ASICs and entrepreneurs: The founding of China’s first mining pool

    09 December 2020. Written by Ashton Playsted

    This is the second article in our “f2pool and the rise of crypto mining” series. In this edition, we trace the early history of f2pool and its two co-founders, Chun Wang and Discus Fish.

    f2pool—the first mining pool in China—was born in 2013 in response to the introduction of ASICs (application-specific integrated circuits), specialized chips designed specifically for Bitcoin mining. When used in dedicated mining machines, these chips were many times more efficient at tackling the “math problems” Bitcoin miners solve to earn newly minted bitcoin than GPUs, the standard up to that point.

    The mining community had mixed reactions to the introduction of ASICs. Because they were so new, some people didn’t believe they would actually replace GPUs, at least not any time soon. Many early pools, not anticipating major adoption, didn’t upgrade their tech stack to support ASICs right away and couldn’t handle the dramatic hashrate increase when they took over.

    Some critics thought the higher barrier of entry brought on by these specialized and expensive devices and the limited number of manufacturers producing them, combined with their orders of magnitude higher processing power, would hurt the decentralization of the network. Supporters pointed out the positive effect of ASICs on network security that would be made possible by a huge increase in hashrate and predicted their coming dominance in the mining world.

    Because ASICs were so much more effective than GPUs, many existing mining operations were rendered obsolete almost overnight. With the rise of these new machines, mining difficulty—a measure of the amount of computation required to mine a block—skyrocketed. This made it a lot more difficult for smaller-scale miners to compete. Pooling resources was a way to help these miners continue to earn revenue.

    For pooled mining to take hold in China, miners needed a reliable, low-latency internet connection and a solution for dealing with the Great Firewall. Many Chinese miners were already connecting to foreign pools, but there was a gap in the domestic market waiting to be filled.

    Having experienced the trials and tribulations of small-scale Bitcoin mining firsthand, f2pool co-founders Chun Wang and Discus Fish knew what miners wanted. For example, in addition to providing a solution for smaller scale miners to pool their resources, f2pool also improved on payout schemes as the first mining pool to use an automatic payout system to give miners better cash flow and limit their exposure to unpredictable risks like hacks.

    “We took on mining as a career. We had a very clear understanding of what miners needed the most.”

    Discus Fish, Co-Founder at f2pool

    The life of an early crypto entrepreneur

    Betting on the coming dominance of ASICs in the mining world, Chun and Discus Fish went to Wenzhou, a city in southern China famous for international trade, to get to work.

    “For the first two months, we were completely immersed in building out the pool, often pulling all-nighters. I can still remember the taste of the Shou Zhua Bing [Chinese pancake] Discus Fish bought for me in Wenzhou during that time.”

    Chun Wang, Co-Founder at f2pool

    As soon as it launched in April 2013, f2pool was welcomed by the mining community and experienced rapid growth. By 2014, the hashrate connecting to f2pool accounted for one third of the hashrate on the entire Bitcoin network, making it the biggest Bitcoin mining pool in the world.

    With f2pool up and running, they left Wenzhou two months after they arrived to pursue other entrepreneurial endeavors. Chun went to Beijing, and Discus Fish went to Lin’an to found Yibite—a very early crypto portal founded by early evangelists—and Yinyu (“Silver Fish” in English), a Litecoin mining hardware manufacturer. At the same time, they continued running f2pool, with Chun in charge of development and management while Discus Fish handled marketing and accounts.

    In 2015, Yinyu closed its doors in the midst of the 2015 crypto bear market. Discus Fish hadn’t anticipated such a drastic price drop, and the company wasn’t prepared for it. While this was a big blow to Discus Fish at the time, he later said it was a valuable lesson that helped him make better decisions down the line.

    With the closing of Yinyu, Discus Fish reunited with Chun in Beijing. For convenience, they rented a business office and a residential apartment in the same building. f2pool was thriving. But by the end of 2016, Chun had moved to Thailand, and the two co-founders were still the whole team. Something had to change.

    “It was a hard time for us when there were only two people on the entire team. I worked almost 24/7, but as the business grew, it became really hard for us to handle everything. So we had to build a team to operate the pool. The hardest time I remember was when I coded the Zcash mining pool at home in Thailand. Discus Fish called me every other day or so to check on the progress.”

    Chun Wang, Co-Founder at f2pool

    The team gradually expanded as the pool supported more and more new coins, eventually becoming the full dedicated team it is today. f2pool now supports mining for more than 40 Proof of Work cryptocurrencies.

    Beyond Bitcoin: The long-term perspective

    Few early miners held onto their coins for very long. They had expenses like electricity and hardware upgrades to cover, so they tended to sell for fiat frequently. But Chun and Discus Fish were in it for the long haul, and crypto mining was more than just a “money printer” for them. They believed in the technology and were open to investigating and supporting new projects in a time when “altcoins” were often viewed in a negative light. This gave them the patience to stick with the industry through its dramatic ups and downs.

    Of course, they made mistakes too.

    “We also suffered losses, which was probably one of the main drivers in helping us get better at finding good opportunities,” Discus Fish said. In an early interview in traditional media, Discus Fish explained how he once sold 100,000 ETH at a price of less than $3. Today, with the ETH price hovering near $600, that much ETH would be worth $60 million. The biggest lesson he learned from experiences like this, he says, was to take a long-term perspective and have an open mind when it comes to evaluating new crypto projects.

    These lessons would serve them well when f2pool became an early supporter of Ethereum mining in 2016, when the buzz around the network was just emerging. When Ethereum first came to China, only a few exchanges, such as Poloniex and Yunbi, supported it. In a matter of months, f2pool accounted for 25% of the network’s hashrate.

    Over its seven years of existence, f2pool has mined about 9% of all the Bitcoin blocks ever produced. Today, its share of network hashrate is about 23%, making its Bitcoin pool the biggest in the world.

    In the third and final part of this series, we’ll cover the new generation of cryptocurrency mining and f2pool’s role in its innovation and development.

    Written by Ashton Playsted

    Ashton Playsted


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