China is kicking out more than half the world’s bitcoin miners – and a whole lot of them could be headed to Texas
China has long been home to more than half of bitcoin miners, but now, Beijing wants them out with ASAP.
In May, the government called for a crackdown on mining and trade, eliminating so-called crypto circles as a "massive mining migration." This move is ongoing now, and could be a game changer in Texas.
Mining is a very powerful process that creates both new coins and keeps a log of all existing digital token transactions.
Despite the stockpile that caused the long-term extinction last winter, Texas tends to have the lowest prices in the world, and its share of renewable resources is growing over time, with 20% of its energy coming from the air since 2019. an energy grid that allows customers to choose between power providers, and more importantly, its political leaders are pro-crypto - dreamy conditions for a miner who wants to be graciously accepted with cheap energy sources.
"You will see a big change in the next few months," said Brandon Arvanaghi, a former security engineer at crypto exchange Gemini. “We have managers like Greg Abbott from Texas who promote mining. It is going to be a real industry in the United States, which is unbelievable. ”
Mining dominance in China
2021 global energy distribution data for the mine is not yet available, but previous estimates have shown that 65% to 75% of the world's bitcoin mines occur in China - mainly in four Chinese provinces: Xinjiang, Inner Mongolia, Sichuan and Yunnan. The Sichuan and Yunnan power plants become meccas of renewable energy, while Xinjiang and Inner Mongolia are home to many of China's coal-fired power plants.
The decline of miners has already begun in Inner Mongolia. After failing to meet Beijing’s climate targets, provincial leaders have decided to give bitcoin miners two months to resign, apparently blaming the loss of their power in crypto mines.
Castle Island Ventures co-founder Nic Carter says while it is not entirely clear how China will handle the next steps, a phased release is possible. “It looks like we are moving from a policy statement to a real implementation briefly,” he said.
The way this outcome is measured is based on hashrate, a sector term used to describe the computing power of all miners in the bitcoin network.
"Due to the decline in hashrate, it seems that imports are being cut off across the country," Carter continues, who thinks that perhaps 50% to 60% of the total bitcoin hashrate will eventually leave China.
Although the Chinese declaration has not yet been confirmed by the policy, that does not prevent miners like Alejandro De La Torre from reducing their losses and making the exit.
"We do not want to deal with every age, a new ban coming in China," said De La Torre, vice president of Hong Kong's Poolin mining dam. "We are therefore trying to diversify our global mining hashrate, and that is why we are moving to the United States and Canada."
One of the best features of bitcoin is that the site is completely agnostic. Miners only need an internet connection, unlike other industries that have to be very close to their users.
“The wonderful thing about bitcoin is that it is not appreciated by many who say it is a portable market; you can bring it directly to the energy source, ”said Steve Barbour, founder of Upstream Data, a company that manufactures and provides portable mining solutions for oil and gas facilities.
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That means the relocation will not happen immediately, in part, because it will take miners some time to move their equipment out of China or finish their goods and set up shop elsewhere.
Where they are going
Because small-scale miners compete in the low-income industry, where their only variable cost is energy, they are encouraged to move to the world's cheapest energy sources.
"All the Western miners I know have been ringing their phones," said Carter. "Chinese miners or miners controlled by China are headed for Central Asia, Eastern Europe, the U.S. and Northern Europe."
Another possible destination is China's neighbor, Kazakhstan. The country's coal mines provide cheap and sufficient electricity. It is also helpful that Kazakhstan has a more relaxed attitude towards construction, which works well for miners who need to build physical inclusion in the short term.
Didar Bekbauov uses Xive, a company that provides catchment services to foreign miners. Xive also sells the necessary specialized mining equipment.
Bekbauov says he has stopped counting the number of Chinese miners who have called him asking for transportation, from operating at 15 degrees to thousands.
"One of the miners told us that only the power stations had blocked the operation of the mines and that the private sector would continue to operate for the miners," Bekbauov told.
“But most of the electricity is generated by government power stations, so the miners will have to leave. That makes them insecure and want to find other places, ”he said.
Whether Kazakhstan is a place or just a stop to the long migration to the west remains to be seen.
Arvanaghi is advancing in North America and thinks the hashrate there will grow in the next few months.
"Texas not only has cheap electricity in the U.S. but also some of the world's cheapest," he said. "And it's very easy to start a mining company ... if you have $ 30 million, $ 40 million, you can become the Prime Minister of mining in the United States."
Wyoming is also prone to being pro-bitcoin and could be another mining site, according to Arvanaghi.
However, there are a few major limitations that the U.S. It has become a global mining hub.
In another, the first time to build the physical infrastructure needed to handle miners in about six to nine months, Carter told. "It is possible that the U.S. cannot be as powerful as other countries in terms of participation in these missing miners," he said.
Asset management can also be difficult. There is a shortage of shipping containers, due to Covid's tail winds.(ads1)
But perhaps the biggest question is the reliability of the Texas power grid. The hurricane that devastated the state's major mountains in 2021 has once again sparked a debate over whether Texas should prove its winter credentials with its plans, a more expensive project that could affect taxes or other funding for those seeking access to the state power grid. Recently, ERCOT, a Texas grid-based organization, called on consumers to save energy in the midst of what officials have called an unusual number of "forced-out exits" and the upcoming heat wave.
Responding to Musk's criticism
Tesla CEO Elon Musk has slammed bitcoin mining, saying it is bad for the environment. It is not a new criticism.
For years, critics have tarnished the world's most popular digital token by polluting the world, while supporters have praised the beauty of bitcoin and its role in accelerating the rise of renewable energy.
It is unclear whether the migration of Chinese mines will make or break this case for bitcoin lovers in the debate surrounding the carbon token token. A prominent account, so far, has been that much of the world’s bitcoin has been reduced by China’s policy.
"From a narrative point of view, there is definitely a improvement," Carter said. "But China also has the world's largest marine resources."
The country supplies vegetables from wind, solar and mainly south hydropower. The Xinjiang grid, for example, is 35% powered by wind turbines and solar power.
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If all miners eventually leave China, it will mean less mineral energy mining, but it will also mean that the network share of renewable energy mines will decrease. That is why the question of where these migrant miners end up may seem daunting to the future of bitcoin. "It's the biggest bitcoin story of the year," Carter said.
De La Torre says they are looking to increase jobs using green energy, a practice that has been around for years. He says that hydro plants are generally cheaper than minerals in many parts of the world.
"The mines are price sensitive, so demand for very low power and very low energy needs to be renewed because when you burn fuel .. you have the cost of extraction, refining and transportation," explains Blockstream CEO Adam Back. .
Lazard
Year after year, the investment bank Lazard releases a reduction in energy costs per source. Its 2020 report shows that more renewable energy sources are equal to or more expensive than conventional energy sources such as coal and gas. And the cost of renewable energy is declining.
But there are limits to the effectiveness of crypto mining in renewable energy.
Although solar and wind are now the world's most expensive energy sources, both energy sources are limited in scale, so there are concerns about the performance of miners who rely solely on wind or solar energy.
For the next six months
At present, there is not a large amount of mines in the world ready to feed the scattered Chinese people. While they are busy finding a new home, we can see hashates go offline - and stay offline.
In practice, that could mean that all the remaining miners have a great advantage over time.
Having more local dispersal will also drain world power, and will also reduce the power of any single independent nation to select or control a network.
And we can see special areas of the crypto economy emerge in the next few months.
“You’ll see the authorities using good standing and building the equivalent of special areas to encourage miners to take over their neighborhood,” Carter said. “We see it at the level of government here. You will also see it on a national level, you may even see mine subsidized electricity. ”
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