China’s leadership in the Bitcoin mining industry will be challenged

摘要： China has a lot of advantages in the Bitcoin mining industry, though it won’t last forever, as more countries are entering the space.

If you talk about Bitcoin (BTC) mining, you have to talk about China. China has become a giant in the Bitcoin mining ecosystem with major mines and pools, quick, cheap labor and a majority control of the world’s hashing power. So, should you go set up a mining operation there? Do the pros outweigh the cons? Is China actually a threat to the Bitcoin ecosystem? Let’s look at the state of Chinese mining.

Back to the basics

In the beginning of Bitcoin, you could simply mine from your laptop or set up a few miners in your home to run the hashing algorithm. But as more miners started turning on and the Bitcoin mining difficulty rose, higher levels of computing power and electricity was needed to solve the equations and reap the reward.

Only a finite amount of Bitcoin can be mined — 21 million tokens — so as time goes on, it will get harder and harder to mine them. Miners continue to need better and faster hardware, which requires more electricity. Today, mining operations are moving to large data centers where thousands of miners run day and night.

Related: How to mine Bitcoin: Everything you need to know

Why mention all of this? Because when mining at a large scale, electricity costs, labor costs, the speed of acquiring new hardware and sustainability come into play if generating profit is the goal — and China has the advantage in nearly all of these areas.

The state of mining in China

At the end of 2019, China produced nearly two-thirds of the world’s hashing power. Even though cryptocurrency usage and exchanges are reportedly banned in China and Bitcoin mining was once in danger of being shut down, the government took an about-face and is increasingly embracing the use of blockchain technology in its major industries — and allowing Bitcoin mining to grow.

Related: US Bitcoin holders worry about Chinese control of the mining network

Bitcoin mining in China is a growing industry because labor costs are cheap, turn-around time is incredibly quick, and lead time and production costs are much lower, since the country is a hub for global trade. Since much of the hardware used to mine Bitcoin is made in China, miners can very quickly be upgraded. If you want to set up a data center fast with low overhead and expenses, do it in China.

Low electricity costs in the form of hydropower are available as well. Because Bitcoin mining requires so much electricity between powering the miners and powering the fans to cool the miners, a data center needs to get electricity as cheaply as possible. Hydropower in the Sichuan province is reportedly as low as $0.02 per kWh during the rainy season, and the Chinese government is now encouraging mining in this province so operations can take advantage of the hydropower plants there.

Related: Sichuan rainy season to give Bitcoin hash rate a much needed jolt

But only some Chinese mining operations run on cleaner, cheaper hydropower. Most run instead on coal, which is a dirtier and more expensive option. Of the main power sources today, hydro is the cheapest, at around $0.01 to $0.02 per kWh, with wind being another cheap option at $0.025 cents per kwh. Gas and coal are the more expensive options, at $0.03 to $0.035 cents (plus transmission costs and taxes). So, while labor and materials may be cheap, coal usage makes mining operations unsustainable from both a cost perspective and environmental perspective. Factor in the political instability of setting up mining operations in China, and you may want to look elsewhere.

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詳見全文Full Text： cointelegraph.com

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