Miners sweep across Iran, scrambling for electricity at as low as 5 cents per kilowatt-hour

(Text | Ratchet Pizza)

The cryptocurrency market is sluggish, mining machines are being sold as scrap metal... Chinese miners are struggling to survive. Going overseas has become a consensus among many miners.

Russia, Georgia, Iceland, Canada... They are looking for low electricity prices around the world to find new homes for mining machines.

Iran has become one of the destinations for Chinese miners. "The electricity resources here have almost been divided up by Chinese miners," said Wang Yang, who is engaged in the mining machine hosting business in Iran.

In the past few months, he, like many Chinese miners, traveled thousands of miles to Iran to look for the legendary "4 cents per kilowatt-hour" electricity resources. He is a witness and a personal experience of the Chinese miners' entry into Iran.

01 Gold Rush in Iran

In the second half of 2018, Wang Yang, who had just entered the cryptocurrency circle for a year, decided to go to Iran to mine.

He is 37 years old and has been a stock trader for 11 years, fighting in the A-share and U.S. stock markets.

His entry into the cryptocurrency world was accidental: in mid-2017, a former partner approached him and asked him to manage his Bitcoin.

After the September 4 incident, the cryptocurrency market plummeted. Wang Yang, who had been working in the traditional stock market for many years, could not accept such a tragic loss and intended to liquidate his position.

"Hold it!" the partner told him.

A few months later, Bitcoin hit a record high of $20,000. Wang Yang was deeply shocked and joined the circle.

In the second half of 2018, a domestic mine owner found Wang Yang and commissioned him to find cheap electricity resources around the world. After fighting in the U.S. stock market for many years, Wang Yang has a group of friends scattered around the world.

After careful investigation, Wang Yang set his sights on the Middle Eastern country of Iran.

Whether in terms of population or economic output, Iran is a well-deserved Middle Eastern hegemon. The country has rich oil and gas resources, a good industrial base, and abundant electricity resources. It is the largest electricity exporter in the Middle East. The Financial Forum reported that in the five fiscal years from March 2013 to March 2018, Iran exported nearly 43 billion kilowatt-hours of electricity to its neighbors, earning $4.1 billion.

Electricity prices in Iran have long been very cheap. After the United States resumed sanctions against Iran in the second half of 2018, although the Iranian currency, the rial, depreciated sharply, Iranian power plants used domestic natural gas, and electricity prices did not surge.

At the same time, under sanctions, Iran's factories have closed down one after another, and electricity resources are even more oversupplied. Unlike China, Iran's power plants do not have a stable buyer like the State Grid. Many small power plants are facing a survival crisis at all times, and out of helplessness, they often offer extremely low electricity prices.

For miners who are accustomed to the average electricity price of 0.4 yuan per kilowatt-hour in China, Iran's electricity price is "terribly" low.

"When we first came to Iran, some power plants quoted electricity prices that were only 0.5 yuan per kilowatt-hour in RMB," Wang Yang said. "At that time, they were 'very stupid and naive' and sold it at cost."

Soon, Iranian power plants changed their mindset - Chinese miners taught them how to share the profits from mining coins.

One of the power plants directly told Wang Yang that the electricity was free and he only needed to hand over 70% of the mining income. Wang Yang could not accept such a high commission.

Finally, Wang Yang reached an agreement with an Iranian mining farm. The two parties agreed that the power plant would provide electricity, factory buildings, miners' dormitories and security services for free, and take a portion of the mining revenue. The contract was in Chinese, English and Persian and was signed for two years.

The power plant is privately operated and uses natural gas internal combustion engines to generate electricity. Unlike large domestic power plants with installed capacities of hundreds or thousands of MW, its installed capacity is only 35MW, but it is more than enough for Wang Yang's 15,000 mining machines.

A mine deployed by a Chinese miner in Iran (picture from the Internet)

Once a price trough appears, the market will react. China's mining army began to sweep across Iran.

"In Tehran, I met a Chinese fellow who said he was here for tourism," Wang Yang said. "But I always felt that he and I were of the same kind. Two months later, I ran into him again in Tehran - he was obviously not here for tourism."

With the entry of Chinese miners, the number of buyers is increasing rapidly. What makes Wang Yang happy is that there is no phenomenon of power plants arbitrarily breaking contracts in the market.

"Iranian power plants attach great importance to business reputation. If they have already signed a contract with a Chinese mine, they will not agree to cooperate with another mine later," said Wang Yang.

He said that Iran's power plant resources have basically been divided up by Chinese miners.

And they almost no longer sell electricity directly, but choose to mine coins and share the profits.

02 Mining machine entry

Compared with finding cheap electricity, another problem that gives Chinese miners a lot of headaches is how to transport mining machines to Iran.

Wang Yang told a blockchain reporter that the mining machines are mainly shipped from China to Iran by sea, a process that takes more than 20 days and is divided into two stages.

The first stage is from China to Dubai, an international transit point. This section is relatively easy: using ordinary logistics, the shipping cost of a machine is between 1 and 2 US dollars.

The second phase is the mines from Dubai to Iran.

This journey determines the life or death of the mining machine. The biggest difficulty lies in whether the mining machine can successfully clear customs and enter Iran.

Lieyun Finance previously reported that Iran has expressly banned the import of all mining equipment, and the customs only confiscated the mining machines without charging any fines.

"As far as I know, there are now 30,000 to 40,000 Chinese mining machines stranded at Iranian customs," Wang Yang told a blockchain reporter.

Wang Yang said that this is, to a certain extent, because Iran has not clearly defined the taxation standards for mining machines, and "it is not necessary to confiscate the machines."

Electronic products are subject to a tariff of 30%-35% of the product value when clearing customs in Iran. "But mining machines are a new thing for Iranian customs. They don't have the customs code for mining machines and cannot declare taxes normally."

In addition, the value of mining machines fluctuates with the price of coins, especially second-hand mining machines. Wang Yang said that most of the mining machines sent to Iran are second-hand mining machines purchased at low prices, with S9 being the majority.

Under this circumstance, how to levy taxes has become a problem, which makes it difficult for mining machines to enter Iran. For this reason, miners have to rack their brains.

"As long as you can handle customs clearance, I can help you ship the mining machine to Iran." Zhang Sheng, who does logistics business in Iran, told a blockchain reporter.

Wang Yang said that the reason why the mining machines he handled were able to pass customs was because of the "connections" of the internal personnel of the Iranian customs. At the same time, miners also need to pay a certain percentage of the agreed mining machine value.

For example, a domestic miner has a mining machine worth 1 million yuan that needs to enter Iran. After receiving the mining machine, the guarantor will be responsible for the entire transportation and customs clearance of the mining machine, and pay a guarantee of 1 million yuan to the miner. If the mining machine successfully passes customs, the miner needs to pay 1 million yuan and the guarantee fee to the guarantor and get his mining machine back.

According to Zhang, in addition to entering Iran through customs, there is another route for mining machines: first by sea, then through the border of Iran's neighboring countries, which is equivalent to smuggling.

"But now this route is getting more and more expensive and dangerous," said Zhang, who does not recommend miners smuggle mining machines into the country.

In order to allow mining machines to enter Iran smoothly and enjoy low electricity prices, miners need to pay huge costs.

Many people lamented that these mining machines that have ended up in Iran may never return to China again.

It should be noted that even if the mining machine starts mining smoothly, it does not mean it is absolutely safe.

Mining is still in a gray area in Iran, and Iranian law does not clearly define the legal status of mining. In other words, the Iranian government can shut down mining farms at any time.

03 Iranian opponents

There were many legends about Iran among the miners. The law and order in Iran was chaotic and the people were tough. Some miners were robbed just after they set up their mines.

But after actually coming into contact with Iranians, Wang Yang discovered that Iran’s security environment is much safer than reported by the outside world.

First, most Iranian mines are built directly inside power plants, which, as partners, provide security for the mines and miners.

Secondly, Iran, which practices Islamic law, has very severe penalties for theft. When a thief is caught, he or she will not only be imprisoned and fined, but may also be subject to other penalties. The execution will be arranged in public to deter potential criminals.

As time goes by, driven by the large number of Chinese mining workers, many Iranian people have also joined the ranks of miners.

They began to look for ways to purchase second-hand mining machines in China and smuggle them into Iran. Today, many Iranians have begun to place dozens or even hundreds of mining machines in their homes and warehouses to mine directly.

Unlike China, most areas of Iran are not covered by power grids, and there is no distinction between industrial and residential electricity. Iranians can pay electricity bills directly to power plants and enjoy low electricity prices.

It is obviously impossible for Iranian power plants to turn a blind eye to such a crazy "mining fever".

They are both the most important partners and potential rivals of Chinese miners.

"Now many Iranian power plants will buy Chinese mining machines and mine on their own," Wang Yang revealed. "As far as I know, the largest Iranian power plant engaged in mining has deployed more than 10,000 mining machines."

In addition, many Iranian power plants have also launched mining farm hosting services to host mining machines for Chinese miners.

However, large Chinese miners who own tens of thousands of mining machines still prefer to send their own miners to Iran.

"Domestic miners are provided with food and accommodation, and their salary is about 6,000-8,000 yuan. If we send people to Iran, the salary will be at least 12,000 yuan," said Wang Yang.

This figure far exceeds the average local salary in Iran.

However, this money is not easy to earn. In Iran, the miners' lives are extremely boring. Wang Yang's mine is located in the power plant area, and there are 12 miners in three plant areas. They work in two shifts. After work, they go back to the dormitory to sleep, and then continue to work after waking up.

Miners who manage mining machines for different miners do not talk much about mining-related matters.

"The main concern is that the other party will steal our business and that our commercial secrets will be leaked," said Wang Yang.

Iranian local food is mainly naan, grilled meat and yogurt, which are not suitable for Chinese stomachs. Most miners choose to buy their own food and cook together, and the frequency of buying food is set at once a week.

This is often the only time they go out - as an Islamic country, Iran has no entertainment venues such as KTVs and bars, and miners rarely leave the mines.

In Iran, they missed home, but like nomads, they gradually adapted to making the world their home.

"Chasing dreams in the Middle East." This is how a miner described himself before boarding a plane to Iran.

In order to survive this winter, miners either stockpile second-hand mining machines in preparation for the flood season; or connect upstream and downstream to keep each other warm; or travel around the world to find the cheapest electricity.

From Iran in the Middle East and the five Central Asian countries to Libya in North Africa, Chinese miners have been searching for mines without stopping. *Some of the interviewees in this article are pseudonyms.