Will Liquid-Cooled Miners Dominate the 3rd Hashrate Revolution?

The crypto market is what is on everyone’s mind right now, above the surface that is.

Below the surface, there is something serious happening in the mining industry. Mining hashrate has come to a crossroads once again. Whether the most shutdown products will come back to the main stage is probably not the major concern of all the miners.

At this moment, the good news is that there are still some old miners of high hashrate power running. While the bad news is that the miners who entered the field with high coin prices or owning several low hashrate ones were forced to shut down or have a bunch of machines but no suitable hashrate power. The former has already gained profits back, in the case of a big drop in coin prices, laying flat has a good return. The latter, at least for now, is the receiver of the high end of the market.

Some questions:

Is this the ending of the mining industry? And, is it true that buying cheap miners at is the smartest way of becoming profitable right now?

What are those pioneers and mining machine manufacturers doing?

Water-cooled products, which are like modified cars in the past, are being accepted and recognized by mainstream manufacturers. So what exactly does it mean?

The truth may be scarier than thought. An era of high hashrate power and super hashrate power is about to come. The year 2022 will be the first year of the third hashrate revolution.

This article is close to 5000 words and is divided into seven dimensions. You can browse in sections.

Note: This article was written by Mark Zhou, originally published here. It has been republished with permission

1. An important hashrate generation we are experiencing

An important hashrate generation we are experiencing

The individual & geek era spanned 4 years, from 2009 to 2012 where the ultimate core was still CPU and GPU mining. First, it was the M (Mega, MH/s), then G (Giga, HG/s). During these rapidly changing years, the G as the leading individuals or companies have earned a lot of profits day to day, no one has foreseen the upcoming of the TeraHash era (Tera, TG/s). We bid farewell to the past with no signs. No goodbye, only farewell.

The professional miner (ASIC) air-cooled era: From the first ASIC mining machine which appeared in 2013 to now, as the chip is made smaller and smaller, the hashrate power is getting higher and higher which increased from the beginning 10G of each unit to the maximum 140T today.

According to today’s best energy consumption ratio, ASIC miners basically have approached or reached the physical limit of ASIC air-cooled products. Currently, Intel's ASIC air-cooled 138T, has almost the same hashrate as Antminer S19XP. Therefore, the next step is not to make further changes to chips but to achieve exponential growth in ASIC product’s hashrate.

The professional miners (ASIC) of the water-cooled era: It has been exactly a decade since these have been operating (2012). This decade the mining industry has made a large number of people, firm believers, mining machine manufacturers, power resource consolidators, power equipment suppliers, mining machine traders, mine builders, mine owners, etc. Ten years in the mining area equal decades in traditional industries.

This year Bitmain has released mass production of Antminer ASIC water-cooled miners. Here, we can't help but ask will ASIC miners encounter the third revolution of the mining industry shortly?

This question is like asking whether new energy cars will replace traditional fuel cars. No need to ask, because it has already come. It's just that our industry is different from the traditional car industry. It will only grow faster than we think. Just like ASIC replacing the CPU, GPU mining. No goodbye, only farewell.

2. Several logics of liquid-cooled becoming mainstream

Several logics of liquid-cooled becoming mainstream

Use limited energy to pursue the best power consumption ratio: The electricity cost ratio will only get higher in future hashrate products unless a more desirable power consumption ratio can be obtained. For example, Antminer XP Hyd has a power consumption ratio of 20.5 which is more than double the power consumption ratio of current running miners.

Scaled pollution sources: Decentralized professional mining sites are not all located in the mountains or next to reservoirs, but are more likely to be in industrial areas or close to residential areas. noise pollution, related to greenhouse gas emissions indicators, is likely to become a prerequisite for limiting the existence or opening of scaled sites.

The best heat dissipation of liquid-cooled systems has given rise to a "large" market: As for the air-cooled systems, because of the dissipative, physical level of heat dissipation, coupled with the high-intensity operation of hardware products and environmental corrosion, not only the problems of the machine occur frequently and but also its life expectancy is limited. The cooling efficiency of the wind-touch chip is only about 8%. For the immersed oil cooling, it is a good way to dissipate heat because of the full immersion of the body. The oil flows to take away the heat from the heatsink and achieve heat dissipation for the chip, but the oil cannot reach the chip directly. The projected area of its heatsink is only about 15%, and the flow rate is slow, so its heat dissipation efficiency is only about 20%~35%. While the liquid-cooled is different due to the perfect match between the water-cooled plate and the chip, the specific heat capacity of water is better than oil and the density is 10,000 times more than air, making the rapid flow of water can take away 99% of the thermal energy.

Taking actual data of running Antminer 19 series as an example, at the same frequency, the average chip temperature is 70-75 degrees of air-cooling, 65-70 degrees of oil-cooling while only around 60 degrees of liquid-cooled. Therefore it is obvious that the heat dissipation of liquid-cooled is way better than air-cooling and oil cooling, which makes the future an era of large power supply, and large computing power. From the technical point of view, because of the heat dissipation of liquid-cooled, 6000, 10000, and 15000W power supply is possible. For TSMC's 5nm or 3nm chips, under the premise of an adequate number of chips, solve the problem of power consumption and chip temperature. In 2023, the emergence of 300-400T miners is also very possible. In addition, the power consumption ratio may also decrease to 20.5% or lower.

**The soaring rise of hashrate has not come:**Is the online overall hashrate we saw real? No, not exactly. The key point of hashrate is energy. How many miners are on their way to global migration or have already reached their destination, waiting for the accomplishment of infrastructure. The real hashrate may probably break through 300E with the help of energy protection. In this case, can we say the revenue goes down 40% if the hashrate increases by 40%? Probably not, because the base electricity price remains the same. So for miners, how much revenue decline will occur?

Let’s takeS19as an example, according to the base electricity price of 7.5 cents (0.5 RMB), the electricity bill share is 51.9%, with a daily gain of 75.16. But if the hashrate rises 40% to 300E, will the revenue go to 45(75.16*0.6)? It is not. At this time, electricity costs will account for 81% of net income of $6.1, a 78% drop in revenue. Of course, the logic of the measurement lies in the currency price remaining unchanged. And we know in this industry, we can’t predict the short-term, and no need to predict the long-term.

Let’s see the performance of water-cooled XP. When the hashrate reaches 300E and the S19 electricity share is 86%, the XP liquid-cooled electricity share is 53% and the gain is 57.4 per day. The single T gain is nearly 3 times higher than S19 and the overall gain is 9.5 times higher. Of course, if this is the number and the coin price remains the same, XP liquid-cooled payback time is about 6 years. OMG!

Therefore, we must believe that the future does not need to be predicted. Otherwise, why do we still mine?

Of course, some people will say that the above calculation is not rigorous. When the hashrate rose 40%, the priority shutdown are low-hashrate machines. If they are shut down, the hashrate will accordingly drop. This is true, but we must not underestimate the manufacturers' ability to produce, and the number of high-hashrate machines already stored in the warehouse. According to the ability of several major manufacturers to sell futures, we can only say that it is exaggeratedly unbelievable.

3. ‘Crisis’of Revolutionary

Crisis of Revolutionary

Risk:
Shortly, the cheap miners you buy may become scrap metal. It is just like buying CPU and GPU miners in the ASIC era. The change in the technology upgrade is revolutionary. In a sense, in the bear market of air-cooled ASIC, buying miners at the bottom is actually a good investment. Picking up low-hashrate miners during the storm of liquid-cooled technology is nothing but only committing to the beliefs.

Risk:
The price of electricity determines the value of the mining farm. No matter how close a relationship you have with energy sites, the majority of profits will go away without competitive prices. Industrial electricity, high electricity price countries, high energy tax countries, etc. have nothing to do with resources, but with the viability of the business.

Opportunity:
The upcoming liquid-cooled era and the improvement of the industry infrastructure make us believe in the power of the leading force. The arrival of the "cloud storage", is the result of education by the giant. Today "cloud storage" is everywhere. Bitmain, accounting for 80% of the industry, has targeted 80% of all the products to be liquid-cooled in the 2023 annual plan. It will certainly lead the industry from the air-cooled infrastructure to the gradual change of water-cooled infrastructure.

Opportunity:
Traditional TSMC 5nm miners, such as the S19 series, are highly likely to be upgraded and their performance can be greatly improved. The sooner they enter the liquid-cooled era, the more industry dividends they will get. We don’t need temporary winning. Whoever survives in this battle will be the winner.

4. Why TSMC chips have good performance improvement?

Why do TSMC chips have good performance improvement?

Here, let’s analyze the competing logic between those big manufacturers. Any general leader, if they are not fully committed to the market and their followers and do not pay 100% or 120% effort, their chances of surviving in this industry will almost become zero. Only second-rate players will directly go all out in the face of a master just like martial arts combat.

While in the mining world, the chip manufacturer is the most powerful one. Bitmain’s purpose is to make sure a long-term supply plan of chips so that its business logic is all about how to use more TSMC chips instead of maximizing its technology. If they turn their focus to chip technology, the large number of miners that they need to produce will become a big challenge. So in a word, as for Bitmain, everything is all about the large quantities of chips rather than maximizing the performance of TSMC chips to the extreme.

In this case, the stock market has better chances now. Have you ever thought about transforming a 5nm chip with a liquid cooling system? It is not a golden opportunity that manufacturers left you, but the supply chain of chips.

Therefore with enough improvement space for hardware, the right upgrade method of software, and adequate infrastructure support, air-cooling ASICs will have an access to upgrade into the brand-new liquid-cooled with lower cost.

5. Intel VS big manufacturers, a generation difference in products

Intel VS big manufacturers, a generation difference of products

We are not talking about technology, but concepts, acknowledgment, and understanding. There is no doubt that Intel can definitely get the world’s best chips and supply system. But acknowledging is a magic thing. When Intel decides to only provide three mining listed companies in North America with prototype production, the arrogance will leave them at least a generation difference in products. Is Facebook’s technical ability worse than TikTok's? No, it’s not. But it is the inadequate acknowledgment of short videos that makes them miss a whole generation. Today Intel is highly likely to lose in this liquid-cooled war if they are putting such great effort into air-cooling.

Mining products are not consumer ones. The competitiveness doesn’t depend on the scale of the company. They are investment products that pursue the best power consumption ratio, the best revenue ratio, and the best use of time. ‘Where you start decides where you end.’ but if you run 10,000 meters to the left, and suddenly you just found that the race is supposed to be to the right.

It’s OK. The night is long and we are always waiting for you.

6. Is liquid-cooled the ultimate form of hashrate product?

Is liquid-cooled the ultimate form of hashrate product?

In the short-term known technology (not to mention quantum computing) and from the history of mining development, people hesitated between air, oil, and liquid cool. The core limitation of single miner hashrate is ultimately about dissipation and temperature. From the perspective of cost, pollution, and convenience, water can be recycled and non-polluting compared to the annoying noise brought by the wind. It is hard to find another alternative cooling medium.

7. What are the differences between the future liquid-cooled market and today’s market?

What are the differences between the future liquid-cooled market and today’s market?

The infrastructure cost will increase; however, compared with investing in mining products the combined cost is less than 5% of the hashrate cost. For an investment of 95% to buy hashrate.

The number of machines will be reduced; the number of machines in water-cooled sites will be, on average, at least 40% less than those in air-cooled sites, and up to 50% less. That is, where a 10 MW site used to require about 3,000 machines, today only 1,850 machines, or 1,500 machines. The requirements for land and environment have become lower.

**Reduce the generation of electronic waste:**because of the reduction of machine space, with the same 10 MW, the deployment of machines becomes less, which is equal to the possibility of reducing the generation of electronic waste, in addition to reducing the land area then the cost of land. Machine chip heat dissipation is enhanced and hashrate is increased, which is to enhance its service life.

Basic service providers appear: with the gradual upgrading of the industry, the competitiveness of air-cooled sites will become increasingly weak, and will be replaced by water-cooled sites. More and more new sites will consider a hybrid site solution (air-cooled + water-cooled), or water-cooled only (Bing as representing). In the water-cooled infrastructure (water-cooled mining container) branded, standardized, globalized water-cooled infrastructure service providers will appear. Branded liquid-cooled infrastructure service providers aim not only to the product, and the manufacturer services but also serve the whole industry, multi-brand, covering a variety of models.

**Trade flow is still strong:**liquid-cooled products are not only in the world of institutions and large scale clients, there will be miniaturized liquid-cooled equipment suppliers, providing infrastructure to more small-scale new entrants, lowering the current industry threshold of tens of millions to million. The mining machine market will continue to thrive.

**Technical service providers appear:**Some miners owning the S19 series and TSMC 5-nanometer chip machines will upgrade their stocks and catch the bonus first. In the case where the stock of upgradable machines exceeds one million units, there will be specialized upgrading service providers. The upgrade from air cooling to liquid-cooled will become a standardized product entering the market, and one or more large-scale liquid-cooled technology upgrade companies will emerge in stages.

**Super-hash rate products:**Due to the introduction of air plugs and liquid-cooled, liquid-cooled power supplies will appear with products of more than 10,000W. With super power supplies, there will be mining machines with ultra-large computing power exceeding 400T.

The market really can't be analyzed, inside the bear market, the analysis is pessimistic. Why do we still say liquid-cooled is the third hashrate revolution, in the mining industry if you can call it a strategic opportunity, there are two main ones.

1. In the bear market, firm belief in the coin, or the valley bottom held a low-cost machine. Most of the profiteers in the current round of the bull market, are resistant to the cold winter of 312, the sting of 519, somehow embraced the era of institutional entry, and witnessed the ascension of $60,000 bitcoin.
2. Breaking ground in a technological revolution situation. The head mining machine manufacturers that are still active today, all made their debut in the air-cooled ASIC era. The big miners and institutional miners with "money" capabilities also broke ground in this era. These pioneers, because of the fear of technology and faith, deserve to be the shareholder of the dividends of the times.

What about the future?

What kind of story will happen in the upcoming water-cooled era of big hashrate, and will more sovereign nations embrace Bitcoin? Will it fall from grace amidst traditional skepticism, or will it reach new heights in consensus and faith? Will great companies still be born in the liquid-cooled era? Will there be other disruptive technologies other than water cooling?

The blockchain industry, at any time, is staging miracles and has infinite possibilities. Whether individually or collectively, you are in it, you are a force to change the times, and it is the unknown situations of the future that will make us look forward to it together.

Here, in addition to technology and outlook, for all miners, there is a small story that is encouraging.

Two friends were walking in a forest, both without shoes. But one of them kept his shoes around his neck, suddenly they met a bear. One could not run fast as he had no shoes, and the other immediately put his shoes back on. Then when the bear came up to gnaw on his partner, he ran away. The moral of the story is; that bears in the forest, we will certainly encounter, but shoes are not to let you run faster than the bear, it is to make you run a little faster than your friend. As long as you can run faster than your friend, you can survive and finally see the sea through the forest.

The air-cooling revolution is just like the shoes around our neck. Are you ready to start your journey with shoes around your neck?

See more information about the miner at Meta-Luban.