China has now shut down almost all crypto mining operations in the country, with the last stand among the hydro dams of Sichuan.
Photo from CFP
By SI Linwei
“An exceedingly sad scene. A quiet end to an era, and maybe the beginning of a new one.” Such was the maudlin mood that descended upon China’s cryptocurrency miners on the night of June 19, overtaken by sudden sentimentality.
The government issued an order, the world’s carbon emissions fell, and a few rich people who have made their money in a highly questionable way – burning coal to solve meaningless math problems – will make slightly less money for a while. So what’s to cry about?
As all mining operations in Sichuan Province were shut down overnight, a video went viral, perhaps even fake, of ranks of flickering “mining machines” going dark. The lights went out. No blast, no casualties, no tragedy.
An order issued in Sichuan on June 18 introduced strict power consumption monitoring in real-time from midnight the next day, effectively pulling the plug of mining operations which, by some measures, are even more polluting than genuine mineral extraction from the actual earth. Any suspected mining activities are to be immediately investigated, with no room for negotiation, nowhere to hide electricity usage, and no more welcoming power plants offering bounteous energy.
Crypto miners have already been kicked out of the coal-rich northern provinces of Inner Mongolia, Qinghai, and Xinjiang, triggering a flight to Sichuan, where hydropower is cheap. In the two weeks leading to the final cut, miners begged for their livings, arguing for hydropower’s lower environmental impact and jobs created by crypto farms. They even went so far as to suggest paying more taxes! It made no difference. The roof is blown and the tunnel has completely collapsed.
Bitcoin billionaires began to bleat. “They broke my heart,” Xiong Yue, founder of Bixin, wrote on social media. He had been watching videos of crypto farms being unplugged as grief-stricken miners drowned their sorrows and wept all the way to the bank. Miner Bohe37degrees – now disappeared from social media – went so far as to call the shutdown “apocalyptic” – perhaps the language of someone who has played a few too many video games. The day after the ban, at a hastily organized event by mining machine maker Bitmain, a banner was put out saying “Let foes be friends. Let’s huddle together.”
As is normal in any industry, when operators are banned from one place, they simply move to another, where things are more lax, corrupt, or inept. The answer to the miners’ woes lies, they believe, overseas, a move that had already begun before the crackdown. Some mining-friendly countries have welcomed displaced miners with open arms. Arman Batayev, deputy director of Kazakhstan’s AIFC Business Connect, told reporters that Chinese miners are welcome to set up shop in his country, where they are guaranteed cheap electricity and full legal protection.
No new bitcoins were created for more than an hour on the night of June 19, versus the normal ten-minute interval. Miners elsewhere will reap some benefit in the medium to long run. The difficulty of the pointless sums which power Bitcoin will be reduced as the overall computation power across the network falls.
With the disappearance of industrial-scale crypto farms in China, computational power will be more evenly distributed. North America and Central Asia will rise as mining hubs. Professional miners and large financial firms dominate the market, leaving individual, sometimes amateur, miners at their mercy. Any operations that remain in China will be small hobbyists, a few machines in an apartment rather than a sprawling crypto farm, the decentralized structure that cryptocurrencies were originally designed for.
If decentralizing power had been the original intention of Satoshi Nakamoto, bitcoin’s mysterious creator, the fact that such power can vanish overnight is an argument both for and against the cryptocurrency itself.