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Ever since the State Council Financial Stability and Development Committee called for "cracking down on Bitcoin mining and trading activities," miners have been in a panic and don't know what to do.
Xinhua News Agency commented that to crack down on virtual currency mining, not only do local governments need to take the initiative to issue documents to stop mining activities and cut off growth; they also need to introduce comprehensive measures including electricity prices, land, taxation, environmental protection and other aspects to promote the orderly exit of existing companies.
According to data from the Cambridge University Center for Alternative Finance, as of May 17, 2021, the annual electricity consumption of global Bitcoin "mining" is approximately 134.89 terawatt hours (1 terawatt hour is 1 billion kilowatt-hours). If Bitcoin mining is regarded as a "country", it ranks 27th in the global national electricity consumption ranking, exceeding Sweden's electricity consumption.
From this perspective, Bitcoin mining has become a "power-consuming behemoth" that seems to be a burden on the power system.
An industry insider who declined to be named said that my country's bitcoin "mines" account for about 70% of the world's computing power, and most of them are located in Xinjiang, Inner Mongolia and Sichuan, which are rich in thermal power and hydropower resources and have favorable electricity prices. They have become the center of global bitcoin mining.
The meeting of the Financial Stability and Development Committee of the State Council is an important regulatory signal. For more than ten days, the nerves of the mining industry have been tense. On the one hand, many mining companies have divested their domestic related businesses and announced plans to go overseas. On the other hand, they hope that the supervision will not be "one size fits all" and allow the entire industry to "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 some areas. In order to save electricity expenses, "miners" migrate like "migratory birds" to pursue cheap electricity resources, which has become a unique scene in the mining circle.
In fact, this is determined by the PoW mechanism. Because of this, Bitcoin mining is in a "prisoner's dilemma" from the beginning to the end.
Specifically, according to the Bitcoin algorithm, the system will automatically adjust the difficulty so that the block generation speed is stabilized at around 10 minutes. All miners in the world will compete to keep accounts, and the Bitcoin rewards for the newly generated blocks will be distributed to the nodes that successfully keep accounts.
In order to be fair, the mining pool model distributes the Bitcoin rewards after successful accounting according to the proportion of mining machine computing power connected to the mining pool. Therefore, the higher the computing power of the mining machine connected to the mining pool, the more Bitcoin rewards will be obtained. Over time, the more computing power invested in mining, the more Bitcoin rewards will be obtained. This has created a "prisoner's dilemma", which has caused the computing power of the entire network to increase, and the power consumption has continued to increase, which has also become a point of criticism from the outside world.
Most of my country's bitcoin mines are located in Xinjiang and Inner Mongolia, which have abundant thermal power resources, and Sichuan, which has abundant hydropower resources. Since 2017, bitcoin miners have had a rough fate, frequently affected by factors such as power supply, regulatory policies, and crypto market conditions, with their earnings fluctuating and miners undergoing several reshuffles.
For example, Ganzi, Sichuan, is known as the "World Mining Capital" in the mining circle because of its rich hydropower resources. However, at the end of 2019, Ganzi issued a notice on "Ganzi Prefecture actively doing a good job in meeting the peak winter power supply" to regulate the shortage of electricity during the dry season. At the same time, due to the rich power resources in the flood season, miners actively participated in the local "consumption demonstration area" to digest the surplus hydropower or even abandoned electricity.
In contrast, Inner Mongolia has continued to carry out high-pressure supervision on Bitcoin mining. As early as 2018, Inner Mongolia carried out a comprehensive clearance and rectification of Bitcoin mines. Last month, the official WeChat account of the Inner Mongolia Development and Reform Commission issued an "Announcement on Accepting Petitions and Reports on Problems of Virtual Currency 'Mining' Enterprises" and an announcement on soliciting public opinions on the "Eight Measures for Resolutely Cracking Down on and Punishing Virtual Currency 'Mining' Behaviors (Draft for Comments)" issued by the Inner Mongolia Autonomous Region Development and Reform Commission. The announcement stated that in order to thoroughly implement the deployment requirements of the "Several Guarantee Measures of the Inner Mongolia Autonomous Region on Ensuring the Completion of the 14th Five-Year Plan Energy Consumption Dual Control Target Tasks", comprehensively clean up and shut down virtual currency "mining" projects, give full play to the role of mass supervision and guarantee, and improve the reporting channels for problems of virtual currency "mining" enterprises, the Office of the Autonomous Region Energy Consumption Dual Control Emergency Command has set up a virtual currency "mining" enterprise reporting platform to fully accept petitions and reports on problems of virtual currency "mining" enterprises. This is evident. However, Bitcoin mining has also had a positive impact on the local economy. Jiang Zhuoer, founder of the Litecoin Mining Pool, said on his Weibo that many mining areas, such as the northwest and southwest regions, have serious local debts and power abandonment. Bitcoin mining has a significant impact on the finances, employment, and income of residents in poor areas, and it also helps new energy facilities to gain profits and further expand their scale.
Hydropower and thermal power present a "two worlds of ice and fire"
Recently, Xinhua News Agency has been keeping a close eye on the cryptocurrency circle and has published several articles in succession. In the articles published by Xinhua News Agency, it is proposed that in order to crack down on virtual currency mining, local governments should not only take the initiative to issue documents to stop mining and cut off the increase, but also introduce comprehensive measures including electricity prices, land, taxation, environmental protection and other aspects to promote the orderly exit of existing enterprises. It is also believed that high-energy-consuming "mines" should not be allowed to squeeze out precious resources.
The implication is that electricity resources should be used on the "cutting edge" of promoting economic development. In this regard, experts suggest that regions with abundant electricity resources can establish a multi-dimensional regular monitoring system such as market access, monitoring of large electricity users of Internet companies, and monitoring of abnormal Internet traffic to strengthen source control.
Under the strict supervision, the Sichuan Supervision Office of the National Energy Administration issued a notice on holding a research seminar on virtual currency mining. The notice stated that according to the relevant requirements of the National Energy Administration, in order to fully understand the relevant situation of virtual currency mining in Sichuan, our office decided to organize a research seminar, which will be held on the morning of June 2, 2021.
Industry analysts said that at this time when the "Sword of Damocles" is hanging high, the conference has become particularly important and has attracted the attention of the entire industry.
According to Golden Finance, it interviewed a senior Sichuan miner about the Sichuan symposium. The miner revealed that overall, no news is good news. Today, Sichuan mainly discussed the severity and losses of power station water abandonment. In addition, the Xinhua News Agency article "orderly withdrawal" also gave a lot of room for imagination. At present, at least based on the actual situation in Sichuan, the flood season can definitely be passed. Of course, there will be a need for cost increase in electricity prices, so it is still certain whether mining can continue and the safety of mining machines.
From this point of view, although the "one-size-fits-all" strict governance has been temporarily avoided, the alarm has not been lifted. Many industry insiders believe that mines using thermal power are doomed, while mines using abundant hydropower during the flood season are likely to survive. Because, on the one hand, my country implements a "one-vote veto" system for environmental protection; on the other hand, my country's task of achieving carbon peak and carbon neutrality is still arduous.
According to data, on December 21, 2020, the State Council issued the white paper "China's Energy Development in the New Era", which clearly outlines China's "roadmap" to achieve carbon neutrality by 2060. The roadmap is divided into "three steps", namely, from 2021 to 2030, carbon emissions will peak, from 2031 to 2045, carbon emissions will be rapidly reduced, and from 2046 to 2060, deep decarbonization will be achieved to achieve carbon neutrality.
Xinhua News Agency reported that at present, many developed countries have achieved "decoupling" of carbon emissions and economic growth, but my country is still in the stage of increasing carbon emissions and has not yet reached its peak. Compared with many developed countries, my country's time from carbon peak to carbon neutrality is shortened by decades.
"From the perspective of the overall electricity supply structure, thermal power will gradually fade out of history." The above analysts believe that thermal power mining in Inner Mongolia, Xinjiang and other places may be completely eliminated.
Miners "go out to sea to make a living"
As regulators crack down on Bitcoin mining, many domestic mining farms are reportedly planning to expand overseas. Industry insiders commented that after the pricing power of Bitcoin was delocalized, the accounting power of mining was also delocalized, and Bitcoin mining will be more decentralized in the future.
According to Xinhua News Agency, a person in the cryptocurrency circle told reporters that recently many "miners" have considered shutting down their "mines" or moving them overseas. They are preparing to move their "mines" across the ocean to countries such as Russia, Finland, and Canada where local permission is granted and there is an excess of electricity.
Edward Evenson from SlushPool said that recently 300-400MW Bitcoin miners have contacted him, seeking to place machines in certain areas of North America and the European Union, and some are ready to ship machines to Kazakhstan. Machines in Xinjiang are transferred to nearby areas in Central Asia. New machines sent from Bitmain and MicroBT will be shipped to North America. Machines heading to North America usually seek traditional data centers at cheap "all-inclusive" hosting prices, as is customary in China.
Edward Evenson said that China's computing power is not decreasing, but moving. Bitcoin computing power is becoming more and more widely distributed around the world, reducing attack vectors and alleviating concerns about Xinjiang's use of coal energy.
"After this wave of regulation, we have made up our minds to move the mining machines to a European country." A miner who wished to remain anonymous told Nuclear Finance APP that, on the one hand, the abundant supply of water and electricity there has reduced the cost of mining; on the other hand, the region has a cold climate all year round, and the mining machines can cool down naturally most of the time, which not only reduces operation and maintenance costs but also helps extend the life of the equipment.
In addition, a foreign mining machine hosting service provider stated that due to the overseas expansion of Chinese mining machines, the company's mining machine hosting business has been extremely hot recently, and idle production capacity has been sold out. The company is currently actively increasing its production capacity to meet customer demand.
At the same time, the "Asian Blockchain Mining Roundtable" will be held in the near future, calling on the industry to cooperate globally to support and promote renewable energy mining. At that time, many industry insiders will attend the meeting for the first time to discuss how to better regulate Bitcoin mining and support and practice the concept of "green mining".
Recently, Twitter and Square founder Jack Dorsey said at the Bitcoin 2021 conference in Miami that miners must make a profit and access to cheap renewable energy can maximize their profits. |
