Escape of Chinese Bitcoin Minor

Jun 17, 2021 0 comments

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China has long lived in more than half of the world’s Bitcoin miners, but now Beijing wants to get rid of them as soon as possible.

In May, the government demanded strict crackdowns on Bitcoin mining and trading, launching what the cryptocurrency world calls the “great mining transition.” This escape is currently underway and could become a Texas game changer.

Mining is an energy-intensive process that creates new coins and keeps a log of all transactions on existing digital tokens.

Despite the shortage of reserves that caused power outages for several days last winter, Texas often has some of the lowest energy prices in the world, and its share of renewable energy is increasing over time. As of 2019, 20% of that electricity comes from wind power. The deregulated power grid allows customers to choose from power providers. And decisively, its political leader is very unencrypted. A dream condition for miners looking for a kind welcome and cheap energy sources.

“We’ll see dramatic changes in the coming months,” said Brandon Arvanaghi, a former security engineer at the crypto exchange Gemini. “Governor like Greg Abbott of Texas is driving the mining industry. It will be a real industry in the United States and will be incredible.”

Chinese mining domination

2021 data on the global distribution of mining power is not yet available, but past estimates indicate that: 65% to 75% of the world’s Bitcoin mining took place in China, mainly in four provinces in China: Xinjiang Uygur Autonomous Region, Inner Mongolia Autonomous Region, Sichuan Province and Yunnan Province. Hydropower in Sichuan and Yunnan has made them a mecca for renewable energy, and the Xinjiang Uighur and Inner Mongolia Autonomous Regions are home to many coal power plants in China.

In Inner Mongolia, the drawdown of miners has already begun. After failing to meet Beijing’s climate goals, state leaders decided to give Bitcoin miners two months’ grace and explicitly condemned the energy shortages of crypto mines.

Nic Carter, founding partner of Castle Island Ventures, said it is not entirely clear how China will handle the next step, but it is likely to be phased in. “It seems that the policy statement is moving from policy statement to actual implementation in a relatively short order,” he said.

The way to measure this outflow is to look at the hash rate, an industry term used to describe the computing power of all miners in the Bitcoin network.

“Given the drop in hash rates, installations are likely to be off nationwide,” Carter continued, thinking that perhaps 50-60% of Bitcoin’s overall hash rate would eventually leave China. ing.

China’s announcement does not stick to policy, but it does not stop miners like Alejandro From De La Torre reduces their losses and creates an exit.

De La Torre, vice president of Purin, a mining pool headquartered in Hong Kong, said: “So we are trying to diversify our global mining hash rates, which is why we move to the United States and Canada.”

One of the biggest features of Bitcoin is that it is completely location-independent. Miners only need an internet connection, unlike other industries that need to be relatively close to the end user.

“The great thing about Bitcoin, which hasn’t been appreciated by many denials, is that it’s a portable market. You can bring it directly to your energy source,” said Upstream Data, a manufacturing and supplying company. Steve Barbour, the founder of, explained. Portable mining solution for oil and gas facilities.

That said, in some cases, escapes don’t happen instantly, as it takes time for miners to move machines out of China or clear their assets and set up stores elsewhere.

Where they go

Large miners are motivated to move to the cheapest power sources in the world as they compete in low-margin industries where variable costs are usually energy only.

“All western mining hosts I know have their phones off-hook,” Carter said. “Chinese miners or miners residing in China are looking to Central Asia, Eastern Europe, the United States, and Northern Europe.”

One of the possible destinations is Kazakhstan, China’s neighbor. National coal mines provide a cheap and abundant energy supply. It also helps Kazakhstan to take a looser attitude towards architecture. This is a good sign for miners who need to build physical equipment in a short period of time.

Didar Bekbauov operates Xive, a company that provides hosting services to international miners. Xive also sells the specialized equipment needed for mining.

Bekbauov says he has stopped counting the number of Chinese miners who called him to ask about relocation options, ranging from 15 rig operations to thousands.

“One miner told CNBC that only government power plants restricted mining and private power plants would continue to serve miners,” Bekbauf told CNBC.

“But most of the electricity comes from government power plants, so miners need to move, so looking elsewhere is uncertain and desperate,” he said.

It is not yet known whether Kazakhstan is the destination or just a stopover for a longer migration to the west.

Arvanaghi is bullish in North America and expects hashrates in North America to increase in the coming months.

“Texas not only has the cheapest electricity in the United States, but also some of the cheapest electricity in the world,” he said. “It’s very easy to set up a mining company … $ 30 million, $ 40 million can be the best miner in the United States.”

According to Arvanaghi, Wyoming also tends to be a probitcoin and could be another mining destination.

However, there are some major restrictions on the United States becoming a global mining destination.

For one thing, Carter told CNBC that the lead time to build the actual physical infrastructure needed to host a miner would probably be six to nine months. “The United States is probably not as agile as any other country in supporting these stray miners,” he said.

Mobile logistics can also be difficult.There is Due to the tailwind of the Covid Pandemic, there is a shortage of shipping containers.

But perhaps the biggest issue is the reliability of the Texas power grid. The storm that devastated a large area of ​​the state in 2020 rekindled the debate over whether Texas should protect its system from the cold. This is a costly project that can affect taxes and other charges for people trying to use the state power grid. More recently, ERCOT, the organization that runs the Texas grid, has called on consumers to save energy in the heat wave that is coming with an extraordinary number of “forced outages.”

Answer musk criticism

Tesla CEO Elon Musk Defeated Bitcoin mining, Claims that it is bad for the environment. It’s not a new criticism.

For years, skeptics have abused the world’s most popular digital tokens to pollute the planet, but proponents have been the strengths of Bitcoin and its role in accelerating the rise of renewable energy. I have praised.

It’s unclear whether China’s mining spill will support or break Bitcoin enthusiasts in the debate over token carbon dioxide emissions. The main story so far has been that many of the world’s Bitcoins are being mined with Chinese goals.

“From a narrative point of view, it’s definitely an improvement,” Carter said. “But China also has the most abundant hydropower resources in the world.”

The country provides important energy vectors from wind, solar and especially hydropower in the south. For example, the grid in Xinjiang Uygur Autonomous Region is 35% powered by wind and solar energy inputs.

If all miners eventually leave China, that means less fossil fuel mining, but it also means less share of the renewable energy mining network. This is why the question of where these migrant miners end up may prove important to the future of Bitcoin. “This is Bitcoin’s biggest story of the year,” Carter said.

De La Torre states that it is trying to expand its business using green energy. This is a trend that has been around for years. He says hydropower plants are generally cheaper than fossil fuels in most parts of the world.

“Because the mining industry is price sensitive, the lowest cost electricity tends to be renewable in order to find the lowest cost electricity. If you are burning fossil fuels, the costs of extraction, refining and transportation will be high. That’s why, “explains Blockstream CEO Adam. back.

Each year, investment bank Lazard publishes a breakdown of energy costs by source. The 2020 report shows that many of the most common renewable energy sources are as cheap as or cheaper than traditional energy sources such as coal and gas. And the cost of renewable energy continues to fall.

However, there are limits to operating a crypto mine purely on renewable energy.

Solar and wind are currently the cheapest sources of energy in the world, but both sources face significant limitations, raising concerns about the feasibility of miners looking exclusively at wind or solar energy. I am.

Next 6 months

For the time being, the mining capacity of Chinese miners ready to absorb the diaspora is not very high around the world. Hashrates can go offline and stay offline while they scramble to find a new home.

In reality, that means that all the remaining miners are more profitable than a period of time.

Increased geographic decentralization equalizes the global balance of power and reduces the ability of a single sovereign state to adopt or control a network.

Also, special economic zones may emerge within the next few months.

“You’ll see the jurisdiction take a very favorable stance and create a special zone equivalent to encourage miners to host locally,” Carter said. “We’re looking here at the state level. We’re also looking at the national level. You might also see subsidized electricity for the mining industry.”

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