If you want to understand the status of mining in the blockchain industry, you must have a general understanding of the upstream, middle and downstream of the entire blockchain industry.
Upstream, such as the production of Bitcoin and other coins and mining-related companies. Among them are enterprises that design and produce mining machines, as well as the construction of mining farms and power generation equipment, and the operation of mining pools. These are all upstream enterprises of the blockchain.
Midstream, the midstream of blockchain refers to the transaction link and storage link. Many centralized and decentralized exchanges, as well as wallet development for various currencies, are midstream companies in the blockchain industry.
Downstream, various applications relying on blockchain technology, whether it is the underlying protocol, basic chain or application chain, belong to downstream enterprises.
In the upstream, midstream and downstream industries, each link has its own logic for making money, and the level of risk is naturally very different. Below we introduce the categories.
The first type of way to make money is simple investment or speculation, specifically buying blockchain assets in the secondary market. The threshold is the lowest and the entry capital requirements are very low, as long as you can use the exchange to buy coins. The risk is high, and whether the profit or loss depends heavily on personal judgment of the market.
The second type of way to make money is early risk investment in projects, which is ICO. The threshold is not high, but the risks are extremely high. Some make dozens of times or even hundreds or thousands of times, while others lose all their money. First, because the project is in its early stages and is still a long way from being successfully implemented, the risk of project success or failure is high. Second, many unscrupulous projects are simply meant to defraud money and have no intention of bringing the project to fruition.
The third way to make money is cross-market hedging and arbitrage, referred to as arbitrage. The risk is small, but the threshold is now relatively high. The income from brick moving comes from the price imbalance in multiple markets. Now manual brick moving has been gradually eliminated. Programmed brick moving transactions and increasingly professional operations have higher technical thresholds.
The fourth type of way to make money is high-frequency quantitative trading, which is a single-market arbitrage method. Similar to moving bricks, the risk is low and the technical threshold is high. You need to be very familiar with both the development and trading systems to make a profit.
The fifth way to make money is to open an exchange. The threshold mainly comes from capital and technology, as well as operations. The main risk is regulatory and policy uncertainty.
The sixth type of money-making method is over-the-counter trading. As the number of exchanges with OTC functions gradually increases, the profit margin for individuals is gradually decreasing.
The seventh category of making money is the production of hardware such as mining machines and chips. Companies that are doing well in the industry include Bitmain, Avalon, BITFURY and other companies. Professional development skills are required to engage in this industry.
The eighth way to make money is to operate a mining pool. The threshold for a mining pool is mainly technology and miners’ computing power support.
The ninth category of ways to make money is program development, such as applications, quantitative trading programs, automatic trading tools, mining machine and mining pool program development, etc.
The tenth way to make money is mining. If Bitcoin is compared to currency, mining is the process of issuing currency. It is a low-risk, medium-yield investment category. The payback period of a Bitcoin mining machine is approximately 100 to 300 days, depending on the currency price. In the next article, we will explain the relevant knowledge of mining in detail.