When Bitcoin finally takes over the world, 2021 will be remembered as the exodus of minors. Photo / 123rf
When Bitcoin finally takes over the world, 2021 will be remembered as the exodus of minors. Officials across China are shutting down businesses and carrying out mass arrests as part of a global crackdown on the cryptocurrency trade and strike – forcing miners to travel to new corners of the world in their quest for power.
Carried away by the government purge, a new silicon-rich diaspora is forming: a diaspora that could transform cities and countries around the world.
Until now, China has been a magnet for crypto “mining” operations, which use fleets of specialized, high-speed computers to create new digital coins like Bitcoin and Ethereum by solving mathematical problems.
But Texas is bidding for the summit: This month, Governor Greg Abbott unveiled his “master plan” to tempt crypto billionaires in the state. Elsewhere in Miami, Florida, Mayor Francis Suarez has urged crypto producers to relocate and is considering special corporate zones for miners.
“We have seen a dramatic increase in the number of companies contacting us to handle the relocation of mining operations from China to the United States,” said Nicole DeCicco, former Ethereum miner and director of consulting firm CryptoConsultz.
“We have partnerships with shipping companies, especially air freight, who can offer the most competitive lead time – and time is money in the mining industry.
But what does it really mean to “mine” crypto?
Cryptocurrencies are basically computer networks that govern the ownership of digital tokens, recording every transaction on a shared database called a blockchain and verifying them by having multiple computers verify each other’s work.
Bitcoin does this by setting challenging puzzles for computers to solve and rewarding them with new coins – a hugely inefficient and power-hungry process that, according to the Cambridge Center for Alternative Finance (CCAF), absorbs more electricity than the whole set. from Finland. . Earlier this year, researchers at the Chinese Academy of Social Sciences predicted that by 2024, China’s bitcoin mining industry could consume more energy than Italy.
China was about 75% of the world’s mining power last year – but scientists believe Bitcoin alone generates enough CO2 to lower the country’s emissions targets.
CCAF researcher Michael Rauchs describes how miners would move from November to April in the warm northwestern provinces of Xinjiang and Inner Mongolia, where coal and solar power are cheap, before charging their computers on trucks and off to southern Sichuan and Yunnan for the rainy season. , when hydroelectric dams produce so much reserve energy that it costs next to nothing.
The recent rise in crypto prices has inflated this process, exacerbating a global shortage of microchips and causing blackouts in several countries. Gavin Brown, professor of financial technology at the University of Liverpool, points out that China is also trying to push people towards its own more controlled digital currency, which will launch at the Beijing Winter Olympics next year. Together, these factors seem to have sealed the downfall of the miners.
So where do they go next? The price of energy is everything, but DeCicco says miners are also increasingly considering environmental costs. Their ideal targets are the so-called “blocked” renewable energies, ie energy sources located in isolated areas where a large part of the product is wasted. Colder temperatures are also good, as they make it easier to keep mining rigs cool – and having supportive regulations and politicians always helps.
Iceland has all of these factors, with its deep reserves of volcanic energy, while El Salvador has just made Bitcoin legal tender and has abundant geothermal energy. In the United States, possible candidates include Texas (despite its heat), Nebraska, Florida, and Wyoming, which only use about 40% of the energy it generates. All four states have passed laws that put crypto on a stronger legal footing.
“Historically, most of the energy we produce has been hydrocarbon-based,” said Chris Rothfuss, Wyoming state senator and chair of the blockchain committee that spearheaded the campaign.
“We are seeing a drop in income [ahead], and we want to make sure that we try to diversify into spaces that are truly forward looking. Cryptocurrency and financial technology are outstanding candidates. “
But Bitcoin’s sky-high issuance has tainted the crypto’s reputation and made it anathema to environmentalists, including former lawyer Elon Musk, who recently announced that Tesla would no longer accept Bitcoin payment for its cars until that a greener way of operating becomes the norm.
The outage of the Texas power grid in a winter storm earlier this year – which left 4 million people without power and 111 dead – has heightened fears of the ripple effects this new influx of miners can have, and that cryptographic takeovers can drain enough resources to cause future outages.
Some in the community are hoping that a greater era of climate-friendliness can be ushered in by replacing Bitcoin’s expensive ‘proof of work’ method with a more energy efficient solution called ‘proof of stake’. The latter requires solving less complex sums, which makes the cost of electricity to verify each transaction much lower. If that takes hold, the mining industry could persist, but in a way that doesn’t require power-hungry processors.
It is also possible that these state- or country-wide takeovers are not the economic healing effort that they appear to be.
“Miners work over three or four year horizons, constantly having phases of renewal,” explains Professor Brown. “If the economy suddenly fails, they’ll say at the next inflection point, ‘okay, broken tools, we’re not in this business anymore.’ “
The usual tactic of local officials of attracting long-term job creation with initial incentives would be risky here.
Rothfuss has no illusions about this. “I cannot guarantee that it is beyond the short term,” he admits.
“We’ll see what happens in a few years.”
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This notice was published: 2021-06-19 08:14:27