China Bitcoin Mining: Losing Access to Hydroelectric Power?
Cheap hydroelectric power may be restricted for Chinese miners of Bitcoin, putting them on a level field with worldwide mining, a note from a regional power company shows, among other reports of mining facilities moving in search of suitable power sources.
Cheaper energy has been one boon for Chinese miners of Bitcoin, besides the powerful position of Bitmain. But now, miners may be thrown off the grid and lose access to cheap hydroelectric energy.
One of the first to take the news seriously was Whale Panda, a known supporter and holder of Bitcoin:
I don't know what % miners this affects, but it will mostly be miners that were switching over to BCash anyway. This in combination with competitors for Bitmain is great news for decentralization. https://t.co/HWAPsHtZ9n— WhalePanda (@WhalePanda) November 14, 2017
The announcement apparently comes as a circular from the Sichuan Electric Power Company stating it would no longer provide the power to mining operations. The Sichuan province is also undergoing a years-long crackdown on smaller hydroelectric plants, to consolidate the province's power system as larger dam projects are being built.
Mining insiders spoke to Tech Node, stating earlier that finding cheap power is not so straightforward and miners are not protected and guaranteed they would receive enough power:
"The southwestern region has abundant hydropower resources," an insider said, “so electricity costs about half the price during the wet season. It’s hard to imagine why any mine would want to relocate now."
"The price is so high at the moment," a Bitcoin mine manager, who asked to remain anonymous, said. "Shutting down costs mine owners hundreds of thousands of yuan every day."
Another province with rich water resources, Yunnan, is undergoing a similar reform of hydroelectric power, so more state control is expected in general as smaller hydroelectric plants are ditched for large dam projects.
The miners' troubles, therefore, may be in fact related to electric power regulations rather than to an outright crackdown on mining and the usage of Bitcoin. The power regulations mean miners would have to search for new locations or sources of power, but it would not affect the market in the long term as the difficulty would adjust to lowered hashing power.
At the moment, China is the world's powerhouse in mining Bitcoin and other cryptocurrencies. Sources show that more than 71% of the world's hashing power is delivered through Chinese computational centers. The data show as much as can be accounted for, with possibilities of hidden mining power.
Iceland, considered a large mining hub, yields 2% of the hashing power, while the US, despite the building of new mining centers, has just 1% of the power. China still has much cheaper coal energy to supply to mining operations.
But China has further centralized mining by drawing in international or solo miners to the larger pools, which pay out more predictable rewards.
It is extremely hard to calculate the real hashing power. In the past month, a drop in the Bitcoin hash rate has been observed, with some of the power moving to Bitcoin Cash, but the rest has come offline without being accounted for.