Is mining in danger as illegal mines in Kangding, Sichuan are being rectified?

Today, a chat screenshot was forwarded crazily in various WeChat groups and among friends. Judging from the avatar and nickname in the picture, Guo Hongcai (founder of Bitangel Fund, angel investor in Bitcoin and blockchain, and early Bitcoin player), known as Bao Erye in the cryptocurrency circle, said that there is definite news that all mining farms in Sichuan will be closed after the 10th. Later, Guo Hongcai himself refuted the rumor in his circle of friends, saying that the chat record picture was photoshopped by netizens and the news was false. But this incident does not seem to be groundless.

Internet news map

According to a report by Cover News on June 8, an inspection team led by Jia Mo, deputy secretary of the municipal party committee and mayor of Kangding City, Sichuan Province, and composed of multiple departments of Kangding, conducted an investigation and rectification of the "three no projects" and production chaos in the Zhedong area of ​​Kangding City.

Kangding Zhedong area is located in the northeast of Kangding. The Dadu River runs from north to south across the entire Zhedong area. Mountains can be seen on both sides of the river. In addition to flowers, insects, birds and fish, there are also mining machines operating day and night and workers watching over them.

Geographical map of Zhedong area

It is widely said in the industry that 70% of the world's Bitcoin is produced in China. The domestic mining farms that make a living by producing cryptocurrency are mainly distributed in Sichuan, Yunnan, Inner Mongolia and Xinjiang. In Sichuan Province, most of the mining farms are concentrated in the Dadu River Basin, where there are abundant and cheap hydropower resources.

The inspection team did not specify the targets that the Kangding Municipal Government had decided to rectify this time. But everyone knew that the mines that had a "cooperative relationship" with the hydroelectric power stations along the Dadu River and built factories nearby were also included.

The flood season in Sichuan Province is from April to October. During this period, electricity production will reach its peak, which also means that the high electricity cost will drop sharply to a little over 10 cents. This is also the reason why mine owners are willing to spend hundreds of thousands of migration fees to transport mining machines from the north to the south.

If the regulations are strictly followed, a series of procedures such as environmental impact assessment, filing with the Development and Reform Commission, architectural design, planning approval, and obtaining construction permits for new projects will take a lot of time. This means that mine owners are likely to miss the golden time of the flood season and have to bear additional land costs. After the flood season ends, they have to move back to the north or shut down their mining machines and wait for the next flood season, which is difficult for them to accept.

Therefore, in the Zhedong area, most of the mines and factories there are so-called "three no" projects: no construction planning land use permit, no construction permit, and no land use permit. They are undoubtedly the focus of this major rectification.

The miners’ road to mining has always been bumpy. The sudden introduction of policies and short-term fluctuations in currency prices have forced them to keep their nerves tight.

On April 8 this year, when the National Development and Reform Commission released the "Guidelines for Industrial Structure Adjustment", "virtual currency mining activities" were listed as industries that have been clearly eliminated or immediately eliminated by national industrial policies. This is undoubtedly a heavy blow to virtual currency mining practitioners.

Going back in time, on January 5, 2018, China Business News reported that the leading group of the Internet Finance Risk Special Rectification Office issued a notice to all localities to guide enterprises under their jurisdiction to orderly withdraw from the "mining" business. At that time, the Internet Finance Rectification Office focused its "handle" on the most critical "electricity bills" and "electricity consumption" for Bitcoin.

The policy level has been doing this from time to time, making mining practitioners more cautious. When facing relevant government inspections, some simply lied that they were not engaged in digital currency mining, or moved to more remote mountains to avoid the "visible hand".

For Sichuan mining practitioners, this is not the first time they have "fallen down" in Sichuan. The rainy night of June 26, 2018 may also be unforgettable for them. The unexpected flood caused mines at lower altitudes to suffer instantly, including large mines with tens of thousands of mining machines.

At the same time, due to heavy rain, a large area of ​​mining farms in Sichuan lost power, making a large number of mining machines unable to operate normally. According to statistics, the global computing power was 44.8EHash/s on June 24, but it dropped to 34.7EHash/s on the 28th, a loss of about 30%, which seems to be closely related to the flood.

If this rectification makes it difficult for mining operations in the Dadu River Basin to be maintained normally, whether a similar computing power impact event as last time will occur again, thereby affecting the prices of related currencies, all of these are worth further discussion.