5 Minutes, by Read more: * Chinese bitcoin miners face state-sanctioned financial risks* Bitcoin miners prefer data centers with low-cost power and pleasant weather* After short-term interruptions, geographic diversification is probable. Reuters, HONG KONG/SHANGHAI, July 7 – Large bitcoin miners departing China to avoid a government crackdown will take months to re-establish operations, as data centers from Texas to Siberia try to acquire space and electricity for them, while many smaller players may be unable to move at all. Bitcoin is created or “mined” by high-powered computers, usually located in data centers across the world, vying to solve hard mathematical riddles in an energy-intensive process. After the State Council, or cabinet, issued a crackdown on bitcoin trade and mining in late May, targeting financial concerns, the industry in China, which represented for as much as 70% of global capacity, is in disarray. Miners in China are now closing down or looking to relocate, in search of accommodating authorities, low temperatures to avoid overheating machines, and cheap electricity – ideally surplus power from hydro plants or unused oil fields. Even after plummeting 50% since May, the power required by bitcoin mining globally in early July translates to an annual consumption roughly as great as Austria’s, according to estimations by academics at the University of Cambridge. While the move is expected to spur the development of new mining centers in the long run, miners are already encountering limited data center capacity and logistical hurdles overseas. “None of these guys are going online in June or July,” said Thomas Heller, Compass Mining’s chief business officer, noting that miners had to gather machines distributed across China, test, clean, and pack them, ship them abroad, and clear customs before installing them. Smaller Chinese miners, who have less cash on hand to pay for shipping and are unfamiliar with working outside, may struggle to find hosting centers they can trust, according to miners. Nonetheless, Compute North, which operates bitcoin mining data centers in Texas, Nebraska, and South Dakota, is speeding up growth plans for next year in order to accommodate “a large surge of queries” from China. “There’s no doubt in my mind that we’ll see a lot of computers sitting in warehouses for the next six, nine, or twelve months while the infrastructure catches up,” said Dave Perrill, CEO of Compute North. “For large-scale deployments, we’re targeting the first and second quarters of 2022… (but) it’s not a simple switch; it requires a lot of technical engineering, procurement, and construction.” BitRiver, a Moscow-based company that runs bitcoin data centers in Siberia, has accelerated plans to create new facilities and expand current ones in order to fulfill some of the demand from individuals fleeing China. BitRiver forecasts that demand for space in its facilities will climb to 1.5 million mining machines requiring up to 2.5 gigawatts of power, dwarfing the 125 megawatts of power consumed by its existing three data centers. “We know corporations are leaving China because they are flocking to us,” said Roman Zabuga, a representative for BitRiver. According to Adam James, a senior editor at OKEx Insights, China’s ban on bitcoin mining might result in up to 90% of all mining in the country going offline. In desperation, some miners are dumping machines. According to co-founder Didar Bekbauov, the Kazakhstan-based hosting center Hive Mining receives roughly four questions each day from Chinese potential clients inquiring about rates, availability, and regulations. Kazakhstan simply does not have enough ready-to-use data center space to accommodate all of the miners, he explained. However, the turbulence in Chinese bitcoin mining isn’t terrible news for everyone. “Our revenue jumped automatically after hundreds of thousands of bitcoin mining equipment in China went down,” said Dale Irwin, president of Greenidge Producing, a bitcoin mining and power generation facility based in New York. The bitcoin algorithm maintains a consistent rate of production, altering every two weeks to demand more processing power to make bitcoin if there are many machines mining, or less if there are less. The computing power used to mine bitcoin has dropped to a six-month low since China’s crackdown. The crackdown, according to Kevin Zhang, vice president of business development at Foundry, a crypto mining, finance, and consultancy organization based in the United States, could stimulate international diversification in the long run. “A lot of regions previously unexplored by bitcoin miners, like Southeast Asia, South America, or Australia, will be incentivised to use their stranded renewable power,” he said. (Editing by Sumeet Chatterjee and Lincoln Feast; reporting by Alun John in Hong Kong and Samuel Shen and Andrew Galbraith in Shanghai; additional reporting by Alexander Marrow in Moscow and Allison Lampart in Montreal.)/n
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