Issue #009: The surprising story of Chinese Bitcoin mining
Dear subscriber,
Welcome to The Bitcoin ESG Forecast #009.
Main story
Ever since the 2021 mining ban, finding out what’s happening in China has been hard. But it matters. What happens in China affects Bitcoin’s ESG story materially.
So I did some digging, interviewed some Chinese miners and collected some data.
A lot of what you’re about to read has not been disclosed publicly until now. Findings include a novel use case, a great heat recycling story, and an explanation about why the remaining Chinese hashrate is greener than it was pre-ban.
Before we press ahead, a quick note to let you know that from June this newsletter will become a paid-subscription letter. This will help me commit the time it takes to do more high quality mining and ESG research and reporting. In the meantime, the two months remain free to you as an early subscriber. Thanks for being one of the first. For that I’ve very grateful.
OK on with the show …
While a lot of hashrate migrated to other countries (US initially, Ethiopia more recently), a lot of new hashrate has also come into China since the China “ban”
Current hashrate in China is widely agreed in the mining community to be around 15% of the global total. Still significant. Down on the 21.1% it was according to Cambridge in Jan ‘22, but not as much of a drop as you’d expect. In short, China outwardly says “Bitcoin mining is banned” but its not, whereas Kazakhstan outwardly say “Bitcoin mining is not banned” but with under 1% of global hashrate now, it effectively is.
No offgrid coal-based mining occurs any more. It’s too easy to spot, it competes for baseload energy and interferes with Central Govt's emission targets. This has caused a significant reduction of the emission intensity of Chinese mining post-”ban”.
Mining is mostly hydro, micro-hydro (particularly in the wet season). The areas above the red line are very wet months for 4 regions: Xi’an, Wuhan, Bejing and Xining, where hydro becomes incredibly cheap.
But we also uncovered a lot of ongrid mining and, more surprisingly, a lot of retail ongrid mining.
Retail ongrid miners mine at a loss, because they pay, well, retail electricity rates. Why would they mine at a loss? Simple: to get money out of China, or out of the Yuan into USD. They convert Chinese Yuan for ASICS and electricity which creates BTC, which gets converted into USD. Many retail miners are happy to take the profitability hit simply to have a way to convert Yuan to USD.
Local provincial govt often supports what Central Govt does not, because it's economically advantageous to do so. We heard more than one story where the provincial govt gave an effective "licence to mine" in return for the rights to use their recycled heat.
For example, one 13 MW mining operation, an example of that new hashrate, works in tandem with the Provincial Govt. They buy electricity from them and in return the govt gets the right to use their recycled heat for free. Because 95% of the energy from Bitcoin mining is disbursed through heat, this is almost as effective as getting heating for free. What do they use that (free) heat for? Heating water for fish farms.
Top Picks
We've noticed more renewable energy and sustainability magazines joining the conversation around the Bitcoin ESG case.
The latest is Recharge News which notes that Bitcoin mining provides electricity demand, helping renewable energy sources remain profitable. Other magazines that have shared similar sentiments include Anthropocene, Renewable Energy Magazine, and One Green Planet.
Lastly, a new peer-reviewed study by System Engineering students from Cornell University shows how integrating green hydrogen technologies with Bitcoin mining can enhance renewable energy deployment, for instance, expanding wind farm capacity by up to 73.2%.
Trailblazers
Giga Energy, a Texas-based Bitcoin mining firm is expanding its operation by partnering with companies from Argentina, the 12th leading methane emitter globally, to establish Bitcoin mining installations, utilizing wasted natural gas to power mining activities.
Riot Platforms has invested in Reformed Energy, which utilizes plasma gasification technology to convert solid waste into synthetic gas, a low-cost power source for data centers and Bitcoin mining operations. As Riot's VP puts it, while the technology itself isn't new, the missing piece of the puzzle was finding a viable outlet for the energy, and Riot is that piece.
A car and truck wash in Idaho has converted its gas heating system to a Bitcoin mining heating system, using a Fog Hashing B6 immersion tank and six Bitcoin ASIC miners to generate heat.
This innovative approach has transformed their propane-based hydronic snow melt system into a profitable operation, showcasing the potential to mine Bitcoin while utilizing the generated heat to replace traditional heating systems.
RenewaBlox, a renewable energy company, is on a mission to utilize stranded energy in the UK for Bitcoin mining. It aims to address issues such as wind energy curtailments and methane gas management as it seeks to contribute to decarbonization efforts while generating revenue.
Lastly, there are many innovative ways Bitcoin Mining can be used and more keep coming up. If you missed this, in 2018, Kamil Brejcha was already growing tomatoes in a greenhouse that uses excess energy generated from Bitcoin mining.
Top Features
I joined Nik of The Bitcoin Layer podcast to discuss Bitcoin’s inevitable inclusion in ESG funds, surprising institutional support, ending regulatory hostilityand challenging Bitcoin energy FUD perpetuated by European Central Banks, (26 Min watch).
I also got an opportunity to join Troy Cross on the Bitcoin Atlantis Commentary Booth where we discussed how Bitcoin mining can drive innovation and positive change in energy systems, locally and globally (25 min watch).
ICYMI: It's easy to come across environmental FUD articles about Bitcoin. These narratives often emphasize the energy consumption associated with Bitcoin mining, highlighting its potential environmental impact while overlooking its broader implications and potential mitigating factors. Here is a quick scoring system to see how high the writer's FUD factor is.
Housekeeping Notes
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