Interview with Longwin Crypto，River Wang
Introduction: This is a Newsletter about Global Crypto Mining. Our vision starts from China and goes global. Not only Bitcoin, but also include all miners,machines and companies connected to cryptocurrency. ( Colin Wu )
We are a professional investment management organization and have been paying attention to the field of digital assets. However, due to some investment experience in the field of domestic Internet finance, I feel that no matter mining or digital asset investment, as a business, it lacks the support of relevant laws and regulations in China, so we have not participated.
In April and May last year, the local government of Sichuan began to build a consumption park. As a businessman's intuition, we felt that this industry had obtained some tacit approval and endorsement at the government level, so we considered entering this industry. We spent six months inspecting Yunnan, Sichuan and Xinjiang, and then we took action. The first batch of machines were bought in December last year. On the day of placing the order, the currency price exceeded $18000, and then it rose to more than $60000. As the currency price has been rising, there is no ideal correction in the middle. Based on careful consideration, we added two positions in the middle, invested tens of millions in total, and then came '519' (State Council of the PRC asked to crack down on bitcoin mining).
Like everyone else, we still hope that the policy can be deregulated and give miners a buffer period, but we all know the final result was not ideal.
As an investment, legal compliance is the premise. Whether it is to protect the existing investment or continue the follow-up, we think we should go out. To be honest, we are no strangers to foreign investment. We went to the United States to invest in real estate in 2014. Up to now, we have invested in more than a dozen projects, with a total of more than 5000 long-term rental apartments. Moreover, we are still familiar with overseas laws and regulations. I remember several hot spots at that time, one is central Asia, Kazakhstan, one is Russia, and the other is North America. South America is not considered by most people.
However, even if we can go to Central Asia and Russia, we don't really want to go, because it is similar to China. The central government is relatively strong. In addition, most of them use thermal power instead of clean energy. If it is an investment with a span of 3-5 years, it is basically not considered by us. In the United States, we have invested in real estate for 8 years and experienced three presidents without any policy problems. Recently, we also sold two projects to institutional investors. So we prefer North America.
However, after I asked around North America, many people still had no place after signing the NDA with us. Because of this domestic policy adjustment, the world is in a hurry. Because of this domestic policy adjustment, the whole world is in a hurry. The construction cycle of mines in North America, especially in the United States, is relatively long. Many power plants have electricity, but there are no plants. It takes a long time to find a location. In addition, there are many technical problems. The first is the entry of second-hand machines. The second is that the cryptocurrency we dig is also subject to tax. Based on our experience in investing in real estate, the profits will be greatly reduced if we don't design well.
When we were still doing preliminary work in North America, a friend from South America came up and asked us if we were interested in putting some machines to South America. As a result, we began to conduct due diligence on some partners in South America. We have selected three potential partners in South America: the first is a well-known person in the field of cryptocurrency in Paraguay, who digs mines, exchanges and OTC. Due diligence results show that they are more inclined to trade rather than mining, but also let us know more about Paraguay. The second subject of due diligence is Argentina, which was engaged in trade and invested in mining at the same time. According to my understanding, the foundation of mining people in Argentina is very good. Because of government subsidies, their electricity bills are very cheap, about less than 20 cents. Therefore, there are a lot of mining people in their families. They put a few mining machines at home and earn thousands of yuan a month, which is a bit like Chinese individual farmers raising pigs in the past. However, Argentina strictly controls the import of equipment based on the protection of domestic manufacturing industry. In addition, inflation is very strong. The third is a private miner, who started mining in 2017 and mined in the border areas of Paraguay, Brazil and Argentina, which is somewhat similar to the old miners in China. Based on several indicators, we evaluated the situation of our partners and started our mining machine launch plan in South America in batches and times according to the maturity of cooperation conditions. Finally, we determined to start the third firstly and the second one continued to investigate.
After the partner is selected, the next step is to consider machine transporting. Our machines are in Xinjiang. In order to save time, we consider flying the first batch of machines first. As most of the sea logistics are in Guangdong, we decided to transport it from Xinjiang to Shenzhen first, and then fly it from Shenzhen to South America.
The next consideration is tariffs. Different countries have different import management systems, so where to enter customs still has a great impact on taxes. For the first batch of machines, we chose Paraguay between Brazil and Argentina as the destination. If we declare according to 1000 US dollars per machine (M31S), the freight and tariff of a machine are about 3500 to 3700 yuan. If there are new machines, it is estimated that more tariffs will be needed.
The first batch of machines are pathfinding, with a total of more than 100 sets, including 30-40% by air and 60-70% by sea. We hope to make both roads accessible. The air transport will take about 10 days, so the air transport machine has been running on July 28. The shipping needs to wait for the shipping date, which takes about 40 days in total. However, the cost of sea transportation is about 10%-15% of that of air transportation. If the volume is large, sea transportation is recommended.
The local mines in South America are relatively small as a whole, which can not be compared with those in China. Most of them are hundreds of machines, and the larger mines have only a few thousand machines. The electricity charge is based on the cost price, about 25 cents to 30 cents, but a certain proportion of the excavated currency is charged as the custody service fee. According to the current currency price, the electricity charge plus custody fee is about 60 cents. In addition, due to the small overall scale, most mining machinery manufacturers do not have a local maintenance center, so machine maintenance is also a problem. The power fan can be provided by itself. If the core components are broken, they can only be sent back to China. It is estimated that it will take 1-2 months to repair them. In contrast, the overall industrial chain of Central Asia, Russia and North America will be better.
Due to the low electricity cost and the friendliness to Cryptocurrency, many North American mining industries have gradually built large mines in South America. For example, Bitfarms built a mine on the polar island near Antarctica in Argentina. The local temperature is cold and the land is vast. The use of natural gas may be a direction in the future.
From the ‘519’ policy adjustment to the launch of the machine in South America on July 28, it took more than two months. However, it only took more than one month to really operate the project in South American. In retrospect, within the company, we still defined this project as a business venture. On the one hand, we have never been to South America and are not familiar with the local business environment. On the other hand, all partners, including domestic and overseas, have not met face-to-face, so we have also prepared for the worst. At present, the project is progressing fairly smoothly. If it can succeed in the end, I think one reason is that there is the cooperation of global Chinese, including domestic and overseas, including new overseas immigrants and the second generation of immigrants. The common cultural gene can greatly reduce the communication cost. In addition, we must mention the global bitcoin consensus. In cross-cultural communication, whether speaking Chinese or Spanish, it can be very easy to cooperate and have an unspeakable sense of intimacy. Perhaps this is the power of consensus.
Looking back on the investment in mining this year, I still feel a little dreamy. Unconsciously, we went from the northern hemisphere to the southern hemisphere. The adjustment of national policies cannot be controlled by individuals and enterprises, but there are still many things to follow. I think we should pay enough attention to it in future investment .In particular, it is worth mentioning the concept of being friendly to society and environment included in ESG.
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