The sleeping giants are awake once more – In Canada, US, Russia and Kazakhstan
You cannot keep them down for long!
It was inevitable, given the global acceleration of interest in cryptocurrency during the course of this year, and the massive investment of time, innovative effort and resources in blockchain protocol development, that the mining gap left by the exodus of a huge chunk of China’s large participants would be filled.
As is the case with the cryptocurrency community in all of its aspects, the new mining boom has been fueled by an interesting dynamic, that being the purchasing of Chinese mining rigs by cryptocurrency mining entities all over the world, specifically outside of the Chinese internet firewall and away from the long arms of the communist government which actively sought to ban all cryptocurrency mining activity across many regions of the People’s Republic in the summer of 2021.
Back then, the hysteria that was being peddled across many Western mainstream news channels would have made it easy to believe that many major cryptocurrencies – in particular Bitcoin – would begin to lose their edge in terms of value because of a sudden cessation of mining by giant operations in China that had had a huge advantage over any rigs in any other region of the world due to cheap and sometimes free electricity, enabling factory-like industrial mining rigs to have been established across the country, which by the time the government intervened, were mining over 70% of the world’s newly produced Bitcoins.#
Surely a sudden outage of up to 70% of all mining facilities would make it easier to mine Bitcoin and affect the value? Nope. Far from it. This incident merely stress-tested Bitcoin and its continued rising value and robustness of its global infrastructure was demonstrated to all and sundry.
In fact, the removal of Chinese mining rigs, and the sudden dumping of the hardware caused graphics card manufacturer stock to decline rapidly in the United States as second hand graphics cards flooded the market.
This should have been a sign of things to come.
Many miners moved to Texas, a state which heralds the Bitcoin mining industry, and does not have an anti-libertarian government wanting to have a go at anyone who dares to contribute to a vast, futuristic decentralized economy and society, however that is now being accelerated further.
It has come to light this morning that the Bitcoin mining boom that is now taking place is being fueled by the purchasing of the gigantic mining rigs that were used in China before the bans by the government took place. These rigs are now being connected to the internet and power sources in other parts of the world that do not have a totalitarian government, and are back in business.
Fourteen of the biggest crypto mining companies in the world have moved more than 2 million mining machines out of China in the months following the ban, according to data gathered by the Financial Times, with most of these machines having been hastily moved to the US, Canada, Kazakhstan and Russia.
Electricity usage is one of the key factors that dissuades people or entities from starting their own cryptocurrency mining business. Due to the extremely clever blockchain which simulates physical assets in that it keeps the resource finite and therefore the value high, the cost of electricity needed to power ASIC or graphics card mining activities is huge.
Therefore, it makes sense that many of these rigs are moving to Kazakhstan and Russia, because those are two nations upon which the entire economy is based on raw material commodity extraction and export, the largest single commodity being crude oil.
Because the two countries are two of the world’s largest energy providers, electricity is not expensive and there is no likelihood of either nation joining the ‘green’ bandwagon, as it the whole climate change rhetoric is contrary to their main industry, fossil fuel production.
It is also very unlikely that a return to the censorship and government overreach which collapsed in 1991 will ever return. Memories are still fresh with regard to the oppression, and the subsequent economic catastrophe that ensued when the Soviet Union finally ceased to exist thirty years ago.
The Financial Times report on this migration which went to press in the early hours of November 22, 2021 European time stated that Sam Tabar, CSO of Bit Digital had stated “We started our fleet migration in March 2020, which in hindsight was a great move. When the ban was announced we had 20,000 miners in China.”
Despite this migration, that particular firm had to leave over 370 mining machines behind in china because they had become obsolete, but still, this shows the industrial scale of such a migration project by many mining firms.
Not only have migrations taken place to form new mining entities using Chinese machinery, but the majority of large public Bitcoin mining entities in North America have expanded the number of machines in their fleets since China’s ban, according to data held by the Financial Times.
Whilst over 20,000 machines have gone to Russia, 87,000 to Kazakhstan and a further 87,000 to the United States, it is perhaps not surprising that Canada is another destination, given that in the year 2000, 640,000 Chinese nationals moved in one year to Toronto, invested in real estate projects and backed Canada’s banks with huge injections of liquid cash from mainland China.
Today, in Toronto, one in three residents is of Chinese origin, and the country has enormous trade ties to mainland China.
In Canada, 35,000 Chinese Bitcoin mining machines have arrived ashore, where it is likely that the same operators which operated them in China are now operating them outside of the restrictions and constraints of the Chinese government.
In some cases, entire companies have shipped their mining rigs in one go to one destination. Out of the 87,000 rigs which migrated to Khazakhstan, 80,000 of them came from one Chinese mining company, Bitfufu.
There are almost a million older mining rigs still powered off in mainland China, many of which are the older, more obsolete Antminer 9 machines, however this demonstrates that most of the newer ones are now up and running in free market nations with cheap power, and perhaps some of the old Antminer machines could be also recommissioned from storage, and sent overseas.
If this is not testimony to the determination by large entities to continue to make their business and take their part in the development of the decentralized finance (DeFi) sector, then what is?!