Visit: He went to Inner Mongolia to build a mine

The weather in the sparsely populated Inner Mongolia grassland is very similar to that in Han Feng's hometown in Guizhou. The sky is blue, with continuous white clouds and endless grassland.

In August, Han Feng decided to build a Bitcoin mine in a banner here (a county-level administrative region unique to Inner Mongolia).

The proposed mine site is next to the local substation. He wants to build 48 mines here, with an estimated annual electricity consumption of 800 million kilowatt-hours. This is a business that can increase the local electricity revenue by 20 million per month.

In July, Xinjiang Economic and Information Commission issued a regulation to remove illegal Bitcoin mines in the region, but this did not affect Han Feng's "marriage" with the local government of Inner Mongolia. Han Feng hoped to discuss the power supply and price with the flag chief in detail, and reach an agreement with the government to build his mine before the dry season in the south.

Policies, regulations, operations, how to build a Bitcoin mine through local governments is a rather mysterious thing to the outside world. But what is the real process? How does the local government consider the relevant policy risks? Deepchain Finance followed Han Feng's cooperation with the Inner Mongolia government throughout the process, striving to get a glimpse of it.

“What is Bitcoin? Is it illegal?”

The phone rang, and Han Feng, who had just rested in a motel, answered the call. It was from his middleman.

"I can meet the top leader tonight and have a chat." Han Feng got up from the bed. The top leader the other party was referring to was the head of a certain banner in Inner Mongolia.

Han Feng learned from the middleman that the State Grid electricity price in Inner Mongolia could be negotiated down to 0.031 per kilowatt-hour.

At present, the computing power of the entire Bitcoin network has soared to nearly 50EH/s, while the price of Bitcoin has fallen to more than US$6,000. According to the current market conditions, the daily profit of a Bitcoin mining machine is only about 14 yuan.

The profits from Bitcoin mining are getting thinner and thinner, and finding lower electricity prices has become the key to the survival of miners.

Han Feng, who has worked as a miner for four years, is familiar with electricity prices across the country. The average electricity price at his mine in the Beijing-Tianjin area is close to 60 cents. The electricity price of small hydropower stations in the south is the lowest, about 25 cents, but they can only meet the power supply needs during the flood season. In comparison, Inner Mongolia, where the electricity price is 31 cents and the power supply is stable throughout the year, is the most cost-effective.

This time, Han Feng made full preparations and discussed the cooperation with a banner chief in Inner Mongolia, striving to build this mine in Inner Mongolia.

"Are you nervous?" Assistant A Zheng asked Han Feng, who was taking a deep breath. Han Feng did not answer.

Going to the government is also a very risky thing. One of Han Feng's friends was once defrauded of millions of dollars because he believed the lie made up by someone who said he was the son of a city mayor and thought he could get a preferential electricity price.

Han Feng sat up straight during the meeting with the flag chief. This was Han Feng's second visit. Through a connection, he established a relationship with the local government.

“What is Bitcoin? Is it illegal?”

When the flag chief heard that Han Feng was going to build a Bitcoin mining farm here, he suddenly said this.

"Let me report to you that the government's attitude is this: it has banned Bitcoin exchanges, but it neither encourages nor bans Bitcoin mines."

The flag chief frowned. Han Feng felt that since they were going to have a long-term cooperation, they still needed to tell him what they were going to do here specifically.

Externally known as the "Big Data Processing Center"

Han Feng handed the plan to the flag chief. He planned to build 48 mines on this grassland with a total of 57,000 mining machines. After completion, it will consume 800 million kWh of electricity each year and pay 240 million yuan in electricity bills for the local area.

This is a considerable income for the locals. This is the least developed banner in Inner Mongolia, with an average wage of more than 3,000 yuan per person. Marble factories and agriculture and animal husbandry are the main sources of income for the locals.

But this place is located in the Inner Mongolia Plateau, which is rich in coal resources, and has abundant wind power and thermal power.

Before Han Feng arrived, the local area had been worried about "transporting and selling" the excess electricity.

According to Han Feng's plan, after the mine is completed, it will provide 400 jobs for the local area, with each job paying 6,000 yuan a month.

Regardless of whether it can be realized in the end, these have aroused the interest of the flag chief.

The banner chief did not express too much concern about the relevant policy and legal risks. For the local government, this was a worthwhile deal.

As early as 2017, Bitmain, the largest mining machine manufacturer in China, built a mining farm in the neighboring banner, which also gave the banner chief a reassurance.

The flag chief didn't know much about Bitcoin. After Han Feng emphasized to him that Bitcoin mining was not illegal, the flag chief took the initiative to ask: "Do you think we can apply for this mine in the name of big data analysis and processing?"

Shenlian Finance learned that in the cooperation cases between mining farms and local governments, most of them apply in the name of big data processing and analysis. This not only allows them to pass government approval, but also allows them to obtain national subsidies for high-tech industries and electricity discounts.

Han Feng has some mining farms that were approved in Guizhou under the name of a big data processing and analysis center.

The above-mentioned mining farm built by Bitmain in Inner Mongolia is also under the name of a big data processing center.

Tax evasion mines are under special supervision

Han Feng doesn't like dealing with the government; he's afraid of frequent policy changes.

"If there is a change of leadership or a new policy, they may not recognize this electricity price, and we will have no way to deal with it then," said Han Feng. So he hopes to negotiate this cooperation with Inner Mongolia as soon as possible.

On September 4 last year, seven ministries and commissions jointly issued a document stating that virtual currency ICO projects were illegal fundraising and ordered the closure of domestic exchanges. At the beginning of this year, the supervision of mining farms also gradually began.

A document led by the Internet Finance Risk Special Rectification Office Leading Group (hereinafter referred to as the "Internet Finance Rectification Office") was successively issued to local financial offices. This document mentioned that it is necessary to actively guide enterprises under its jurisdiction to withdraw from the "mining" business, and requires local governments to compile statistics on enterprises engaged in "mining".

Mines that are not registered as companies locally and do not pay taxes are the focus of supervision.

Han Feng told Deepchain Finance: "In fact, this does not have much impact. The government is just clearing it, but whether to refund it or not still depends on the mine. If there is really no other way, the mine will find another place to continue."

"The low price of coins and the insufficient computing power of the mining pools are the main reasons for the closure of mining farms," ​​said Han Feng.

A miner told Deepchain Finance: "In fact, the government's supervision is to guide the industry to develop in a healthier direction. What is being cleared out are small mines that do not pay taxes and steal electricity."

At present, Han Feng still has some mining machines in the south, using local private hydropower. Now the south is still in the flood season, which is the best time for mining in Sichuan and Yunnan. The water in the river flows through the hydropower station, and the electricity that is not used up will be released in vain. The mining farm only needs to negotiate the price with the small factory manager of the private hydropower station, and then it can build a factory and mine.

But during the dry season, the mines must either relocate or connect to the national grid to continue operating. Han Feng went to Inner Mongolia to discuss electricity in preparation for the dry season.

The mine being negotiated this time is Han Feng’s first mine in name. Before, he basically entrusted his mining machines to other mines. He bought an already built mine in Caofeidian, but it was closed in April this year because it was not profitable.

Building mines in places like Inner Mongolia and Xinjiang, where there are few people and there is an endless supply of electricity, although the price of electricity is higher than that of private hydropower stations in Sichuan and Yunnan, etc. But this is a more secure option, at least it can ensure stable operation all year round.

After returning from Inner Mongolia, Han Feng thought about it and wanted to ask the flag chief to lower the electricity price. After the electricity price was settled, he would build a factory next to the Inner Mongolia power station, and the power from the power plant would be directly transported to his 57,000 mining machines through transformers.

But Han Feng is also worried that with such a market, he doesn’t know when he can get his money back. Three months, half a year, a year? With the fluctuation of the currency price, everything is unknown.