International Bitcoin “miners” are reaping the rewards from China’s effective ban on energy-intensive practices, creating a vacuum by filling the digital tokens left by former Chinese competitors, and obtaining higher profits.

China’s largest Bitcoin producing province has launched Suppress In June’s computer-driven cryptocurrency mining, this was part of a broader attempt to reduce carbon emissions and promote private cryptocurrency, because the country can operate independently Official digital currency.

The country has always been the largest Bitcoin producer in the world, accounting for half of global production. Miners elsewhere said that the cooling of Chinese production has opened up markets for other competitors.

“Think of the global average daily production of Bitcoin as a pie. The size of the pie remains the same, and every existing miner can help himself get a bigger piece,” Chief Financial Officer of Hut 8 Mining, a publicly traded company based in Toronto Officer Shane Downey said.

Bitcoin miners create new coins by using powerful computers to solve mathematical puzzles. The number of coins that can be produced every day is fixed, so the fewer competitors, the easier and cheaper to mint new currencies.

The improvement of the economy means that entrepreneurs are launching new mining operations in countries around the world.

The overall computer power used for Bitcoin mining on a global scale was initially halved Chinese suppression, But according to data from the data website Blockchain.com, it is now about 30% lower than in May.

The profitability of Bitcoin miners depends on the current market price of the token, the cost and power required to run the server, and the speed of the mining unit.Bitcoin recovered from summer to $50,000 on Monday Low of about $30,000 Can further motivate miners.

“It’s like doubling the number of machines we have,” said Fiorenzo Manganiello, founder of the private equity firm Lian Group, which owns one of the largest renewable bitcoin mines in Europe.

Hut 8 Mining also benefited from this: The company’s mining revenue in the second quarter increased by 241% year-on-year to 31.4 million Canadian dollars (24.8 million US dollars). , These months are harvest months. Mining profits in the same period were 19.3 million Canadian dollars, up from 697,000 Canadian dollars in the same period last year.

“With China’s ban on domestic miners, the global [production] It has dropped by about 40% to 50%, and in Hut 8, we started to mine about 40% to 50% of Bitcoin, and the cost did not directly increase,” Hut 8’s Downey said.

The UK-based mining company Argo Blockchain also reported that revenue in the first half of 2022 increased by 180%, citing changes in global mining conditions that allowed it to produce more digital coins without increasing the number of machines used. Pre-tax profit soared to 10.7 million pounds, compared to 523,074 pounds in the first half of 2020.

Hut 8 Crypto Mine
Hut 8 Encrypted mine. The company’s mining revenue increased by 241% in the second quarter © Hut 8 Mining

Sam Doctor, head of strategy at BitOoda, a US digital asset expert, estimates that it will take about 18 months for capacity to return to pre-ban levels. It takes time to replace lost resources because it involves upgrading electrical infrastructure and building facilities.

Miners from China are trying to migrate to neighboring countries For example, Mongolia and Kazakhstan, but many equipment cannot be transported across borders. There are also concerns about the stance of local authorities on Bitcoin mining.

Bitcoin mining has Severe environmental impactAccording to the Cambridge Bitcoin Electricity Consumption Index, it accounts for 0.4% of the world’s energy consumption and consumes more electricity annually than Finland or Belgium. China’s miners have had a particularly large impact due to their dependence on coal energy.

“As far as the current situation is concerned, we believe that cryptocurrencies have a long way to go to meet ESG standards,” said an analyst at French asset management company Candriam, referring to investment standards related to environmental, social and governance issues. .

Outside of China, mining activities are leaning towards areas rich in renewable energy resources such as Norway and Canada. But with the surge in demand, professional site operators find it difficult to build facilities fast enough.

“It will take about a year or more for mining capacity to recover. Kjetil Hove Pettersen, CEO of Norwegian miner and data center operator Kryptovault, said that a lot of new mining equipment was sent to the United States and Canada instead of China, but the data The center capacity is a bottleneck.

Server racks in a data center operated by Kryptovault, Norway
Server racks in a data center operated by Kryptovault, Norway. As demand surges, site operators find it difficult to build new facilities fast enough © Norwegian Kryptovault

In the United States, Texas has been one of the biggest beneficiaries of the new mining landscape, while professional mines in Norway and other European countries have been frustrated by insufficient demand.

“Someone called us and asked us to accept their machines. If we provide them with space in our data center, some people will provide 50% of their future profits,” said Manganiello of the Lian Group.

The price and quality of computers needed to mine encryption units have also declined. Before the Chinese crackdown, miners had to pay higher prices for their computers because they were looking for more efficient ways to obtain Bitcoin. As Chinese servers pile up, the price of computers—and the barriers to making money that come with them—has collapsed.

Kryptovault’s Hove Pettersen said: “Currently, the profitability of Bitcoin mining is so high that even the oldest and least efficient machines can be profitable.”

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