectly affects mining machine manufacturers and mines that coexist and co-prosper with the price of bitcoin.

"In the middle of this year, selling the mine at a high price was considered a strategic exit." Xu Zhihong was the founder of a brain-opening brain. After entering the currency circle in August 2017, he first invested in the mine in Tengchong, Yunnan. This was his view The most real and profitable business, digging Ethereum for a year and a half and many higher-yielding projects. "In mid-2019, we felt the assets were better and we sold the entire miner."

He said it was a strategic exit. It seems that this decision is wise. The mining machine industry and bitcoin are dominoes. Regulatory exchanges will reduce the liquidity of bitcoin, which will cause the price of bitcoin to drop, which will lead to fewer people mining, and less of it to the miners.

Xu Zhihong is a celebrity in the coin circle and mining circle. He was a member of the team. On November 21st, he had just been invited to host a live broadcast of the launch of Jia Nan Technology's NASDAQ listing. Known as the first share of the blockchain, Jianan Technology is the second largest mining machine manufacturer in terms of market share. It has hit the IPO four times and the market feedback is still not optimistic. Canaan Technology issued 10 million shares at an issue price of $ 9, and its closing price on the day of listing was $ 8.99, falling below the issue price. As of November 27, Jianan Technology's closing price was 8.25 US dollars, and the next trading day opened at a price of 8.05 US dollars, closing at 8.89 US dollars, a cumulative decline of 8% over four trading days.

It can be seen from the prospectus that the income structure of Jianan Technology is single, and it mainly depends on the sales of mining machinery. The income structure of Canaan Technology is divided into three parts, product income, mining machine rental income and service income. Among them, product income is divided into blockchain products and AI products. Blockchain products mainly refer to Bitcoin mining machines and other parts of mining machines. And accessories sales. In the first three quarters of 2019, 2018 and 2017, the proportion of mining machine revenue in total revenue was 98.3%, 99.7% and 99.6%. As of September this year, AI revenue was 1.4 million yuan, accounting for only 0.1% of total revenue. Mining machine rental income was 13.3 million yuan, with revenue accounting for 1.4%.

The plunge in the price of bitcoin at the end of 2018 has led to a significant decline in the sales of mining machines and the average selling price of the machines, which has a significant impact on the operating performance of Canaan Technology. The prospectus shows that in the first three quarters of 2019, the revenue of Canaan Technology was 959 million yuan, a year-on-year decrease of 62.4%; the net loss was 236.3 million yuan, which was 305.0% lower than the 150 million yuan of net profit in the first three quarters of 2018.

This is not the situation faced by a mining machine manufacturer of Jianan Technology. Since the fourth quarter of 2018, Bitmain, which has a market share of 65.5%, has continued to report negative rumors such as plunging into huge losses, cutting off marginal businesses, and mass layoffs. The battle for control of the two founders is even more public.

Peng Junhao, chief researcher of the Matcha Research Institute, told reporters that the recent sharp pullback in the price of bitcoin has indeed had a greater impact on the sales of mining machines, and it has become more difficult for extensional expansion. At present, the price of Bitcoin has fallen to the price of the S9 shutdown coin. From the perspective of stock, a classic BTC miner like S9 can't get a profit in the current dry season. Therefore, it is more common in the market to modify the S9 or purchase the S9 at a low price.

Xu Zhihong believes that, in addition to the industry winter and policy supervision, this is also related to the competitive landscape of the mining machine industry. The products of mining machine manufacturers are very close, lack of differentiation, and the technical barriers to competition are not high. As long as there are R & D technicians, it is easy to produce mining machines, and industry competition is still intensifying. According to Kong Meng, CEO of VeryHash computing platform, Bitmicro's Shenma mining machine has a good sales volume in the second half of this year, and may exceed Jia Nan Yunzhi's Avalon mining machine.

The core competitiveness of mining machine companies is chips and production capacity. Peng Junhao said that mining is the only purpose of the mining machine. Whether the mining machine manufacturer can produce high-performance chips and make the computing power of the mining machine far exceed that of ordinary graphics cards is the key to determining the core competitiveness of the mining machine company. Traditional mining requires only a lot of repeated logical operations, and the design is actually relatively simple. The AI ​​chip meets three requirements at the same time, can carry out a large number of massive operations; has a high degree of flexibility; and has strong data processing capabilities. However, the technical difficulty, principle, and investment threshold of AI chips are far from the traditional mining machine chips, and the transformation is difficult.

The road to compliance

After the turmoil and reshuffle, the blockchain industry will usher in a new round of growth. People in the industry have focused their attention on blockchain-related compliance businesses.

Xu Zhihong first heard of the exchange's project in 2012 in McGondon's Shenzhen office, but at that time Xu Zhihong was not optimistic and did not participate. Mai Gang is the founder of the entrepreneurial factory. He has made angel investments for more than 10 years, and has invested in Douding.com, OKcoin and other projects. This project has since grown to become the three largest domestic exchanges of OKcoin. Even today, Xu Zhihong said that he is still not a believer in virtual currency. He is more optimistic about the impact of technologies such as Ethereum on the blockchain industry.

After closing the mine business, Xu Zhihong's focus is on serving the compliant blockchain business, doing blockchain planning, design, and operation for traditional enterprises and Internet companies. He believes that compliance business will become a big industry in the future. Growth point. Peng Junhao also mentioned that he has recently focused on the exchange's compliance business and investment opportunities in the blockchain industry. Another executive of the three major domestic exchanges told reporters that now the focus of each business is shifting to compliance business, and especially it is actively contacting local governments and state-owned enterprises in different industries. At present, the business demand is still great, and the wishes of both parties Very positive.

On November 18, Huobi China and Jihong jointly created a blockchain + FMCG industry solution. In September of this year, Qianjin Group, a subsidiary of OK Group, and related partners such as the Institute of Automation of the Chinese Academy of Sciences signed an investment agreement for the establishment of a joint venture, mainly engaged in big data analysis and user behavior model analysis.

However, Xu Zhihong believes that, on the one hand, compared to traditional Internet companies, whether it is an exchange or a mining machine manufacturer, the advantages are that they have more blockchain genes and years of cognitive accumulation; but the difficulty is also in transformation, especially from high-margin Exchanges or mining machine manufacturers transform low-margin industries.

Peng Junhao also mentioned that the difficulty in building compliance is to balance and strengthen the supervision of crypto assets without destroying pioneering innovation. In fact, regulatory intervention is an important benefit in the long run. There will be fewer and fewer leek-cutting project parties and exchanges. Really valuable projects will have more opportunities to play, removing the obstacles to the development of the blockchain industry. Well promoted the landing of excellent projects and the long-term development of the industry.

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