Crypto mining in China goes on – though illegally now

In May 2021 China cracked down on crypto mining to stop it for good– in vain, since domestic miners are still finding ways to go on with their business.
About 20 percent of the Bitcoin mining capacity worldwide is still in China, according to expert estimations.

Crypto mining continues to survive in China with many miners not taking Beijing´s stance seriously and staying in the country, hoping for better days. So, the remaining miners in China spread their mining equipment across several sites to camouflage their huge power consumption so that single high energy consumption spots don´t stand out anymore in the grid.

But the government is very serious regarding the ban, and there are two major reasons. China needs electric energy badly and there is upcoming competition from the Digital Yuan, its own digital central bank currency, which the country is still testing.

Related: CZ: China is more serious with its ban this year than in 2017

Techniques to stay undetected

Even before the ban, it was already common practice for miners to rent or set up their own transformers and substations, to provide power to their sites directly from power plants.

Miners are concealing their IP-Addresses by using Virtual Private Networks (VPN), in order not to get precise geographically detected. But this behaviour is known in Beijing and the government cracks down on the use of Virtual Private Networks as well now.

Therefore, underground miners form mining pools as a countermeasure, to hide their tracks. They just join other miners around the world and mix in their computing power with them. And they hide their hashrate, as a pool doesn’t necessarily have to reveal its data. They just tell the rest of the world only about 50% of their real revenue. As it is, the Bitcoin mining index is based on data voluntarily given away by the mining pools.

Meanwhile, China Telecom, one of the biggest telecommunication companies in the country, plays the role of a “mining police“ in China by actively looking for suspicious electric power usage.

Dry-season migration doesn´t work anymore 

Soon, these underground miners will have a new problem with the dry season coming.

In the years past, the miners just packed up and moved away from the dry hydro-power plants and set themselves up close to coal-powered plants in the Xinjiang province or Inner Mongolia; but both those regions have completely banned crypto mining. Therefore, it can be expected that more mining farms will pack up their equipment and leave the country once and for all to make a new start overseas. After all, crypto-mining is still like a license to print money – provided they can plug themselves back in at some other place.

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