The other side of hydropower Bitcoin miners: What have they brought to the impoverished mountainous areas in the southwest?

Original title: "The contribution of a small mine owner next to a hydropower station in Sichuan and Yunnan"
Written by: Community Jun Source: Community Jun Chat Investment Public Account

Recently, the community leader communicated with small miners who operate Bitcoin mining in Sichuan and Yunnan, and summarized the content of the communication as follows:

Q: Can you briefly introduce where your mining team is located?

Answer: In the mountains of Sichuan and Yunnan, some are near large power stations with good transportation locations, and some are deep in the mountains and old forests with very bad locations.

Q: Why do this deep in the mountains? Are there any benefits?

Answer: This question is more complicated to answer. The simplest reason is low cost.

Q: Can you explain in detail why the cost is low?

Answer: Specifically speaking, we mainly use hydropower to mine Bitcoin. There are some hydropower stations in the mountains of Sichuan and Yunnan. During the flood season in summer, these hydropower stations can operate at full capacity and supply electricity to the surrounding counties and villages. Due to the large terrain difference, the hydropower stations here can generate relatively large amounts of electricity when operating at full capacity during the flood season. However, these hydropower stations are usually isolated grid-type hydropower stations, which means they cannot supply electricity to the State Grid.

The specific reasons include that the location is too remote. If many power transmission facilities are built there, the cost advantage of hydropower will be spent on building transmission lines and maintenance, and the actual operation may lose money. Electricity is a special thing. If you don’t use it, it will be wasted. In summer, the surrounding villages don’t actually use much electricity, so most of the electricity is wasted in the end. In addition, in the process of wasting electricity, the equipment of the hydropower station itself will also have a great impact and loss.

Some power stations are connected to the State Grid, but they cannot export all their electricity to the State Grid because there are many large hydropower stations in Sichuan. In summer, they cannot use up all the electricity generated. Although UHV and storage technology are available, they have not been promoted everywhere. So if all hydropower stations supply the State Grid with full load, the State Grid may not be able to support it. I don’t know much about the specific details, but a lot of electricity is left over and wasted.

At the same time, because this part of the country is located in a mountainous area, it is basically impossible for many companies to enter and start production there. Transportation is underdeveloped, there are too few flat lands, and the cost is high. Even if they enter, they cannot recruit people.

We need to consume this excess electricity. The price is also very cheap. I even understand that in some cases, even if I use this electricity at zero cost, it is good for hydropower stations in some cases, as it will cause less damage to the generators. I am not a hydropower professional, so it may not be accurate, but this is probably what I mean. Of course, I pay for it, so it is definitely not possible to use it at zero cost.

Q: What is mining?

A: The mining industry is quite special. You can think of Bitcoin mining as a process of standardizing electricity into a recharge card. The tool used is the mining machine, which is usually very expensive when new and cheap when old. Mining machines have their own pricing logic.

What you can understand is that no matter how much electricity you have, I basically just need to buy enough machines to use up this electricity and exchange it for Bitcoin. This Bitcoin can be sold on the market. Part of it needs to be sold to pay the electricity price. Part of it is profit.

For me, the most important thing is to buy mining machines. At the same time, I need a small team to watch over these mining machines. Compared with other industries that require large venues, computer rooms, etc., I don’t need much here.

Q: What skills are required for operation and maintenance?

Answer: No, when the machine is in good condition, anyone who can basically operate a computer can use it. When it is broken, repairing it requires skills, and those with high difficulty will be returned to the factory. Basically, the technical difficulties are solved when the mining machine is manufactured. Instead, what is needed is hard work and finding the right place to solve the problem.

Q: What are the local benefits?

A: The biggest contribution is definitely to the hydropower station. The hydropower station itself has employees who need to be paid, and the hydropower station has to pay taxes, part of which depends on the electricity we provide, which also contributes to the local area. These mountainous areas are underdeveloped, and the locals are basically left behind by the elderly and children. Before we came, the industry was basically only local specialties, and there was very little foreign investment.

Let me give you an example. In addition to electricity bills, some of us need to stay in the local area for a long time, so we have to buy food, clothing, housing and transportation from the locals, and we also have to buy food, drink and entertainment locally. For example, in one of our mines, we need to hire a local aunt to cook, and pay her 3,000 yuan a month. It’s not that the local salary is so high, but mainly because they think it’s hard in the mountains, and it’s very important for them to pay an extra 1,000 yuan. For example, during the flood season, we ask them to help move the machines to the shelves, and pay them by the day, which is also an income. In fact, after we came to some places, including the logistics industry, maintenance industry, catering, accommodation and entertainment, there have been many changes in all aspects. Some of them are caused by our direct consumption, and some of them are caused by the fact that after we paid, the local people have money and they also consume, and the cycle starts.

Speaking of the mountain roads in some villages, when we first arrived, we needed to use tricycles to pull the machinery up, and some people moved it, so trucks couldn't enter.

Question: So it seems like you guys are actually having a hard time?

A: It was actually very hard. We found resources (hydropower) in these mountainous areas and then used them. The electricity bills were either paid to the collective, the power station, or the country. Sometimes it rained and there were many landslides. When we made money, everyone would be jealous, but when we lost money, no one would care because it was all our own money. We actually dealt with the local people in a down-to-earth manner and became friends with them.

Question: You introduced the situation during the flood season, but how do you generally deal with the dry season?

A: I will gradually shut down during the dry season in winter and wait for the flood season in the following year. Some people will move their mining machines to other places with cheaper electricity, but I will not. I mainly work on hydropower.

Question: Could you please tell us how much profit your industry has?

A: The industry is quite special. If we only look at the mining cost and the coin price, the mining cost may be lower than the coin price only in a bear market. But in many cases, it depends on the price of the mining machine. If the price is high, it may take one or two years to recover the investment, not to mention the profit. This year's profit is not bad.

Q: What do you want to express through this communication?

A: It’s mainly to complain and vent. Recently, the policy pressure is very high. In fact, we really want to pay taxes and become formal. We can do it if there is some profit. The encryption industry has good and bad places, but we use hydropower to mine. We are doing good things and useful things. There are taxes to create jobs and help local areas consume hydropower. If we don’t consume it, the electricity will be directly wasted and there is no way to retain it. China is too big. Not every place has a good way to attract investment. A team like mine was actually very grassroots at the beginning. Many practitioners I know usually did not have a high degree of education in the early days. They just knew that this could make money and slowly entered the industry. Before opening a restaurant, there were truck drivers. Think about it, which rich second-generation with a high degree would climb into the mountains to find a hydropower station.

There are big guys in our industry, but there are also many small business owners. We don’t want to, and we don’t have the ability to, go abroad to find mines. Many friends who went abroad to run mines were cheated by foreigners, and their mining machines and infrastructure were confiscated. They lost all their money, and even their personal safety cannot be guaranteed. So we especially hope that the policy can provide a way for us to become formal, pay taxes, and survive. We can endure hardships and are not afraid of them. We can also help local governments solve problems and hope we can play our role.