Babbitt column | After the “no mining”, has the trend of the development of the blockchain industry changed?

One of the first two days was very hot, and soon it was in the currency circle:

In the "Guidelines for Industrial Structure Adjustment Guidance (2019, Draft for Soliciting Opinions)" issued by the National Development and Reform Commission on April 8, the "virtual currency mining" part was listed as the first category in the third category of elimination. Paragraph 6 of the "(18) Others" section of the production process equipment.

Although this news caused a big reaction from the currency circle, but because of the sharp rise in bitcoin prices and the popularity of IEO in those days, everyone was still addicted to the money-making effect of the currency circle, and did not take this news seriously. . But I personally feel that this news is not as simple as it is, there are some things behind it that deserve to be considered.

Although this is only a draft for comment, there is still a month of comment period, but in the style of the government, the possibility of subsequent adjustments is very small. Basically, this matter is so qualitative.

The general government has the following attitudes towards the industry: encouragement, support, restriction, elimination, and prohibition. The nature of this time is “elimination class”, and the elimination is already more strict qualitative. According to the “Draft for Comment” 》:

The elimination categories are mainly backward processes, technologies, equipment and products that do not meet the requirements of relevant laws and regulations, do not have safe production conditions, seriously waste resources, pollute the environment, and need to be eliminated. It should be noted that the pair is not allowed, restricted or eliminated, and is in compliance with relevant national laws, regulations and policies.

The term used here is “not in compliance with relevant laws and regulations”, “does not have safe production conditions”, and “serious waste of resources” is basically the government’s perception of bitcoin mining.

On the one hand, it is a "elimination class", not a "restriction class", and it is not an encouragement class. This shows the attitude of the government. On the other hand, the "elimination class" is not a "prohibition class". That is, the government does not support this matter. And will gradually phase out in the future, but there is a time limit in the middle.

First, why is it so sudden?

Then, the first question is: Why did the country suddenly introduce this policy?

First of all, we must be clear that the state’s attitude towards digital currency is consistent, that is, resolutely opposed! From the beginning to the present, from now to the future, it will definitely be this attitude, basically this attitude will be within the foreseeable three or five years.

The state’s attitude toward digital currency began with the publication of the “Notice on the Prevention of Bitcoin Risks” from the five ministries and commissions such as the People’s Bank of China on December 5, 2013. It is clear that bitcoin is a virtual commodity and does not have a monetary property; On September 4, the People's Bank of China, the China Banking Regulatory Commission and the China Securities Regulatory Commission jointly issued the "Announcement on Preventing the Risk of Subsidy Issuance Financing". The "Announcement" pointed out that the financing of token issuance refers to the so-called "virtual currency" such as Bitcoin and Ethereum, which is essentially an unauthorised illegal public financing through the illegal sale and circulation of the token. Act, suspected of illegal sale of tokens, illegal issuance of securities and illegal fund-raising activities such as illegal fund-raising, financial fraud, pyramid schemes, etc.; then later restricting third-party payment of virtual currency, severing the channel of legal currency deposit; then opening blockchain information The service was filed, and the “forbidden mining” was carried out a few days ago.

The state's attitude is very clear, that is, it only supports the development of the blockchain technology, but it strictly prohibits financial activities such as digital currency and financing.

Bitcoin is the first of its kind in digital currency, and mining is its core technology. It is natural for the country to adopt a negative attitude. Many people may also have a hint of fantasies about the country's change of attitude toward digital currency. I think this fantasy is not necessary. The country will not change this attitude in the short term.

Second, the marginalization of mining

So what is the impact of the “no mining” policy on the bitcoin and digital currency industries if it is implemented?

I think the most obvious change is that mining will become marginalized. The marginalization here refers to the marginalization of geographical location and the marginalization of policy.

From a geographical point of view: Many mines have already selected mines in Inner Mongolia, Gansu and Sichuan. In the future, they may have to go further because of the lack of policy. Some may consider going to the border and even going to the border. Some will consider going abroad and going to places where policies are open, which is geographically marginalized.

From a policy point of view: before the country has explicitly issued this “forbidden mining” policy, some local governments can still close one eye, but after this policy comes out, even if they want to close one eye again It’s also very difficult, and the scale is small. If the scale is bigger, it will not cover up. As long as someone reports it, it is easy to get things done.

Since the state has introduced policies, it is basically unnecessary to expect the country to revise its policies in the short term, or to expect that the domestic bitcoin mining industry can go against the policy, and it is unrealistic to grow and develop. Bitcoin's mining industry will certainly not end, because mining can not be completely banned, but it may be marginalized.

Some mining companies used to mine in the name of “big data” and “cloud computing”. In the future, all mining companies should carry out this name, and even with “big data” and “cloud computing”. In the name of mining, the difficulty has also increased a lot, which is the marginalization of the policy.

And at present, it is mainly limited from the perspective of electricity. In the future, the government still has many directions to limit:

Previously, in the Internet Financial Risk Special Remediation Work Brief (No. 53), Pan Gongsheng, the deputy governor of the central bank and the leader of the special group for the remediation of Internet financial risks, said in his work deployment: “The National Financial Work Conference explicitly requires that restrictions be deviated from the entity. The economy needs and evades the 'innovation' of supervision. Therefore, the pseudo-financial innovations that are not related to the real economy should not be supported. In the next step, measures should be taken to comprehensively adopt measures such as electricity price, land, taxation and environmental protection to guide relevant enterprises. Order to quit."

Third, the rise of special algorithms

I have written an article specifically to analyze the blockchain in the process of value transfer in the end do not need POW, in the end can not be digging mine? My personal answer is that if you want to do a point-to-point value transmission system, you can't do without calculations, you can't do without decentralization, and you can't do mining.

On the one hand, the state prohibits mining, on the one hand, the development of the industry is inseparable from mining, then what should we do? Is it already in a dead end? Not necessarily!

Since the state supports cloud computing, but does not support digital currency mining such as Bitcoin, if we make some adjustments to the mining algorithm, and the mining process itself is part of the cloud computing, is it possible to avoid policy risks? What is the role? For example, the design of my consensus mechanism is not based on mining, but on computing, which means that the main business is used for calculations. Mining can only be an additional effect.

In the previous section, we talked about the fact that many companies use the name of “big data” and “cloud computing” to mine. The reason why it is borrowed is because the mining of bitcoin is a general-purpose algorithm. Mining is not used to make other social contributions, and it does cause energy waste from a certain perspective.

But if the future mining is turned to a dedicated algorithm, things will be different. It turned out to be "fake calculation, real mining". After a special algorithm is in the future, the professional algorithm may be combined with a certain piece of artificial intelligence, which will become the mode of "mainly calculation, by the way, mining". The computational process required for the blockchain is truly “big data” and “cloud computing”, which not only evades government regulation, but can even be supported by the government.

I personally estimate that this may be the trend in the future: the consensus mechanism is mainly based on mining, which is dominated by calculation and supplemented by mining; the general algorithm is slowly falling, the special algorithm is slowly rising; the edge calculation is related to reality. A more compact approach will slowly become mainstream.

Fourth, the existing public chain license

Since the country prohibits mining, the development of existing mining projects will be greatly affected. Some projects still need to make some business adjustments, but the most influential are the new projects that need to be mined in the future. They may not have the opportunity to appear at all.

On the one hand, such a project is difficult to integrate into the market. On the other hand, for the public, after the national policy is finalized, ordinary participants in the market will form a psychological reflex. They will say that mining is not good. The thing that the government does not support, thus refusing to participate, makes it difficult for new projects to find initial users.

In this case, the existing public chain in the market is equivalent to obtaining the government license by default, because it will not be sent again afterwards. In fact, the trend of the public chain becoming a license has long been started, not from the "forbidden mining".

After the country restricted the ICO and identified the ICO as illegal fund-raising and made a one-size-fits-all approach to the ICO, the road to financing the currency was actually blocked. Many projects that need to be hot-started through currency, financing, and listing have been forced to change. From that time on, the public chain that has already raised the currency has begun to enjoy a similar franchise. Mining is just further confirming this trend.

Fifth, the POS consensus mechanism has become mainstream

The last big trend is: The project of the POS consensus mechanism and the project of the DPOS consensus mechanism will usher in great development, especially POS, which may become the most mainstream consensus mechanism.

This last point may cause a lot of controversy, because in many people's minds, POW is the best consensus mechanism, because it is the most decentralized consensus mechanism, and it can best represent the consensus mechanism of blockchain characteristics.

I don't deny this. In fact, I am also a big fan of the POW mechanism, but I like it is one thing, reality is one thing. The reality is that POW has encountered policy opposition. Although China has clearly stated that “forbidden mining” is the earliest and most representative, it does not mean that other countries will support mining. Otherwise, there may be more countries that “prohibit mining”.

Moreover, the key point is that I personally think that POW's public chain project does not need a lot of it. If there are a large number of public chain projects that use POW, it will cause unnecessary waste. And from an ecological point of view, basically only one chain will survive under a specific algorithm. If the algorithms of several chains are the same, there will be endless battles between them, until one side has various protections. Measures so far.

Although the blockchain is inseparable from the POW, it does not mean that all blockchain projects require a POW. Only in industries related to value transfer, currency, and assets, industries that have high requirements for safety and decentralization cannot be separated from POW. Most of the blockchain projects only issue a pass, and do not need a POW, and they can use the existing POW public link to pass the pass.

In addition, POS itself has many advantages. It is the closest to the current equity model in traditional finance. The public understands that there is no pressure; and it has many advantages in terms of environmental protection, high efficiency, fast transfer time, low commission, etc.; Environmentally friendly and efficient, but it has been greatly questioned in the degree of decentralization, and ordinary people have no chance to participate at all. Relatively speaking, I am still more optimistic about POS becoming mainstream.

For most projects, POS may be the most appropriate mechanism, and I think this is why Ethereum intends to switch from POW to POS.

Just look at the recent news headlines about V God, and you know how V-God is optimistic about the POS mechanism:

V God sends 15 tweets: POS and fragment blockchain will increase efficiency by 1000 times

In response to the 51% attack on ETC in recent days, V God expressed his opinion on Twitter today. He believes that "this 51% attack confirmed that our decision to switch to PoS is correct."

PoS is the dream of Ethereum. This is not just a strategy to expand the network, it is basically the Ethereum version of Nakamoto's prediction: the future of the blockchain. However, since the introduction of PoS, it has been a long time, and now more and more people are skeptical that the current mining unions will not be very angry about this change and may hinder the implementation of the change. As a preparation for the PoS upgrade, Ethereum recently released an upgrade to Constantinople and St. Petersburg. At the same time, they are preparing for a "sharding" network, which is very important to make extensions easier. These updates are also used to reduce ETH block rewards from 3 ETH to 2 ETH, which were created to optimize the system and improve the efficiency of current PoW systems. In the view of V God, the use of POS has greatly improved environmental protection, efficiency and security. Although I think some of the arguments are slightly exaggerated, but basically for these reasons, I boldly expect that a large number of blockchain projects will turn to the POS mechanism in the future, and the POS mechanism will gradually become the mainstream consensus mechanism for blockchain projects.

The above is some thoughts about the possible changes in the future development of the blockchain industry after the introduction of the national “forbidden mining” government. On the one hand, this policy is currently only a draft for comments, and has not yet been finalized; on the other hand, the reality is very complicated and what can happen, so we will continue to observe.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!


Was this article helpful?

93 out of 132 found this helpful

Discover more


How to maintain liquidity in protocols? A quick look at the time-bound token protocol Hourglass

LP sets the time for liquidity lock in the protocol to obtain higher returns. Written by Babywhale, Foresight News. O...


ETH rebounds to $2200, how do cryptocurrency practitioners view the future market trend?

In the same bullish market, the BTC ecosystem is thriving because of its inscription (Bitcoin), while the ETH ecosyst...


Sky is the Limit: An Artistic Rebellion in the Digital Frontier

The artist created an NFT featuring the Ripple Labs CEO for our Most Influential feature.


A look at the Ethereum Inscription Track Besides the thousandfold coin ETHS, which other projects are worth paying attention to?

Ethscriptions is an alternative solution to smart contracts and L2, which are currently centralized.


Foresight Ventures: Can Asgard NFT AMM build a new rainbow bridge?

The walls surrounding Asgard are as sturdy as gold soup, and how to improve asset liquidity on the chain is an eterna...


Reflecting on the combination of Web3 and sports Who really needs who?

Web3's passion for sports is superbly manifested in FTX.