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2021 is not a good year for miners. The tightening of regulatory policies has made the mines feel uneasy, and some even moved their families overseas to seek a "paradise".
First, at the end of February, the Inner Mongolia Development and Reform Commission solicited opinions on the "Several Guarantee Measures for Ensuring the Completion of the "14th Five-Year Plan" Energy Consumption Dual Control Target Tasks (Draft for Comments)" (hereinafter referred to as the "Draft for Comments"), which proposed to comprehensively clean up and shut down virtual currency mining projects and withdraw all of them by the end of April 2021. During the "14th Five-Year Plan" period, the scale of data center construction will be reasonably and orderly controlled, and new virtual currency mining projects will be strictly prohibited.
At the end of May, the Inner Mongolia Autonomous Region organized the drafting of the "Eight Measures of the Inner Mongolia Autonomous Region Development and Reform Commission on Resolutely Crackdown on and Punishment of Virtual Currency "Mining" Behavior (Draft for Comments)" to severely crack down on mining activities.
On the same day, the Sichuan Supervision Office of the National Energy Administration issued a "Notice on the convening of a research seminar on virtual currency "mining". A person close to the Sichuan supervision told China Business News: "This meeting was held to collect relevant information." The Northwest mines have been basically cleared out.
The tightening of policies has forced some mining farms to close their computing centers. Zhang Ling, a mining industry insider, told the ChainDD App that after the tightening of regulatory policies in Inner Mongolia and Xinjiang, almost all the local mining farms have been relocated, with only a small number of them still operating under the name of "big data centers" but also beginning to prepare for relocation.
Zhang Ling believes that mining farms can hardly hide under the crackdown of regulatory authorities. At present, the capacity of a single cabinet server in a mainstream data center is generally 16-20 units, while the number of mining machines in a single cabinet of a Bitcoin mining farm can reach dozens. The rated power of a single mining machine is much greater than that of a rack server. Taking the Antminer S9 as an example, the rated power of the S9 is 1320W, while the rated power of a general rack server is about 500W. A medium-sized mining farm with 5,000 Antminer S9 mining machines consumes up to 6,500 degrees of electricity per hour in the cabinet alone, and the daily electricity bill is as high as 50,000 yuan. As local small thermal power units are cleared, the high electricity bills will not only attract regulatory attention to the mining farms, but also make the mining farms choose to relocate to areas with lower risks and costs. Southwest regulatory policy is expected to be stable
Li Nian, a mining machine seller, told Liande App that the main buyers of his second-hand mining machines have gradually shifted from the northwest to the southwest and overseas.
The southwest region relies on hydropower as the main source of electricity. Take Sichuan as an example. As a province of thousands of rivers, Sichuan is also a province with abundant water resources. There are 7,415 rivers of all sizes in the province, with a total water resource of 261.6 billion cubic meters. At the same time, Sichuan is also a major hydropower province. As of the end of 2020, the installed capacity of hydropower reached 83.01 million kilowatts, and the scale under construction was about 40.1 million kilowatts. Among them, small hydropower stations accounted for nearly 40%. According to statistics, there are 5,025 hydropower stations with a single station installed capacity of less than 50,000 kilowatts in Sichuan Province, with an installed capacity of 15.5859 million kilowatt-hours.
However, the abundant hydropower in Sichuan Province cannot be fully consumed. Due to factors such as the imbalance between supply and demand, the obstruction of the construction of transmission channels, and the weak regulation capacity of hydropower stations in the province, Sichuan Province has experienced varying degrees of "water abandonment" every year since 2012. In 2016, as much as 14.1 billion kilowatt-hours of surplus hydropower could not be connected to the grid, resulting in the loss of about 4 billion yuan in power generation revenue for hydropower stations in the province.
The most serious water abandonment is also caused by the small hydropower stations that are not connected to the grid. Since the cost of grid-connected power generation infrastructure is high and profitability cannot be guaranteed, small hydropower stations have started to cooperate with mining farms for mining a few years ago, and many mining farms are even built by hydropower stations themselves. The owner of the mine told the Liande App that starting from Chengdu and heading towards Ganzi Prefecture along the G5 Beijing-Kunming Expressway, there are many small hydropower stations and mining farms distributed in the mountains on both sides, and the two present a symbiotic relationship.
Therefore, although the Sichuan Supervision Office of the National Energy Administration issued a document to inspect mines, Li Nian believes that the policy will not be tightened quickly, so the overall sentiment in the Sichuan mining circle remains stable. Central Asia and North America become new options for mining
As for the mines that choose to relocate overseas, the main targets have also changed, from the Middle East, Russia and other places a few years ago to Central Asia and North America.
In order to achieve the goal of carbon neutrality, countries in the Middle East and Russia have also gradually tightened their policies in recent years. According to a report on the Qatari Al Jazeera website on May 26, Iranian President Rouhani said on the 26th local time that all cryptocurrency "mining" activities in Iran (including legal ones) must be stopped until September 22. Rouhani said that in Iran, legal cryptocurrency "mining" activities only consume about 300 megawatts of electricity, but illegal "mining" activities consume up to 2,000 megawatts of electricity. In the past few years, Iran has confiscated thousands of illegal "mining" platforms. The government recently called on the country's intelligence agencies to crack down on illegal miners and considered offering a bonus of 200 million riyals (about $900) to those who report illegal "mining" activities.
Russia has always been very sensitive about the mining industry. Although its computing power accounts for 7% of the world, its overseas mining farms have been closely watched by local regulators. Wang Xing, a mining farm owner, told the ChainDD App that they had planned to move the mining farm to Russia, but it was seized at customs, so they had to disassemble the mining machine and ship it to the local area in the form of parts.
Compared with the strict regulations in the Middle East and Russia, the policies in North America and Central Asia are relatively relaxed, and therefore have become new choices for mines.
A staff member of Hulifeng once told China News that the company's mine is preparing to move abroad, and plans to move to Pakistan or Russia. Recently, Jiang Zhuoer, the founder of the Litecoin Mining Pool, said on Weibo that the joint mining business will no longer be open to mainland China, and in the future, mining will be mainly deployed in North America. Bit Mining (formerly 500 Lottery Network), which is listed on the US stock market, also announced on its official website that it will invest in building a mine overseas.
On May 19, BitMining announced that it had signed a legally binding investment agreement with Dory Creek, a wholly-owned subsidiary of BitDeer, and the two parties will jointly invest in the construction of a cryptocurrency mining farm in Texas, the United States. BitMining plans to invest a total of US$25.74 million.
According to the terms, the Texas mine to be built will have a total operating load of 57.2 megawatts and will use more than 85% clean energy and low-carbon environmentally friendly energy for electricity generation.
Then, on May 24, BitMining announced that it would invest in a mine in Kazakhstan. The company plans to invest a total of RMB 60 million to jointly build and operate a mine with a load of 100 megawatts with a Kazakhstan company. After the mine is completed, the company will hold 80% of the shares of the Kazakhstan mine, and the partner will hold 20%. (This article was originally published on Liandede and authorized to be published on Titanium Media App. Author: Dawen)
Note: All interviewees in this article are pseudonyms. (Linked)
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