When China promised to take punitive measures on cryptocurrency mining earlier this summer, the Nasdaq.listed Bit Digital company stepped up its efforts to get more than 20,000 computers out of the country.
These computers are the heart of the company whose offices are located in New York, and it makes money by connecting them to cheap power sources so that its computers can solve the mathematical puzzles needed to mine new coins. The process, known as mining, has turned from something that anyone with a personal computer could have done ten years ago into a huge industry that uses many computers and large amounts of electricity.
Bit Digital and other mining companies are now facing a lot of obstacles as they take their computers out of the country, which until recently used two.thirds of the total global energy devoted to bitcoin mining. The machines can be damaged if they are moved, which makes packing and transporting them to other countries a difficult task. Such a new single computer costs about $ 12,000.
The companies had to decide whether to move their computers by plane or by sea, and take into account the cost of transportation and the time that would elapse. Bit Digital said they still have 9,484 machines – or nearly a third of the computers – in Sichuan Province in China, as of June 30. The company has hired large international logistics companies to help move the hardware and hopes they will bring it to North America by the end of September, said Samir Tavar, chief strategy officer at Bit Digital. The company sends computers to new sites in Nebraska, Georgia, Texas and Alberta, Canada.
The cost of moving the farms is very expensive
The whole process can cost millions of dollars. Oil prices have risen in recent months and bottlenecks in the transport sector created by the corona plague have caused commodity shipping prices to skyrocket. Computers from China imported into the US should be subject to a 25% customs duty. In addition to thinking about how to pack and ship the machines carefully, companies need to find facilities that have a strong enough power supply to ship them to.
“The financial impact on the miners in China is pretty big,” said Fred Thiel, CEO of the Las Vegas Mining Company Marathon Digital Holdings.
Miners make money from processing bitcoin transactions. In return, they get the opportunity to participate in a raffle in which the machines emit random numbers in an effort to emit the number that will release to the world a new Bitcoin currency. This makes mining profitable when the dollar value of Bitcoin is on the rise. An earlier rise in its price, which peaked at nearly $ 65,000 in mid.April, increased miners’ profits, but since then the world’s most popular crypto currency has lost nearly a quarter of its value. This week he re.crossed the $ 50,000 line.
The Bitcoin network releases a new currency every ten minutes and the number of coins that will be issued in the future is expected to decrease. This turns the competition for the release of new coins into an occupation that requires a lot of energy because the only way to increase the chance of reaching the desired number is to run more mining computers at the same time. At its peak in April, Bitcoin miners brought in more than $ 70 million a day, and a survey conducted by the University of Cambridge estimated the annual electricity consumption of bitcoin mining at 130 terawatts / hour – more than the electricity consumption of Argentina as a whole.
The message that surprised the companies
Despite a traditional stance against cryptocurrencies, China has become a major mining market because of its cheap electricity, especially in the coal.rich areas of Mongolia and Xinjiang and the power plants produced by the water power in Sichuan and Yunnan. While some companies like Bit Digital estimated that China might take punitive measures against mining – and began taking their computers out of the country by the end of 2020 – the Chinese government’s announcement in May and responses from subsequent provincial governments surprised other companies.
“It has always been something we have thought about but until now it has not been an urgent matter,” said Alejandro de la Torre, vice president of Poolin, a mining company that has been working in China for a long time. Pool companies like Poolin allow many miners or groups of miners to combine computing power to increase their chances of obtaining new coins, and then the miners share in the profits.
The last time China took steps that led to what some miners call “large.scale mining migration” happened when the government set ambitious targets for reducing coal use and introduced China as a world leader in anti.climate action. Apart from the US and Canada, mining companies ship computers to countries like Kazakhstan or Russia.
De la Torre said he was looking for sites in the US to which he could move some of the mining rigs from China and where he could build a larger data center.
Bit Digital works with companies like Compute North to find a home for the machines they have left. The company, which provides infrastructure for home mining rigs in Texas, South Dakota and Nebraska, has seen such a large increase in demand in recent months that it is developing five new sites that will serve as hostels for new miners. Additional sites are also being built in Texas and North Carolina.
The miners are starting to return to the grid
Other companies have sprung up to provide logistics services for those who want to find new homes for the delicate mining computers. Employees of a company called Hash House located in a warehouse in the city of Shenzhen in southern China, are engaged in cleaning, testing, repairing and repackaging the computers. Computers, which come from rural or industrial areas across China, sometimes come dirty or rusty, said Kirk Sue, the owner of Hash House. Only then, they are loaded onto planes.
Dave Frill, CEO of Compute North, said larger players with access to resources and partners in the U.S. are better positioned to deal with the exit from China. At Compute North, which has partnered with companies like the Nebraska Public Electricity Company, miners coming from China are helping to navigate the complicated process of finding reliable and inexpensive power sources.
“Like any market, what’s happening now is a bit of a Darwinian process,” Frill said. The company has received more requests to host mining initiatives coming out of China than its supplier can accommodate, he said.
There are signs that more reactors are returning to the networks. One measure of how much computing power needed to mine bitcoin reached its lowest level since September 2019 in early July, but in recent weeks it has begun to climb again.
Proponents of cryptocurrencies say the migration of miners will help decentralize bitcoin because it will make sure there is enough competition to release the currencies as well as verify transactions around the world.