Bitcoin mining, China’s “involuntary gift” to the United States

In the small town of Rockdale, Texas, a huge construction site alone illustrates the central role that Americans intend to play in the world of cryptocurrencies, after China decided to exit the sector.

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With a capacity of 750 megawatts, the largest bitcoin farm in the United States now has more than 100,000 computers in three 350-meter-long buildings. In a few months, it will be seven.

China, on its side, intensified its fight against transactions in bitcoin and against the mining of the currency, which is manufactured on these farms through complex equations solved by thousands of computers.

For these energy-intensive operations, cheap Texas electricity is a key advantage, along with its business-friendly environment and skilled workforce, according to Chad Everett Harris, CEO and co-creator of Whinstone, which owns the Texas farm. Rockdale.

“All the leaders in this industry want to come to Texas!” He smiles with his cap on from one of the temporary booths at his plant.

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Originally from New Orleans, he began mining from home in January 2018, with a computer that earned him $ 60 a day, and in May he sold his farm for 651 million euros to the American company Riot Blockchain.

Migration to North America

As of September 2019, China remained the world’s largest producer of bitcoin, accounting for two-thirds of all mining.

But eager to launch its own cryptocurrency, the Chinese government intensifies its offensive every day against the many players in the sector that previously flourished in its territory.

On Wednesday, data released by the University of Cambridge showed that bitcoin mining more than doubled in the United States between May and August this year, accounting for 35.4% of activity.

Sam Tabar, chief strategy officer for mining company Bit Digital, which operates in the United States and Canada, says it began its withdrawal from China in 2020 and accelerated it as the crackdown intensified.

“China’s ban on bitcoin mining was an unintentional gift to the United States,” he says. “Thanks to its ban, an entire industry migrated to North America, with state-of-the-art equipment and knowledge.”

When their investments began to collapse under the Chinese regime, many investors saw the United States as an ideal destination, with its democratic political system, independent judiciary, and sacrosanct protection of private property.

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“When you make a long-term investment in a country to accumulate wealth, you want to make sure it won’t be stolen by the state,” says David Yermack, a cryptocurrency expert at New York University.

However, he warns that the move to the United States is only temporary because northern Europe has clean, cheap and abundant energy, as well as a climate that can help cool down huge working computer rooms.

Ecological cost

Meanwhile, the mining boom in the United States fuels criticism about its environmental cost. Every year bitcoin mining consumes as much electricity as the entire Philippines, according to the University of Cambridge.

“Bitcoin mining in Texas uses less than 2% of all available energy,” says Chad Everett Harris, who believes that the consumption of his Whinstone plant “helps stabilize the grid.”

“Our energy profile is the same as Ercot’s,” the Texas electricity grid operator, whose energy in 2020 was 23% wind, 11% nuclear and 2% solar, with the rest coming from natural gas ( 46%) and coal (18%).

Texas’ unregulated market gives companies a lot of flexibility, says Viktoriya Zotova, an economics professor at Georgetown University. “In principle, they can decide to buy electricity when it is cheap and not buy it when it is expensive.”

Bit Digital is headquartered in Buffalo, New York state. Sam Tabar points out that the city was one of the largest industrial centers in the country before their jobs went to China. “We have come full circle,” he concludes with irony.

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