Crypto’s ‘great mining migration’ has Chinese miners looking at Texas
- Chinese crypto mines have started shutting down operations in the country and the ‘
great mining migration’ is afoot.
- Texas may be the next hub for these miners with cheap electricity, pro-crypto politicians and the increasing use of renewable energy.
- Setting up shop in Texas would entail extra expenditure on cooling solutions in a hot area, and running the risk of power-outage led shutdowns.
The Asian giant, which accounts for over 70% of all Bitcoin mining in the world, had started large-scale crackdowns on miners last month, which led to many companies looking for alternatives. And, according to a report by CNBC, Texas might be on the top of their shortlist as the ‘the great mining migration’ plays out.
The state has cheap electricity and it’s looking to boost its use of renewable energy. As of 2019, 20% of Texas’ power supply was coming from wind energy. And, those living in the state have the flexibility to choose between different power providers. However, that’s only half of the picture since countries like Qatar and Iran have cheap electricity too but that’s not where miners are looking to go.
What sets the southern US state apart is that its politicians are pro-crypto, which could help miners get the clearances they need to begin operations — akin to how Delaware decided it would be the most tax-friendly state for businesses to come and set up shop. Less red tape, quicker turnaround, and relatively huge savings.
“We have governors like Greg Abbott in Texas who are promoting mining. It is going to become a real industry in the United States, which is going to be incredible.”
Two of the top crypto miners in the world — Huobi Mall and BTC.TOP — have suspended their operations in China after last month’s crackdowns. According to a post on Huobi Mall’s official Telegram channel, the company is looking to pave the way for exploring mining rigs in the future.
Other than Texas, Bitcoin is the new crown favorite in Latin America. Countries like El Salvador and Paraguay are already looking to take advantage of this as well.
When will the great mining migration occur?
Experts expect the shift to kick in over the next few months, given the need for crypto miners right now. According to BitinfoCharts, the global hash rate has fallen dramatically since May this year. Hash rate is the total computing power being put towards crypto mining worldwide.
This could spell trouble for the crypto industry, which has been dealing with increased transactions. Miners provide the computing power required to authenticate transactions, so hash rates are part of the essential infrastructure behind all crypto transactions worldwide. If miners have to shut down operations in China, they would want to move to other places fast, or risk losing out on revenues. Each crypto transaction they authenticate creates new tokens, which in turn is their revenue. This means that each minute they spend without operations adds to their losses.
Pro-crypto regulators and regulations may not be enough. A study by the University of Cambridge had found that Bitcoin mining requires about 120 terawatts (tW) hours of power every year.
Questions have been raised about supply-demand economics in the state, after it suffered rolling blackouts and massive winter storms in February.
The Electric Reliability Council of Texas (ERCT) had said in a recent statement that power grid conditions were tight due to hot weather, and approximately 12000 megawatts of generation was offline. And, therein lies the problem from crypto miners.
Not only will they need to set up more cooling solutions in a hot area, but they may be subject to power-outage led shutdowns.
More power, more crypto
The fact that crypto trading requires a lot of power is well documented, and most of this power comes from non-renewable sources.
As mentioned before, Texas does have renewable energy sources, but crypto miners would add to the state’s and the country’s existing power requirements as well.
El Salvador, for instance, was planning to use volcanic energy to provide power for Bitcoin mining. The country announced its plans a day after passing a regulation that made Bitcoin legal tender within its borders.
Texas is likely on top of the shortlist of crypto miners, but it’s not the only destination with the potential to become the next mining hub. China’s next-door neighbour Kazakhstan and the US state of Wyoming are also likely candidates for companies looking to rebuild.
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