Review of the Mining Journey and Outlook for the Future: BTC Ecosystem Layout and AI Trend Assessment

On April 7th, during the Hong Kong Web3 Carnival, an offline themed event "BTC Friends" was held. Old Bitcoin miners gathered with the new forces of BTC Layer2 to reminisce about the glorious years of Bitcoin mining and to look forward to the future development of the BTC ecosystem.

During the event, a senior industry professional shared interesting experiences of early Bitcoin miners, discussed the various challenges faced by miners going abroad, and offered insights on the development prospects of BTC Layer 2 and AI. Below is a整理 of his sharing.

A Decade of Industry Ups and Downs: Witnessing the Development of Cryptocurrency

As an experienced miner, NFT collector, and on-chain inscription participant, this veteran has witnessed the ups and downs of the cryptocurrency industry over the past decade. From the earliest GPU Mining, to the birth of ASIC miners, to the establishment of China's first mining pool, and the first halving of BTC, he has personally experienced all these significant events.

In the subsequent development, he also experienced the innovation of smart contracts brought by the Ethereum ICO in 2017, as well as the DeFi Summer and NFT boom during the last bull market. In the past year, the Bitcoin ecosystem has once again welcomed prosperity, with various inscriptions and layer two network solutions emerging endlessly.

Standing in 2024, this industry veteran believes that Bitcoin has completed a critical early turning point. The launch of the Bitcoin ETF in January this year marked the official debut of Bitcoin as a mature financial asset. He believes that the core issues that have plagued the industry for years have basically become clear, and the entire industry is set to witness massive growth, allowing blockchain technology to truly become widespread, even enabling end users to enjoy the convenience and security brought by blockchain without feeling it. He anticipates that this vision is expected to be realized in the next one or two cycles.

The Rise of Institutional Mining: Responding to Bear Market Challenges

The rise of institutional and professional mining can be traced back to the bear market from late 2014 to 2015. At that time, the price of Bitcoin plummeted, and ASIC miners had already begun to scale, but profit margins dropped sharply. The break-even period, which was originally 3-6 months, extended to 1-2 years, forcing miners to optimize their electricity costs and transition to corporate and large-scale operations to enhance their risk resistance.

The old miner recalled that his first large-scale mining farm was located in the center of Nanjing, with excellent conditions and using IDC central air conditioning. In that farm, they mined over 20,000 BTC and more than 100,000 Ethereum. However, when the bear market arrived, they had to relocate the mining machines to places with more competitive electricity costs due to the high electricity expenses.

Subsequently, a group of miners began to search for cheap electricity resources along the provincial power grid map. They looked for hydropower stations along the Dadu River in a landslide-prone environment, conducting field investigations and negotiations. This process promoted the trend of scaling and centralizing global cryptocurrency mining power, with 70-80% of the world's computing power concentrated near several pit power stations along the Dadu River and in Xinjiang at that time.

Miners Going Abroad: Opportunities and Challenges Coexist

As the regulatory environment changes, many miners are beginning to turn their attention to overseas markets. However, the problems encountered during the overseas expansion are far beyond expectations. From legal frameworks and tax planning to mining operation and maintenance, repair efficiency, online rates, as well as unstable electricity costs and forced shutdowns during special events, various challenges have emerged one after another. High overall costs and low efficiency significantly diminish the attractiveness of the U.S. market.

Some miners are turning to explore the South American and African markets, but they are facing new issues such as political stability and security. Meanwhile, the entry of new overseas players, especially some sovereign wealth funds, has further intensified competition and squeezed profit margins.

The experienced miner lamented that the road for overseas miners is exceptionally difficult, and there are only a few mines that are able to operate stably abroad.

Development and Security Challenges of BTC Layer 2 Ecosystem

With the vigorous development of the Bitcoin ecosystem, long-term congestion of the mainnet has led to overflow demand, giving rise to a number of sidechain and layer two network solutions. However, Bitcoin's limited support for smart contracts has become a significant challenge. In the short term, bridging Bitcoin assets to layer two networks or EVMs has become a compromise solution.

To address the issues of asset security and decentralization during the bridging process, a certain wallet company has proposed a solution based on Multi-Party Computation (MPC). This solution involves the project party, the wallet company as a co-management party, and a third-party security company or insurance company jointly holding private key shares to mitigate single point of failure risks and enhance fund security.

In the long term, with the updates and iterations at the Opcode level of Bitcoin and the emergence of new cross-chain communication solutions, these issues are expected to be gradually improved and resolved.

The Prospects of the Integration of AI and Blockchain

The development of artificial intelligence has brought huge changes for individuals and businesses. On a personal level, AI can now solve 40-50% of daily work stress, significantly improving efficiency. From a business perspective, the advancement of AI, especially AI Agent technology, is expected to deeply integrate with the blockchain industry.

The native information flow and asset flow of blockchain are publicly transparent on-chain, providing an ideal interactive environment for AI Agents. In the future, there may be scenarios where AI Bots representing different individual entities deploy smart contracts on-chain and engage in interactions and transactions. With the resolution of blockchain performance issues and the reduction of on-chain costs, a large number of AI Agents may initiate transactions and use smart contracts directly on-chain, while humans are mainly responsible for formulating rules and conducting risk control.

Based on this vision, a certain wallet company is working to unify the underlying and risk control layers of various wallet product lines, providing a standard API to support the integration of AI Agents. The company expects to launch related product prototypes in the second half of this year, hoping to promote the large-scale application of AI technology in the blockchain field.