Last month, Chinese President Xi Jinping said China had plans to become neutral by 2060, calling for a “green revolution.”
If implemented properly, it could help China finally give up its status as the biggest polluter and significantly improve the global ecosystem, which could also drastically shake the country’s well-known bitcoin (BTC) mining industry.
China’s most famous mining center is the southern province of Sichuan, which has a rich hydroelectric sector. However, electricity there is particularly cheap only during the wet season, which runs between May and September. Outside this period, most miners migrate north to Xinjiang and Inner Mongolia, which currently generate more than 40% of the total speed of bitcoin. Unlike Sichuan, however, these desert regions depend mainly on non-renewable energy sources such as coal. If the government continues to insist on zero zero carbon dioxide emissions, mining there will become inefficient and local players will be left with far fewer opportunities.
The future of bitcoin mining is green
As the world finally learns the hard truths about climate change and man-made carbon dioxide emissions, continued access to renewable energy will become one of the most important factors in bitcoin mining. But are there places that can meet this requirement?
The Commonwealth of Independent States or the CIS region, which includes both Russia and Kazakhstan, seems to be particularly neglected by international players, mainly due to the lack of information on local mining scenes.
Like northern China, Kazakhstan’s electricity is produced mainly by coal-fired power plants. It’s cheap, but it’s not sustainable. In addition, local authorities are interfering in the electricity market by reducing tariffs and costs, which means that they may eventually bounce back.
Russia, on the other hand, has many natural preconditions for cheap energy from renewable sources, as well as a more stable economic environment.
Cold and rich in energy
If you ask me to point out one thing in which the Soviet Union was good, I would say that industrial infrastructure.
Most bitcoin mining in Russia takes place in the famous Siberian region, which has also been a key place for aluminum production since the 1960s. As energy is consumed at all stages of aluminum production, the USSR chose to build Siberian smelters along with hydroelectric plants (Russia hosts about 9% of the world’s water resources, mostly in Siberia and the Far East).
Since then, aluminum smelting technology has evolved, making production much more energy efficient. This, along with the fact that the Soviet government often left room for future growth in infrastructure construction, is the key reason why the region has so much excess power today. According to RusHydro, the world’s second-largest producer of hydroelectric power, the total installed capacity of Russia’s hydropower units is currently approximately 45 million kilowatts. In particular, it is estimated that Siberian hydropower plants produce almost 10% of the total capacity of all power plants controlled by the Unified National Energy Network.
Another key aspect is the scandalous climate of Siberia, where it is cold nine months a year. If there is something for which this type of time is good, it hosts a data center full of large ASIC devices running at full capacity. Anyone who has ever tried digging at home in the summer will probably understand what I mean.
China is an ally
Russia’s proximity to China is also a big plus, as it produces the best hardware.
Historically, Moscow has strong economic relations with Beijing, which continue to strengthen to this day. Delivery between the two countries is cheap, fast and constant: freight trains and freight planes continue to run despite the COVID-19 pandemic.
Now imagine delivering thousands of mining platforms to the state of Texas from Beijing, given that the United States is at war with China and has hit a solid 25 percent tariff on imported mining equipment.
Connected: China and the United States need to learn from each other and cooperate on the CBDC
Continuing the comparison with the United States, operating costs and capital costs for maintaining a data center are significantly lower in Russia, mainly because local labor and construction costs are cheaper.
In addition, if your platform breaks down, you don’t even have to send it back to China, wasting a few weeks (which is considered age in bitcoin mining). Institutional Russian facilities tend to have in-house repair centers with technicians trained directly by the best Chinese hardware manufacturers, so they can quickly start everything up and running again.
Russia has long been the world’s third-largest bitcoin producer, and local industry has grown significantly.
The regulation is clearer than you think
Hearing all this for the first time, one can argue: But the Russian government has banned crypto. Well, that’s not really right. Let’s take a closer look at the country’s basic crypto law called “On Digital Financial Assets” or DFA, which was signed in July.
The bill prohibits Russian residents from making payments in cryptocurrencies from January 2021, but legally recognizes them as “digital financial assets.” He does not mention digging for cryptocurrency in any form, which means that there are currently no legal restrictions.
In early September, however, Russia’s finance ministry proposed amending the DFA law to ban miners from receiving crypto payments for their activities. As reported by the Authority:
“Self-digging crypto is legal, but it loses its financial value, as the payment is usually processed in bitcoins and ethers.”
Although no one knows if the changes will be approved, what they suggest is pretty clear: the Russians can’t sell the coins they mine, but they can legally host their hardware and other infrastructure for foreign players. Most likely, the change will affect mom and pop operations, as large-scale miners are usually paid in fiat currency. In addition, transactions whose customers are abroad can still be legally paid in crypto from abroad, even if the proposed account takes effect.
In addition, regional authorities in Siberia are increasingly supporting large extraction operators because they pay taxes, create jobs and use this excess energy. The truth is that the government is in business and has no interest in destroying anything that contributes to the economy.
By this time, the government has already met with all local large-scale operators, mostly because the consumption of a few megawatts of power is easily detectable by the grid operator (and of course requires some explanation). Earlier in August, the Ministry of Digital Development, Communications and Mass Media published a proposed bill that would establish additional control over data centers in Russia.
The skeptic will continue: But you will certainly be deceived if you decide to mine in Russia. Although doing business is never a risk-free activity, especially in the cryptocurrency industry, there are actually no reported cases of cryptocurrency fraud in Russia. Police regularly close illegal operations that steal electricity, but authorities never wash compatible operations that pay taxes and costs.
Curiously, most stories of inconsistent yield players come from North America, which is generally considered a highly regulated market. In fact, the region is littered with the corpses of mining companies that have either suddenly collapsed or turned out to be fraudulent, disappearing with investors’ money in both cases.
The latest example would be the Toronto-based HyperBlock, which abruptly shut down its 20-megawatt data center in May, saying it had to shut down due to halving bitcoins – despite the fact that this is a regular event that companies can prepare in advance. Similarly, in early 2019, US-based large cryptocurrency and blockchain company Giga Watt shut off access and power to its facilities after it was alleged that it had not paid $ 300,000 in utility bills.
Is there another mining boom ahead?
Of course, Russia could use some clearer provisions on extraction (like most countries in the world), but this process is likely to take some time. Most importantly, the government has finally announced its general attitude, which can be summarized as follows: “We are skeptical about the use of cryptocurrencies as a method of payment, but we are good at the activities involved that stimulate our economy.”
Therefore, the Russians appear to be preparing for a mining boom similar to the one that occurred in 2017. Local retailers recently reported a 49% jump in sales of cryptocurrency-related graphics cards and GPU sales in June. by August they had increased by 470% compared to last year, so things are obviously heating up.
The views, thoughts and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Igor Runets is the founder and CEO of BitRiver, the largest provider of bitcoin mining colocation services in Russia and the CIS region. After completing his MBA from Stanford, Igor returned to Russia to use his more than 10 years of experience in enterprise-class data centers and Siberia’s excess hydroelectric power to bring institutional-grade bitcoin mining to investors around the world. .