If you talk about Bitcoin (BTC) mining, you should be talking about China. China has become a giant in the bitcoin mining ecosystem with large mines and yards, fast and cheap labor, and a lot of control over the global retail power. So, should you regulate mining there? Do the positives outweigh the disadvantages? Is China really a threat to the Bitcoin ecosystem? Let’s take a look at the state of China’s mining industry.
Back to basics
In the beginning of Bitcoin, you could just mine from your laptop or set up more home miners to run the hash algorithm. But as more miners began to strike and bitcoin mining became more difficult, higher levels of computing power and electricity were needed to solve the equations and get the rewards.
You can only extract a limited amount of Bitcoins – 21 million tokens, so over time it will get harder and harder to extract them. Miners are still demanding better, faster machines that require more energy. Today, mining is moving to large data centers where thousands of miners work day and night.
Related: How to Extract Bitcoins: All You Need to Know
Why was all this mentioned? For large-scale mining, energy costs, labor costs, speed of acquiring new equipment, and sustainability play an important role if the goal is to make money, and China has an advantage in nearly all of these areas.
A mining country in China
At the end of 2019, China produced nearly two-thirds of the world’s cannabis power. Despite the fact that the use and exchange of cryptocurrencies is banned in China, and bitcoin mining is threatened with closure, the government has dramatically changed its mind and increasingly supports the use of blockchain technology in its major industries and is allowing Bitcoin mining to grow.
Related: Bitcoin holders in the US are concerned about China’s takeover of mining
Bitcoin mining in China is a growing industry because labor costs are cheap, turnover times are incredibly fast, delivery times and production costs are much lower as the country is the center of world trade. Since most of the devices used to extract Bitcoin are made in China, the miners can be upgraded very quickly. If you want to quickly build a data center with low cost and cost do it in China.
Low energy costs are also available in the form of hydro power. Since it takes a lot of strength to crack bitcoins between driving miners and driving fans to cool down miners, the data center should get power at the lowest possible cost. According to reports, the cost of hydropower in Sichuan Province during the rainy season is only $ 0.02 per kilowatt-hour, and the Chinese government is currently encouraging mining in the province so that companies can take advantage of the hydropower stations there.
Related: Sichuan Rainy Season to Give Bitcoin Hash Prices a Much-Wanted Boost
But only a few mines in China run cleaner and cheaper watercolors. Instead, most of them run on coal, which is the dirtiest and most affordable option. Among the main energy sources, hydropower is the cheapest today at $ 0.01 to $ 0.02 per kilowatt hour, while wind is another inexpensive alternative at 0.025 cents per kilowatt hour. Gas and coal are more expensive options, from $ 0.03 to $ 0.035 (plus transportation and taxes). Thus, although labor and materials can be cheap, the use of coal mining makes them unsustainable, both in terms of cost and environment. Given the political instability of establishing mining companies in China, you can look elsewhere.
Can China stay on top?
Anyone who wants to establish large scale mining is increasingly looking for places in the Nordic countries, Canada and the USA. Although these sites may have higher start-up and maintenance costs, the availability of sustainable and cost-effective electricity proves to be a major advantage. Additionally, these areas are more politically stable, so there is less threat that the government will someday decide to end all mining. In fact, Canada considered mining a “critical service” during the COVID-19 pandemic shutdown.
Related: An overview of the cryptocurrency mining framework in different countries
This may be the reason for changing global retail power. According to a recent report, the potency of cannabis is declining in China from last year, but it is increasing in other parts of the world.
Another reason for the decline may be that mining in China was hit hard in 2020. The COVID-19 pandemic has disrupted supply chains, delaying the delivery of new equipment to data centers. In an industry where every minute counts, hiring slower, older miners means an extra, longer day to lose money and benefits. Additionally, quarantine rules in China prevent workers from working on their platforms, making the job even more difficult.