Bitcoin miners “go offshore to make a living”

Bitcoin mining, the “electricity-swallowing beast,” may gradually go Chinese as domestic regulations tighten and miners go overseas.

Bitcoin miners "go offshore to make a living"

Anna Qiao

Since the State Council’s Financial Stability Development Committee meeting called for a “crackdown on bitcoin mining and trading”, miners have been panicking about where to go.

According to Xinhua News Agency, to crack down on virtual currency mining, it is not only necessary for local governments to take the initiative to issue documents to stop mining practices and cut off the incremental volume; it is also necessary to launch comprehensive measures including electricity prices, land, taxation, environmental protection and other aspects to promote the orderly withdrawal of the stockpile of enterprises.

According to data from the University of Cambridge’s Centre for Alternative Finance, as of May 17, 2021, the annual electricity consumption of global bitcoin “mining” is approximately 134.89 TWh (1 TWh is 1 billion kWh). If we consider bitcoin mining as a “country”, it ranks 27th in the global ranking of countries in terms of electricity consumption, which is already more than Sweden’s electricity consumption.

From this point of view, bitcoin mining has become a “power-hungry beast,” which seems to be a burden on the power system.

An unnamed industry insider said that China’s bitcoin “mining” computing power accounts for about 70% of the world, mostly in Xinjiang, Inner Mongolia and Sichuan’s thermal power, hydropower resources and preferential electricity prices in the region, has become a global concentration of bitcoin mining.

And the State Council Financial Stability Development Committee meeting as an important regulatory signal, more than ten days, the nerves of the mining circle has been tense. On the one hand, many mining companies have divested themselves of domestic-related businesses and rumored to be planning to go overseas, while on the other hand, they are hoping that the regulation will not be “across the board” and that the industry will “land smoothly”.

Bitcoin mining business is difficult

In recent years, the demand for electricity for bitcoin mining has surged, causing a shortage of electricity in local areas. In order to save money on electricity, “miners” are migrating like “migratory birds” to chase cheap power resources, making a scene in the mining world.

In fact, this is determined by the PoW mechanism. Because of this, bitcoin mining has been a prisoner’s dilemma from the beginning to the end.

Specifically, according to Bitcoin’s algorithm, its system automatically adjusts the difficulty so that the rate of block production is stable at around 10 minutes, with all miners around the world competing to keep score, and the rewards in bitcoins for new blocks are awarded to the nodes that successfully keep score.

In order to be fair, the pool model distributes the bitcoin rewards after successful bookkeeping according to the percentage of computing power of the miners connected to the pool. Thus, the higher the computing power of the mining machine that is connected to the pool, the more bitcoin rewards it will receive. Over time, the higher the computing power invested in mining, the more bitcoin rewards you get. This has created a “prisoner’s dilemma”, making the network’s arithmetic power higher and higher, and power consumption growing, which has also become a source of external criticism.

In 2017, bitcoin miners have been suffering from a lot of hardships, including power supply, regulatory policies and the crypto market.

For example, Ganzi, Sichuan province, is known as the “mining capital of the world” due to its rich hydropower resources in the mining community. However, at the end of 2019, Ganzi issued a notice “Ganzi actively do a good job to meet the peak of the winter to ensure power”, to regulate the supply of electricity during the dry period. At the same time, due to the abundance of power resources during the water-abundant period in the area, miners actively participate in the local “consumption demonstration area”, which digests surplus hydropower and even abandoned power.

In contrast, Inner Mongolia has continued high-pressure regulation of bitcoin mining. As early as 2018, Inner Mongolia carried out a comprehensive cleanup of bitcoin mining sites. Last month, the official public number of the Inner Mongolia Development and Reform Commission issued a notice on the acceptance of reports on virtual currency ‘mining’ enterprises and on the “Inner Mongolia Autonomous Region Development and Reform Commission on resolutely combating and punishing virtual currency The announcement of “Eight Measures on Resolutely Combating and Punishing Virtual Currency “Mining” (Draft for Comments)” was published for public comments. According to the announcement, in order to thoroughly implement the “Inner Mongolia Autonomous Region on ensuring the completion of the “14th Five-Year” energy consumption double control target tasks of a number of measures to ensure the deployment requirements, comprehensive cleanup and shutdown of virtual currency “mining” project, give full play to the role of public supervision and protection, improve Virtual currency “mining” enterprise problem reporting channels, the autonomous region energy consumption double control emergency command office set up virtual currency “mining” enterprise reporting platform, comprehensive acceptance of virtual currency “mining The report on the problem of virtual currency “mining” enterprises. This can be seen from the spot.

However, bitcoin mining has also had a positive effect on the local economy. Jiang Zhuoer, the founder of Lepit Mining Pool, said on his Weibo page that many mining regions, such as the northwest and southwest, have very serious local debts and abandoned electricity, and that bitcoin mining is a big help to the finances, employment, and income of residents in poor areas, and also helps new energy facilities to gain revenue and further expand their scale.

Water, Fire and Power in “Fire and Ice”

Recently, Xinhua News Agency focused on the cryptocurrency circle and issued several articles in a row. In the article, Xinhua suggested that to combat virtual currency mining, not only does the local government need to take the initiative to issue a document to stop the mining behavior and cut off the incremental amount; it also needs to launch comprehensive measures including electricity tariff, land, taxation, environmental protection and other aspects to promote the orderly withdrawal of the stock of enterprises. And that we can not let the high energy consumption “mine” squeeze precious resources.

Its meaning, is to use the power resources in the promotion of economic development “blade” on. In this regard, experts suggest that areas with abundant power resources can establish market access, Internet companies with large electricity monitoring, Internet abnormal traffic monitoring and other multi-dimensional regular monitoring system to strengthen the source control.

In the regulatory “strict” head, the National Energy Administration Sichuan Regulatory Office issued a notice on the convening of a research forum on virtual currency mining. The notice said, according to the National Energy Administration requirements, in order to fully understand the situation related to virtual currency mining in Sichuan, I decided to organize a research forum, will be held in the morning of June 2, 2021.

Industry analysts said the meeting became particularly important at a time when the “sword of Damocles” was hanging high, attracting the attention of the entire industry.

According to Golden Finance, it interviewed a senior Sichuan miner about the Sichuan symposium. The miner revealed that, in general, no news is good news at the moment. Today Sichuan is mainly discussing the severity of power station abandonment and losses, in addition to the Xinhua News Agency article “orderly withdrawal” also gives a lot of room for imagination. At present, at least based on the actual situation in Sichuan, the abundant water period is certainly able to transition over, of course, there will be the need to increase the cost of electricity, so the current for whether you can continue mining and mining machine safety is still determined.

From this point of view, although temporarily to avoid the “one-size-fits-all” type of strict governance, but the alarm is not lifted. Many industry insiders believe that the mine with thermal power is in danger, while the mine with rich hydropower during the water period is likely to survive. Because, on the one hand, China’s implementation of the “one vote veto” system of environmental protection; on the other hand, China to achieve the peak of carbon, carbon neutral task is still very difficult.

On December 21, 2020, the State Council released a white paper entitled “China’s Energy Development in a New Era”, which clearly depicts China’s “roadmap” to achieve carbon neutrality by 2060. The roadmap is divided into “three steps”, i.e., from 2021 to 2030 to achieve peak carbon emissions, from 2031 to 2045 to rapidly reduce carbon emissions, and from 2046 to 2060 to deeply decarbonize and thus achieve carbon neutrality.

Xinhua News Agency reported that currently, many developed countries have achieved carbon emissions and economic growth “decoupling”, but China is still in the stage of increasing carbon emissions, and has not yet reached the peak. Compared with many developed countries, China’s time from carbon peak to carbon neutral will be shortened by decades.

“From the perspective of the big power supply pattern, thermal power is bound to gradually withdraw from the historical stage.” The analysts believe that thermal power mining in Inner Mongolia and Xinjiang is likely to be completely retired.

Miners “go to sea to make a living”

The regulatory hand to crack down on bitcoin mining under the heavy hand, currently a number of domestic mining out of the sea plans. Industry insiders have commented that following the de-Chineseization of Bitcoin pricing, the de-Chineseization of mining bookkeeping will make Bitcoin mining more decentralized in the future.

According to Xinhua, a “cryptocurrency” source told reporters that a number of “miners” have recently considered shutting down their “mining farms” or moving overseas. They are ready to cross the ocean and move their “mining farms” to Russia, Finland, Canada and other countries that allow it and have excess power.

Edward Everson from SlushPool Mining Pool says he has recently been contacted by 300-400MW of bitcoin miners looking to place machines in certain areas of North America and the EU, and some are ready to ship machines to Kazakhstan. Machines from Xinjiang are being moved to nearby areas in Central Asia. New machines sent from Bitmain and MicroBT are shipped to North America. Machines going to North America typically seek traditional data centers at cheap “all-inclusive” hosting rates, as is the practice in China.

According to Edward Everson, China’s computing power is not declining, but rather moving. Bitcoin arithmetic is becoming more widely distributed globally, reducing the attack vector and alleviating concerns about coal energy use in Xinjiang.

“After this wave of regulation, the determination has been made to move the miners to a European country.” A miner who did not want to be named told Nuclear Finance APP that, on the one hand, there is an abundant supply of water and electricity there, making it possible to reduce the cost of mining; on the other hand, the region has a cold climate all year round, and miners can naturally cool down most of the time, which not only reduces operation and maintenance costs but also helps to extend the life of the equipment.

In addition, a foreign mining machine hosting service provider said that due to the Chinese mining machine to the sea, the company’s mining machine hosting business has recently been extremely hot, idle capacity has been sold out, and is now actively increasing the scale of capacity to respond to customer demand.

Meanwhile, the Mining Circle’s “Asia Blockchain Mining Roundtable” will be held in the near future, calling on the industry to cooperate globally to support and promote renewable energy mining. For the first time, several industry insiders will attend the conference to discuss how to better regulate bitcoin mining and support and practice “green mining”.

Recently, Jack Dorsey, founder of Twitter and Square, said at the Bitcoin 2021 conference in Miami that miners must be profitable and that access to cheap renewable energy can maximize their profits.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2021-06-06 22:26
Next 2021-06-06 22:55

Related articles