Inside China's secret Bitcoin mine
China dominated the Bitcoin business. Nowhere was the cryptocurrency mined as intensively as here.
China dominates the Bitcoin business. Nowhere is the cryptocurrency mined as intensively as in China. In the Gobi desert, Handelsblatt correspondent Stephan Scheuer visited one of the country’s largest Bitcoin mines.
Background
At the time of this report, China was the global centre of Bitcoin mining. According to estimates by the Cambridge Centre for Alternative Finance, in the peak years between 2017 and 2020 up to 75 percent of global hash power ran on Chinese sites. The reasons were purely economic: in regions like Inner Mongolia, Sichuan and Xinjiang, electricity prices were exceptionally low – fed by coal-fired power plants (in winter) or seasonal hydro (in the rainy season).
Mining farms reached impressive dimensions. Single sites housed tens of thousands of ASIC machines, distributed across warehouses the size of several football pitches. Some operators, like Bitmain – at the same time the world's largest manufacturer of mining hardware – became billion-dollar companies. The energy consumption of the global Bitcoin network exceeded the annual electricity consumption of mid-sized industrial countries by 2020.
In May and June 2021, the Chinese government abruptly ended the business. First, individual provinces announced power cut-offs for mining operations; then a nationwide ban followed. In September 2021, the central government declared all crypto trading activity illegal – including via foreign exchanges. The official rationale named climate protection and financial stability; analysts also suspected preparation of the digital central-bank currency e-CNY, which would tolerate no competition from the private crypto sector.
The consequences were immediately felt. The Bitcoin hashrate collapsed by roughly half within weeks – the largest such drop in the cryptocurrency's history. Chinese miners sold their hardware abroad or relocated entire installations. New centres emerged in the US (above all Texas, with cheap power and no regulation), in Kazakhstan (which itself introduced restrictions in 2022 because of the grid load), as well as in Russia, Canada and the Middle East.
Today the United States is the world's largest mining location with a share of around 38 percent of the global hashrate. Kazakhstan and Russia follow; China itself officially plays no role anymore, although there are signs that some miners continue to operate quasi-underground in remote regions. The rise of the US as a mining location was, in turn, one of the factors that shifted the political acceptance of cryptocurrencies in Washington – through to the second Trump term, in which cryptocurrencies are openly promoted.