Mining Bitcoin in the Arctic

Editor's note: This article is from Soviet Russia Relay (ID: post-soviet), author: Wu Tatar

The Bitcoin sculpture made of metal waste is erected outside the BitCluster mine. In this corner of the world, we welcome the whole world.

In 2020, a Russian company called BitCluster established a Bitcoin mine in the Arctic city of Norilsk. This is the world's first Bitcoin mine located within the Arctic Circle.

With a temperature of minus 40 degrees Celsius, it is one of the coldest places on earth.

As soon as the news came out, various financial media rushed to report it: on the one hand, it was because of the abnormally cheap electricity price here (0.03 US dollars/kWh, equivalent to 0.19 yuan/kWh. According to data from the State Grid Corporation of China, the domestic large-scale industrial electricity price is about 0.63 yuan/kWh); on the other hand, it is because of the harsh environment and geographical location here - it is not only an extremely cold city, but also a declining and heavily polluted industrial wasteland left over from the Soviet era.

Norilsk by Christophe Jacrot

Just flipping through some photos of Norilsk taken online, the strong sense of wasteland and industrialization can't help but make people think of those four (already chewed over) words: cyberpunk.

The data center is built on top of a factory built during the Stalin era that closed in 2016.

In addition, the price of Bitcoin has hit new highs recently, and its wealth significance, which is more valuable than gold, has given Norilsk a bit of "doomsday carnival" temperament.

Although Norilsk is located in the Arctic, it is rich in natural resources. MMC Norilsk Nickel PJSC, the world's largest palladium mining and smelting company, is located here, and it also produces huge amounts of nickel, copper and platinum.

The addition of BitCluster has brought a new business to this old industrial city - cryptocurrency.

The containers used to transport fruits and vegetables have been transformed into mining machinery plants.

Norilsk, one of the northernmost large settlements of mankind, has a permanent population of about 175,000 people. Together with seasonal miners from other places, the population here is about 220,000.

There are only two ways to get here: by plane or by boat.

The polar night in Norilsk lasts for 45 days, starting at the end of November. During this time, there is no sunlight in the entire city.

The extreme cold in the Arctic Circle is not suitable for human survival, but it is very suitable for mining factories that generate a lot of heat, which invisibly saves a lot of cooling costs. Vitaly Borschenko, the founder of BitCluster, is very optimistic about this. He believes that this is a unique condition in the Arctic region.

Even though the average temperature throughout the year is minus ten degrees Celsius, cooling, refrigeration and ventilation equipment are still indispensable.

On BitCluster's official website, they also introduced that they used a canopy made of special material to keep warm and prevent the invasion of low temperatures outdoors.

Norilsk Nickel office building. They now have a new twist on their business: trading nonferrous metals with cryptocurrencies.

Unexpectedly, the cheapest electricity price in the world is in the Arctic.

After BitCluster started construction, it immediately became the second largest electricity user in the area. The first, of course, is the giant non-ferrous metal mining and smelting enterprise.

Even in Russia, a country with a large energy source, the electricity price in Norilsk is quite competitive. Relying on natural gas and hydroelectric power, the electricity price here is 25% cheaper than other Russian cities because it has an independent power supply system and is not connected to the Russian national power grid.

It sounds like there is an added layer of lawless feeling.

Norilsk Gulag Victims Memorial. In 1953, after Stalin's death, the famous "Norilsk Uprising" in Soviet history broke out here, which was also the largest riot in the Gulag labor reform system. In 2002, Putin also went here to lay flowers and express condolences.

BitCluster's mine is built on the site of the defunct Norilsk Nickel factory. This company was once a world-class metal giant and the most polluting company in Russia (no doubt about it). After several serious environmental pollution incidents shocked the world, it was finally closed in 2020 (the mining and smelting activities of other companies have not stopped).

But don’t forget that although this company was established in 1993, it did inherit its mantle from the state-owned joint-stock factory during the Soviet era. As early as the 1920s, a large number of workers worked here.

The manager here at that time was the famous People's Commissariat for Internal Affairs/NKVD.

BitCluster engineers work on a rotating basis and come from other regions of Siberia. This is important, because no one wants to stay in the Arctic Circle staring at machines in the cold. At first, they couldn't find suitable employees locally, so they all came from other places.

To some extent, it is not an exaggeration to call this place a "Gulag sweatshop." The wealth created by the prisoners was "passed" to the federal government, and the federal government "passed" it to the oligarchs. When the oligarchs left, the gold diggers of the digital age came.

There are currently 5,000 cryptocurrency mining machines here.

Another interesting thing is that the first customer of the Norilsk mining factory was from China. At the end of 2020, a Chinese customer shipped mining machines from Sichuan to the Arctic. However, BitCluster did not disclose the relevant information of this customer.

BitCluster is gradually training local employees. Currently, there are 15 permanent employees, including both local and foreign employees.

From an environmental protection perspective, the entry of cryptocurrency companies has indeed made some positive changes to the city’s environmental pollution problems. Alexander Pestryakov, a local city government official, particularly welcomed the move, saying that Norilsk’s “digital assets” have finally gone global.

Various investors will certainly flock to the region in the short term, and the development of the Arctic region may have a new possibility. Another version of the gold rush story will be staged again.

BitCluster is preparing to expand its scale as soon as possible to reach an average capacity of 6 bitcoins per day. It seems that a billion-dollar value is just around the corner.

After reading the online reports about BitCluster, I couldn’t help but think of the story of the Golden Country written by Stefan Zweig in When the Stars Shine: the protagonist Johann August Sutter was a pioneer who came to the New World of America from Switzerland in the 19th century, the discoverer of the “Golden Country”, and the first person in the American gold rush.

His life of ups and downs, joys and sorrows may be repeated in the 21st century.

After all, history always repeats itself.

The core team of BitCluster is in Beijing. They posted this on Instagram. There are also many photos with Chinese customers. Maybe friends in the cryptocurrency circle know them.

Speaking of Norilsk, we have to mention a 2018 documentary, Anthropocene: The Human Epoch.

Norilsk is one of the chapters that tells the story of human beings' exploitation of the earth's resources.

The permafrost and the Bitcoin mining machines on it, one is cold and the other is hot; the massive wealth and the dilapidated and polluted cities, one is bright and the other is dark.

From the mine hunters in Tarkovsky's film "Stalker" who earn a meager income to support their families in the apocalyptic world, to the apocalyptic gold mining in the Arctic Circle in the era of the epidemic.

The sense of absurdity beyond wealth is worth a drink.

Of course, if you still hold Bitcoin, you should have a drink.