Hundreds of depressed Bitcoin miners transformed a luxury hotel in western China one weekend in late June. They were dealing with a major issue: the Chinese government had recently banned cryptocurrency mining due to concerns about illegal coal mining and the financial risks it entailed. You now had to figure out how to get millions of computers out of the country.
The miners sat in a row of white chairs in the Gran Melia Chengdu hotel, attentively listening to executives from Bitmain Technologies, the world’s leading manufacturer of mining equipment. Between talks on Texas energy fundamentals and crypto-mining in Kazakhstan, attendees snacked on cupcakes and drank cocktails.
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Employees at Bitmain offered to act as matchmakers, connecting miners in the United States, Central Asia, and Europe with data centres. They also warned against unchecked expansion into new markets, which would raise costs for everyone. “Say no to the vicious event,” read one of the event’s slides, “Hold together for warmth.” The urgency of the situation became clear only a few hours after the meeting.
Alex, a Chinese miner who did not want the government to publish his last name for fear of retaliation, sang Karaoke as he called on his mountain machines outside Chengdu to check in with his colleagues. His colleague informed him that local authorities had just disconnected power, making his facility silent and potentially unsuitable.
“My money’s all gone,” he moaned as he chugged a beer. “I’m losing money every day because I don’t run those machines.”
Chinese miners were forced to leave behind cheap electricity generated by abundant coal and rustling rivers, propelling them into a wild and extreme world of crypto-energie-hunting. Miners scurried to gold fields in California and Alaska over a century ago, and bitcoin miners are now sneaking to any cheap, reliable source of power they can find. Their next goals are critical for a decentralised, independent industry, as well as other energy-intensive industries competing for greener electricity access.
Of course, nothing is extracted from the ground by the Bitcoin mining plant. Instead, it is typically made up of thousands of computers designed to perform the complex calculations required to keep the cryptocurrency network running. The computers are stacked on storage shelves and are frequently cooled by large fans of water. Warehouses in China are typically located near their power sources, such as independent hydro power plants or coal mining thermal plants. According to TylerPage, CEO of Cipher Mining Technologies Inc., electricity accounts for roughly 80% of operating costs.