The world's Bitcoin mining 'site' is about to change places

   Strict regulations on energy sources may cause large mining farms in China to move to other areas.

   Patrick Li's mining farm used to operate 24 hours a day, with the fan buzzing non-stop. That was the time when Inner Mongolia, China also attracted coin ranchers with very cheap electricity thanks to coal-fired plants

   By 2020, the Chinese government suddenly reminded the Inner Mongolia region of the emission target. By March 2021, the leader of this autonomous region officially banned businesses from using too much energy, including mining camps.

   "Everything was so unexpected. We had no choice but to find a new location," Patrick Li told Sixth Tone.
The world's coin mining farm
   While Bitcoin is seen as a symbol of blockchain technology and decentralization, the reality is that the Bitcoin "mining" network, which is computers that run continuously to validate transactions, is very centralized. China is home to the largest mining farms in the world.
   According to statistics from the Center for Alternative Finance at the University of Cambridge, Bitcoin mining pools in this country accounted for 65% of the total global performance, as of the end of April. In which, Xinjiang, Sichuan and Inner Mongolia are the top ones. the region that contributes the most mining mines.
   The effect of this concentration was evident in April. A water spill caused a coal mine in Ho Do Bich district, Xinjiang to overflow on April 11.
   This coal mine had to be shut down for about a week for work safety checks, so it could not provide enough fuel for power plants in the region.
   This causes Bitcoin mining farms, which consume a lot of electricity, to stop working. At the end of the following week, April 17-18, the capacity of the global Bitcoin network suddenly plummeted by about 30%.
   In order to ensure the decentralization of the blockchain network, tens of thousands of computers around the globe will run computational programs to validate transactions. In return, the most powerful and fastest validating machines will be rewarded with a certain amount of Bitcoin.
   In 2013, Li saw an opportunity and decided to invest in a computer, for the equivalent of a month's salary of an official, to mine Bitcoin and find "financial freedom".
China is a factory for many computer equipment, and soon becomes the mining center of the world. Mining coins is not easy. Only the most powerful machines, finding the correct number the fastest, will be rewarded with Bitcoins. Fierce competition makes mining farms increasingly equipped with more powerful machines, with more numbers, and of course also consume a lot of electricity.       Therefore, ranchers are also always looking for areas with the cheapest electricity.
   "If nomads are looking for a place with water and grass for horses, then miners like us have to find the cheapest, most stable electricity," said Liu Fei, CEO of mining company Bixin Mining.In the rainy season, mining camps in areas with hydroelectricity are active. In the dry season, areas like Xinjiang or Inner Mongolia, with many coal power plants, become busier.
China is no longer a "paradise" for mining coins
   The environmental impact of Bitcoin mining is huge. In April, research published in the journal Nature Communications concluded that Bitcoin farms in China will emit 130 million tons of carbon emissions by 2024, higher than the emissions of the entire Czech Republic.
   Many measures have been put in place to reduce Bitcoin's electricity consumption. One of them is to switch the consensus mechanism from proof of work (PoW), ie using current computing power, to proof by holding coins (PoS). However, due to its decentralized nature, such a major change would be highly unlikely. Mining camp owners also don't want the miner they bought to be useless.
In addition, the value of Bitcoin partly comes from how difficult it is to mine.
   "Like gold, Bitcoin is scarce because mining is difficult and very expensive," said Liu Fei.
Areas with cheap electricity such as Xinjiang and Inner Mongolia used to welcome coin miners. They also offer many incentives for land rental, electricity prices to attract coin miners. However, the Chinese government's strict regulations on the use of fossil energy are making this place no longer a paradise for coin farms.

   "This burgeoning business sector has no overall contribution to the national economy. If it is considered as a supporting industry, the energy consumption is too great," said Guan Dabo, a professor at Thanh Hoa University. Flowers commented.
   Since April, mining farms in Beijing are required to declare their electricity consumption in order to continue operating. Along with data centers, mining machines are making it difficult for the city to control emissions and stabilize electricity during peak hours.
   Since 2013, the People's Bank of China has banned financial institutions from using and exchanging Bitcoin and other cryptocurrencies. In 2017, cryptocurrency exchanges were banned from operating in the country. Initial coin offerings (ICOs) are also prohibited.
   "What are the benefits of digital assets to the economy? We are approaching the issue very carefully," said Zhou Xiaochuan, former governor of the People's Bank of China.
   However, mining is accepted in China. Since there are no regulations prohibiting mining, large Bitcoin mining farms are flourishing in the country. Farm owners know they need to make a quick profit, because they don't know when small coal or hydroelectric power plants will close.After Inner Mongolia tightened regulations on energy, coin farmers are having to find a new land to put their plows. Sichuan and Yunnan, two provinces with many hydropower plants, are being targeted.
   “Sichuan is the province with the most agreeable policy for coin ranchers,” commented Yang Maohua, a ranch in the province.
However, the closure of many small hydroelectric plants in Sichuan has also made many coin investors hesitant to move here. Sichuan electricity prices have also increased about 16% in the past year, hurting profits.
   Given the power and policy constraints, China may no longer be the most suitable place for coin farms.
   "I think this year's rainy season will be the last chance for miners in China. Then there will be an uncertain period. If necessary, I will find a way to move the machines abroad, where there is a policy.