Bitcoin Mining Ban Pushed China’s BTC Miners To Operate Underground
Bitcoin miners have found ways to keep operating in China despite the country’s comprehensive efforts to crack down on the industry, a CNBC report reveals.
Despite the total ban on cryptocurrencies in China, which makes it illegal for anyone to mine bitcoin within the country, several bitcoin miners still have their shops open under the radar.
China used to be the country with the most significant share of hashrate. But that began to change in May when Chinese authorities began cracking down on Bitcoin and bitcoin mining.
Following the enforcement of a recent law against any crypto-related activity in the country, including mining, the country recorded a mass exodus of Bitcoin miners and crypto firms, who had to leave to other countries, mainly to Kazakshtan and the United States.
20% of Bitcoin still mined in China using various power sources
A recent CNBC report has brought to light that some of these miners are still active. These sets of people operate under the radar, relying on multiple power sources to survive.
Ben, a Chinese miner, told CNBC that he had gone underground, spreading his mining equipment across multiple locations to decrease the chances of being spotted on China’s power grid. He has also taken steps to conceal his digital geographical footprint and go behind the meter, pulling electricity from small power sources unconnected to the country’s larger grid.
Specifically, these miners use a combination of grid electricity, hydro-power, and internet protocol address manipulation to keep their businesses up and running.
A good number of these miners had to stay behind because they had no choice. To be specific, miners lacking the resources had to stay behind due to the pandemic travel restrictions, supply chain issues, and a dearth of overseas contacts and money, among other reasons.
The miners that use hydro-power tap power off dams in various areas across the provinces of Sichuan and Yunnan. These dams are suitable for a number of reasons. Majorly due to their inconspicuous nature and the fact that they are less likely to attract government attention.
More significantly, this is especially feasible during the rainy season, which occurs from May to the latter part of fall. Miners construct their own infrastructure to make the power from the dams compatible with their mining equipment.
According to the CNBC report as much as 20% of the world’s bitcoin miners are estimated to still reside in China, scattered across the country in setups similar to Ben’s. It cited a November report by Chinese cybersecurity company Qihoo 360, which estimates an average of 109,000 bitcoin mining IP addresses active in China daily. An estimate from Cambridge University, however, says there are no miners left in the Asian country.
“Mining is no longer a big business” in China, another bitcoin miner told CNBC. Instead, the miner said the activity is now scattered across the country, with “a couple thousand miners here, a couple thousand miners there. It’s more like a sort of band-aid to make money to help move the miners out of the country.”
How miners stay ahead of the law enforcement
As it increasingly becomes easier for miners to evade the authorities in China, the question is, how?
The answer to this can be found in the fact that when a block is solved, the mining pool’s name is often attached to the block on the public ledger. However, this name does not have to be attached, and by not attaching it, Chinese miners avoid detection.
Data packets emanating from Chinese data centers are encrypted to appear as ordinary web traffic to anyone monitoring the exchange of data. Overseas mining pools also help Chinese data centers with technical issues.
