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Top 3 Crypto Mining Pool Founder Speaks on the ‘Wins’ of Working in Hardware

“Crypto Titans” is a series of personal interviews conducted by CoinMarketCap with prominent and forward-thinking minds tinkering on and behind the scenes of the cryptocurrency landscape. Click here to see all the Crypto Titan interviews up to today!

He may not be a common household name (yet!), but Shixing “Shenyu” Mao, one of the first crypto mining pioneers in China, is the founder of one of the current top three crypto mining pools globally, F2Pool. 

After “accidentally” discovering Bitcoin online and starting to work with Litecoin mining rigs and chips, he moved into the sphere of crypto wallets, trying to create a more user-friendly and safer alternative for inexperienced crypto users.

How did you discover Bitcoin, cryptocurrency and mining?

When I was in college, I accidentally came across news about Bitcoin when I was surfing the web. I was curious and Googled what Bitcoin was and found its white paper, and was shocked after reading it. My biggest realization was that the white paper described what could be the future of currencies. I spent the next couple of months in my dormitory on Bitcointalk, going through every thread to learn everything that a new community member will have questions about. Later, I began to buy coins and started mining.

I started trading at the beginning, but I’m more interested in hardware with my science and technology background. It was probably better for me to focus on mining using GPUs in the early days. As I started dabbling in mining, I wrote a lot of manuals and guides for the community, which helped many mining first timers in China get their feet wet as well. It was also during this time that my name was heard more in the industry in China.

As the saying goes: failure is the mother of success. Have you ever had a failure that improved your decision making?

In 2013, after being buoyed by the bull market, I founded Silverfish Mining and tried to manufacture a LTC mining rig based on a TSMC 55nm chip. We had success with the manufacturing of the chip, but due to the lack of financial and management experience, the project was ultimately a failure.

When we started Silverfish Mining back in the day, LTC was trading at $40: when we actually started making the rigs, it was trading around $20. We calculated that the break-even point sale price of LTC mined is at $3.5. There were no suitable financial hedging products at that point in time — had we hedged out risk and secured profits at the $20 price point of LTC, we would have made the business viable. During a long period of 2015, LTC was trading at $0.7, causing our operations to be unprofitable and us to be unable to generate the adequate cash flows to continue.

In a process like this, in fact, it was quite frustrating, because at that time we spent almost all of our efforts to build a chip, a leading performance machine.

In comparison with software companies, running a hardware company gives you an extraordinary sense of achievement, especially since we were working on bleeding edge chip technology for mining. 

The entire manufacturing process was really exciting when we had our wins. For example, the first chip took us 72 hours to make, the core staff barely had time to shut their eyes, we worked nonstop to debug the chip’s design. But in the end, because of the non-technical market environment, the entire project failed. This was a very painful lesson, and it made me stressed afterwards about entrepreneurship, especially in blockchain — companies need to have enough of a budget to try and iterate multiple times and pay close attention to cyclical risk.

The other experience is negative but not exactly a failure in business. In 2017, one of the Ethereum nodes that F2Pool was running had a security vulnerability — in addition to an issue on Alicloud, it resulted in 8,000 ETH being stolen, a value of nearly 100 million yuan [about $14 million] at the time. This is the main reason that I was determined to build Cobo Wallet: cryptocurrency assets had become a hugely profitable target in the eyes of hackers, and cryptocurrency theft was easily becoming a core in the black market profit model.

Another reason [for building the Cobo Wallet] is that although the cryptocurrency industry has been developing for many years, the basic application for crypto wallets is not user friendly for most people, the threshold for use is very high. Users have to protect their private keys: if the keys are lost, the coins are lost. Users are in fact really bad at protecting simple things like their passwords, much less private keys. I believe that people need a safe and useable wallet product.

How has your faith and initial belief in cryptocurrencies changed over the years?

Over the last few years, I’ve maintained my strong belief in Bitcoin. I believe in the underlying blockchain technology, I believe in logic and mathematics, and I believe that these technologies can be continuously iterated upon and gradually mold the next generation of the internet of value.

You’re encountered hundreds of battles in the mining industry since 2011, can you demystify some things about mining?

Mining is essentially akin to purchasing a medium-term call option that is physically deliverable. If we look at it from a financial markets perspective, it’s important to establish the right hedging strategy to ensure financial prudence.

Mining is one of the few parts of the [crypto] industry that’s an industrial business activity with a long supply chain, starting from chip production to manufacturing of mining rigs to mining farms where they are set up to run. Every step of the way requires optimization to reduce cost, regardless of the cost of electricity at the mining farm or the cost of manufacturing mining rigs. There’s definitely a certain delay effect, and the physical manufacturing process typically lags behind market conditions, resulting in supernormal profits during bull markets.

Do you have any suggestions for entrepreneurs entering the mining industry? What advice should they ignore?


Mining has a very long supply chain, filled with uncertainties. Whether it is the stability of the mining, or the stability of the ore machine operation and maintenance, you will not be able to predict outcomes with 100% certainty.

Secondly, the current stage of mining is a call option, there may be relatively large fluctuations in prices and premiums, and one should have a good process to deal with the risk.

What to ignore:

The legend that mining is a highly profitable industry, especially during price surges, should be ignored.

After the halving, mining will enter a period of a reduction of supernormal profits. If the static breakeven period is 3-4 months, you should be looking at the dynamic breakeven period, as this is where the risk is highest. With price fluctuations and a reduction in value of mining machines for resale, it could be hard for people to break even on their investment.

What do you think will be the impact of the Bitcoin halving on the entire Bitcoin ecosystem? Will price be affected?

Historically, Bitcoin has halved every four years, essentially coinciding with bull cycles. Basically, the historical experience is that there will be a significant rise in prices a year or so after the halving. From an economic point of view, this could happen, but it’s definitely not guaranteed.

If we analyze the trends, Bitcoin price should change from May 2020. After the Chinese Spring Festival last year, Bitcoin steadily gained in price from $6,000-7,000 to $10,000+ during the same period. There could be a retracement after this rise and it could enter a fresh bull cycle. History would definitely not simply repeat itself and these cyclical effects could occur.

Many cryptocurrencies are expected to halve in rewards this year. Everyone’s expectations are clearly high. The industry is clearly on the right path forward with each milestone accomplished collectively.

The whole industry is also being recognized and accepted by more and more mainstream institutions and the general public.

Is there any conflict between regulatory policies and freedom for cryptoassets?

I think that regulatory policy and cryptoasset freedom are not in conflict, especially for a new industry such as cryptocurrency. It needs to be regulated more in order to ensure that the industry is moving in a healthy direction and everyone’s assets are better protected.

Only with proper regulation can the cryptocurrency industry become more and more accepted by mainstream institutions and the general public.

What is your vision for the cryptocurrency industry? Is there anything we can’t imagine?

In 2012, we often engaged in intensive discussion of the future and developmental direction of blockchain. At that time, in fact, we basically vaguely foresaw the next five years, ten years, of developmental direction, but the actual development of blockchain speed’s was a lot faster than we expected at the time. It definitely far exceeded our expectation of what’s possible.

Blockchain as a technology architecture enables transfer of value easily over the internet. The future will not simply be the transfer of value, but other interesting use cases. It’s possible to get meaningful information transferred through permissioned controls and to communicate much lower level information. As we exponentially increase the amount of lower level information transmitted, it will create a meaningful amount of network effects.

Then, we can build a very strong foundation for the next generation of things — we predict that [in the future], five years or ten years after the birth of a child, he could have a blockchain identity with his economic activities, his social activities — including his education, medical records — could be collected and verified on the blockchain.

This will improve the efficiency of socio-economic operations in general. For example, we could calculate the magnitude of any commodity’s demand, and produce it on demand. The privacy of cases used in medical research on different diseases can be guaranteed, with the data shared only to authorized people, for the benefit of mankind. On this basis, we could quickly get massive data samples without the fear of infringing on privacy.

This is just one example, and I estimate that in another ten years, we may be able to utilize blockchain in every aspect of our lives.

This is a very exciting and attractive vision.

This interview has been edited and condensed.

Enjoyed reading our Crypto Titan series? Catch our last interview with Hunter Horsley, CEO of Bitwise Asset Management! Or check out the full list here.

Molly Jane is a content manager at CoinMarketCap. Previously the head of news at Cointelegraph, she has also contributed to Decrypt and Modern Consensus. You can find her on Twitter at @MollyJZuckerman.

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