The monthly average computing power ratio of different countries (April 2020)

Source: Center for Alternative Finance, University of Cambridge

Among these countries, Kazakhstan has emerged as the leader in hash rate growth – the country saw a 334% increase in Bitcoin hash rate in the seven months from September 2019 to April 2020.

The rise of Kazakhstan’s mining industry is due to local support for Bitcoin mining.

Since the disintegration of the Soviet Union and Kazakhstan's independence, the country's economy has been highly dependent on the export of mineral resources such as oil and coal. In order to get rid of its dependence on mineral resources, Kazakhstan has set its sights on digital currency.

Statistics show that Kazakhstan has a power surplus of 3,500MW. If this part of power resources is sold to miners, the country is expected to earn an additional US$1 billion per year.

In June this year, the Minister of Innovation and Aerospace Industry of Kazakhstan announced in the parliament that it planned to attract 738 million yuan in digital currency mining investment within three years, and announced that mining would be exempt from paying taxes and fees.

At the same time, the bitcoin mining industry in the United States is booming. Today, the United States has become the second largest bitcoin mining country after China.

"Many of the new mining machines launched by Bitmain recently have been bought by American customers, and one order is tens of thousands of units." Yunnan miner Wan Qiang told Yiben Blockchain.

In June this year, the American mining company Core Scientific announced that it had purchased 17,600 Antminer S19 mining machines from Bitmain.

The Antminer S19 mining machine is the latest mining machine owned by Bitmain, and it is also one of the mining machines with the strongest energy efficiency ratio on the market, with a single price of 14,000 yuan.

Core Scientific claims that this is Bitmain's largest S19 order. The company operates five bitcoin mining farms in the United States, with a total power scale of up to 450MW, which is equivalent to a medium-sized thermal power unit.

In the United States, some power plants are unwilling to be lonely and have started a mining business. For example, a natural gas power plant in New York, USA purchased 7,000 bitcoin mining machines to consume excess power generation.

image description

Source of Bitcoin mining machine installed in the power plant: BlockPitch

In addition to the United States and Kazakhstan, another rapidly rising mining country this year is Malaysia. The advantage of Malaysia in attracting miners is ironic.

Therefore, there are even mining farms that use ID cards to sign lease contracts with landlords. As long as they are caught stealing electricity, they will run away.

image description

The Malaysian media "Nanyang Daily" reported that in 2018, there were at least 50 cases of power theft and mining in Malaysia. In the seven months from January to July 2020, the number of local power theft and mining cases has increased to 94.

secondary title

Mining goes to sea

In overseas mines, there are many Chinese miners.

As early as the beginning of 2018, Reuters reported that Bitmain planned to build a mine in Quebec, Canada. According to the report, Bitmain is selecting a site for the mine locally and has started negotiations with the power sector.

Quebec is located in southeastern Canada and is the largest province in Canada. The local water resources are abundant, the electricity price is low, and the temperature is low, which can save the cooling cost of the mining machine.

In October 2019, Bitmain reached a cooperation with Canadian mining company DMG, which will assist Bitmain in managing multiple mines in North America. The Bitmain Texas mine with 15,000 mining machines is managed by DMG.

"The specific form of cooperation is very simple, that is, Bitmain produces mining machines and hires some local employees as managers." Wan Qiang said to Yiben Blockchain, "And DMG, as a local leader, is responsible for the relationship between power supply and local governments. "

In fact, it is not difficult to open a bitcoin mine in the United States. The story of Bitmain building a mine in a small town in Texas illustrates this point.

The mine is located in a small town called Rockdale. In 1952, Alcoa established the largest smelter in the United States locally. Rockdale's population has since doubled to more than 5,000 people.

However, with the decline of the American manufacturing industry, the smelter gradually ceased production after 2008, thousands of people lost their jobs, the town government also lost a major tax source, and two local hospitals went bankrupt as a result.

Although Bitmain has greatly reduced the size of the mine due to its own reasons, it still deployed 13,000 mining machines locally and solved the employment problem of dozens of people.

image description

Source of Bitmain’s mine in Rockdale: Governing

Soon after, some American mines also poured into Rockdale to mine locally. An American company called Whinstone also helped build a local park and funded three impoverished middle school students.

The mining machines of Bitmain and Whinstone are placed in the abandoned factory of Alcoa. The local mayor Chris told the American media "Governing": "It's really cool to see something new replace the old thing."

A Chinese who is engaged in blockchain business in Africa told a blockchain that Canaan is also looking for partners in Africa recently, trying to expand its mining business to Africa.

secondary title

future unknown

On this Odaily, miners are like nomads who live by water and grass. Where there is cheap electricity, there are miners.

The rapid development of the mining industry in overseas countries is also directly related to electricity charges.

For example, Kazakhstan is one of the countries with the lowest electricity prices in the world, and in some areas it is even less than 1 cent per kWh.

The United States also has its own advantages.

The latest official data released by the U.S. Energy Information Administration shows that in April 2020, the average electricity price in the United States was 10.42 cents per kWh, or about 0.72 yuan. Compared with domestic electricity prices, this price does not have an advantage.

However, the special national conditions of the United States may give miners the opportunity to obtain extremely low electricity prices.

First, the United States is made up of 50 states, and electricity rates vary greatly between states. For example, the electricity rate in Hawaii is as high as 30 cents per kilowatt-hour, while the average electricity prices in Washington State and Texas, which are favored by miners, are 8.08 cents and 8.47 cents per kilowatt-hour, respectively.

Secondly, the industry pricing strategy of electricity in the United States is different from that in China. China's power industry focuses on people's livelihood, and the residential electricity price is lower than the industrial electricity price; while in the United States, the residential electricity price is much higher than the industrial electricity price.

For example, the residential electricity price in Washington State is 9.67 cents per kilowatt-hour, while the industrial electricity price is only 4.77 cents per kilowatt-hour, or about RMB 0.33.

The average price for industrial electricity in the state is only $0.33. This means that in some areas of the state, there will definitely be electricity prices lower than 0.33 yuan.

Finally, the U.S. electricity market is highly market-oriented. As early as the 1990s, the United States liberalized the free electricity sales market, allowing power plants to find customers themselves and negotiate electricity prices directly.

In recent years, the U.S. manufacturing industry has continued to slump, and industrial power consumption in many areas has been greatly reduced, resulting in excess power resources. This gives miners an advantage when negotiating with power plants.

"In places like Rockdale, there used to be an aluminum plant. The aluminum plant is a big consumer of electricity. If it stops production, how will the power plant that supplies it survive? If there are mines coming in at this time, they are willing to fill in the shortfall in electricity consumption. The power plant can definitely give a cheap enough electricity price." A mine owner said to a blockchain.

Although the U.S. mining industry is booming today, most domestic miners still have concerns about going to sea.

“I’m not familiar with foreign countries, and the risk of mining is too great.” Wan Qiang told Yiben Blockchain, “Those people in the mining circle who advocated mining in Iran last year are basically silent now.”

The reason for the ebb of Iran's mining boom is simple: Iran's political situation has been unstable in the past year, and the entry and exit of mining machines and mine operations have been affected.

"Chinese miners who go to sea to mine are relatively passive. Outside, all kinds of relationships are difficult to control." Wan Qiang said, "In some small countries, even if you have a relationship with the president, when the government changes and the new president takes office, the relationship Also useless."

He pointed out that the most important thing for Chinese miners to go overseas is to form a bond of interest with local partners, so that they can make money together and are interdependent.

“Some Chinese miners going overseas are most afraid of being exploited first by local partners and then harvested later.” He explained, “Miner manufacturers like Bitmain can control the supply of mining machines in the mine, and the locals must not dare to neglect. But it’s not necessarily the case for small miners.”

Miner Lao Ding believes that since 2018, miners in the domestic mining circle have been trying to go to sea. But until today, it is still not a big trend for Chinese miners to go to sea.

Many miners said that since the halving of Bitcoin output this year, the capital agglomeration effect of the mining industry has become more obvious.

"Whether it is staying in the country or going overseas, things in the mining circle in the future will be more dominated by big companies and big capitals such as Bitmain and Canaan." Wan Qiang said, "They will build tens of thousands or tens of thousands of mines at every turn. It is difficult for small and medium-sized miners to keep up with a large mine with tens of thousands of mining machines.”

The rise of overseas mining is quietly changing the global mining landscape.

But when it comes to industry participants, the fate of small and medium-sized players is already in jeopardy, both at home and abroad, as mining mergers intensify and head effects become more apparent.

*The interviewees in this article are pseudonyms.