Why China’s tough stance on crypto mining is a boon for miners elsewhere
In late June, footage from crypto mining farms in China started popping up on Douyin, the Chinese version of Tiktok. Machines that mine cryptocurrencies like Bitcoin were being dismantled and packed up. These facilities in China have produced up to 3/4 of the world’s supply of Bitcoin. But that started to change when one of China’s most senior officials at the central government pledged to crack down on Bitcoin mining. But he didn’t specify what measures he would take against crypto miners.
However, some local authorities began taking action. A government-backed news outlet showed social media footage of miners turning off machines after authorities in Sichuan province ordered electricity providers to stop supplying power to these facilities.
After Beijing’s warning, the global mining hash rate, i.e., the measurement of the computing power used to mine Bitcoins dropped by almost 50%. The sudden drop just means
everyone who continues mining now has a bigger piece of the pie. So miners around
the world are taking advantage of the Exodus of Chinese miners to expand their own businesses and hoping that the power behind cryptocurrencies is becoming less dependent
on a single country.
Crypto mining farms are usually made up of thousands of specialized computers and the miners who get the right answers first are rewarded with new cryptocurrencies. And these new coins can be then sold to exchanges. The vast majority of these specialized machines have been manufactured in China, giving miners there quicker and cheaper access than others around the world.
So with easy access to both machines and power, a large share of global Bitcoin mining has happened in China. Beijing’s tightening grip on the industry is forcing its homegrown miners to look for a way out. Since 2017, crypto trading has been outlawed in China because of the potential risks cryptocurrencies pose to financial stability and the possibility of the assets being used for illegal activities. And now mining has come into sharper focus because of the massive amount of electricity consumed by farms, posing a threat to Beijing’s commitment to limit its carbon footprint.
So, miners in China are selling their machines overseas or moving their operations to countries like the U.S, Russia, and Kazakhstan. This exit from China has benefited miners elsewhere. It also gave them access to some of the best machines that were once hard to get. All the machines that are being manufactured and are contracted to the Chinese customers no longer have a place to be installed.
Prices of these mining machines have also dropped substantially. For instance, one of
the most popular models, which used to cost more than $10,000 was available for around half the price. With the market awash with cheap machines, crypto miners are looking to expand across North America and Central Asia. However, it’s a race against time to set up the power infrastructure before other miners come back online. It takes a lot longer to develop this infrastructure outside of China.
Despite the challenges ahead, once these new mining farms are created, crypto mining will likely no longer be concentrated in just one place. As for China’s homegrown miners, the once golden place for mining will become a less viable option. These miners in China are
now looking for new homes in favor of places that are secure.