Bitcoin miners in China have already begun exodus from the country with reports emerging that some of the largest mining pools in the country have already set up shop elsewhere to evade the wrath of Chinese government if it comes after them.
China is one of the most competitive companies as far as electricity rates go and because mining pools depend primarily on electricity for their operations, some of the largest mining pools in the world set up shop in the country. According to statistics available as of mid-2017 over 70 per cent of of all bitcoin mining pools are based in the country. This is a huge number and if government decides to pull the plug on cheap electricity rates for these mining pools, their profitability will go down the drain and they will have no option but to either move shop or shutter down.
Shutting down isn’t going to be an option as far as we believe and so the next logical step is to set up shop elsewhere. Moving to another country at the last moment post the rate hike or a ban wouldn’t be a logical thing to do and for that reason some of these mining pools have already started working on that.
Jiang Zhuoer, the founder of China’s third largest bitcoin mining pool, BTC.TOP, revealed in an interview with Bloomberg that the company “chose Canada because of the relatively cheap cost, and the stability of the country and policies”.
Bitmain has managed to set up its operations in the United States and Canada. Further, there are reports that the company has established a subsidiary in Switzerland, which a company spokesperson said was chosen because it is “one of the most progressive countries…with good legal stability”.
ViaBTC, which is the fourth largest pool, is moving shop and has started its mining operations in North America and Iceland.
The Chinese government’s crackdown on Initial Coin Offerings (ICOs) and cryptocurrency exchanges in September, 2017 may have deterred some of them, but the country is still home to a lion’s share of the mining efforts.
The ASIC (Application Specific Integrated Circuit) hardware used to mine bitcoin and other similar proof-of-work based cryptocurrencies are also almost exclusively manufactured in China, making it readily accessible for mining businesses in bulk quantities. As a whole, the Chinese have a relatively large monopoly over the cryptocurrency mining ecosystem, both in terms of market share and manufacturing.
China’s move to ban bitcoin miners, even selectively so, is likely in response to recent reports indicating the scale and extent of power consumption due to bitcoin mining. As the cryptocurrency ecosystem grows and bitcoin’s usage progressively increases as it has for several years now, the electricity usage is only expected to continue rising with time.