Digital Assets: Why Bitcoin Miners Love The Xinjiang Province In China
It’s the coal.
Cheap power generated using coal in the Xinjiang province is a magnet for bitcoin miners. That trend will only intensify now that bitcoin has hit an all-time high above $47,000 after Elon Musk revealed Tesla’s $1.5 billion investment in the crypto. Power is the single largest cost element in bitcoin mining, and according to Bloomberg, the polluting coal-fired power plants in Xinjiang have made the region a global hub for bitcoin production because of the cheap power they generate.
As of April 2020, China produced about two-thirds of global bitcoin. About one-third of that came out of Xinjiang, according to researchers at the University of Cambridge.
Bitcoin has therefore joined power-intensive industries such as aluminum smelting and polysilicon in locating to Xinjiang.
Located in far-western China, Xinjiang contains more than 150 billion tonnes of resources. That makes it one of China’s largest under-developed coal provinces, according to Wood Mackenzie. Xinjiang mainly produces bituminous thermal coal and is one of the lowest-cost provinces in China.
Wood Mackenzie said in a 2020 report that they expect Xinjiang to be the only province to have a large production increase because of its rising demand for coal-to-chemical projects and coal-fired power plants.
According to BloombergNEF, power in Xinjiang costs as little as 0.22 yuan ($0.03) per kilowatt-hour, compared with 0.6 to 0.7 yuan in central China.
Why cheap power is crucial to BTC miners
Bitcoin mining operations guzzle power to run their computers. These machines solve harder and harder equations as a Proof of Work for earning bitcoin.
Amanda Ahl, a BloombergNEF analyst, stresses that cheap and reliable electricity is essential to bitcoin miners because it directly affects how much money they ultimately make.
Unfortunately, in the bitcoin scheme of things, a rising price leads to higher energy consumption. Charles Hoskinson, a cryptocurrency entrepreneur who co-founded Ethereum, told CNBC: “The more successful bitcoin gets, the higher the price goes; the higher the price goes, the more competition for bitcoin; and thus the more energy is expended to mine.”
Climate experts are alarmed at the pace at which bitcoin mining is consuming power.
According to Digiconomist’s Bitcoin Energy Consumption Index, an online tool created by data scientist Alex de Vries, bitcoin has a carbon footprint comparable to that of New Zealand, producing 36.95 megatons of CO2 annually.
Related Story: Iran Cracks Down On Illegal Crypto Miners
Image credit of coal in Xinjiang: Wikimedia Commons
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