6 Aug 2021
The Great May 2021 China Ban and Its Implications | INSIDE MINING
Thanks to www.bitdeer.com (https://www.bitdeer.com/).
Host C. Edward Kelso
China's been a large part of the Bitcoin money ecosystem for quite some time now: ASICs are manufactured there, data centers, pools. For years, China had 2/3rds of the world’s hash rate.
Last time China cracked down was in 2017, responding to the ICO craze. Exchanges were crushed, and miners lived in a grey area for years after.
By March of this year, the government went after miners in Inner Mongolia. Some thought maybe the crackdown was over environmental concerns and so it would be confined. The end of May cleared it all up, of course.
Even some of the miners in China were skeptical of the ban’s comprehensivity. For years, they’d work with local officials to gather permits and pay fees. But to no avail: facilities were padlocked, machines blocked, etcetera.
Provinces across the country were impacted, including Sichuan, which was thought to be possibly spared due to its reliance on renewable hydro power. But those miners were closed as well. Hash rate soon fell, obviously, as a result.
Something like 50% of the Bitcoin network was essentially shut off.
Hash rate falling made it easier for more smaller miners to climb aboard, so that’s a positive outcome.
But it does boggle the mind to think of how many mining rigs sit idle in China now.
Some optimists are holding to the hope China might eventually ease restrictions and eventually allow some mining to continue. At present no signs point in that direction.
The country is on something of an environmental kick. Cryptos like Bitcoin tend to undermine a great worry for the government, which is capital flight. And of course they’re constantly floating their own central bank digital currency, the digital yuan. Again, it doesn’t look good for miners in China.
And then consider all the previous investment that went into those many facilities in China. All of that was confiscated in a wink, in no time. Do you really believe miners are going to want to go through that kind of capricious uncertainty again?
What’s interesting is the impact China’s ban is having. Places like Texas and Kazakhstan are benefitting from miners on the prowl for capacity.
Obviously, Central Asia has a geographical advantage over the US, and it’s a lot easier to get back up and running -- the United States and Canada are plagued by regulation and permits.
Latin America might be a fit, but those tend to be typically hotter climates as a rule which complicates the cost of data center set ups. Not impossible, of course, but maybe not as cheap as previously thought.
But, what that could do, with Latin America being more receptive to the mining industry, is push manufactures to innovate around internal rig cooling systems. So who knows.
It does appear, however, mining rig machine manufacturing can thrive still in China. There’s a lot of experience in China when it comes to machines. And the relative cheap labor, parts, and assembly costs can make China attractive at least on that level. But, again, for how long? What if the government cracks down further?
And maybe there is a final hope for North America gaining in this scenario, actually. More regulatory clarity, more relative transparency in the rules of the road, more publicly traded mining companies, means miners won’t have to worry about being banned suddenly out of nowhere. So, at least for larger mining concerns, North America can be very attractive.
