Kirk mines Bitcoin in the Chinese province of Sichuan. Every day he “begged” not to be arrested by the authorities.

Like other miners, Kirk has been underground since Beijing cracked down on industry earlier this year. Kirk is a nickname for security and detection by a Chinese miner.

Kirk has distributed his mining equipment in various locations so none of the activity will be noticed on the national network radar. He has also used other energy sources, drawing electricity directly from small, regional power sources that are not connected to the national grid, such as energy from hydroelectric plants to dig coins.

He also had to perform technical maneuvers to hide his location.

Kirk said that he is so used to “doing things right” when running a business in China, and that the past six months have really raised his “guerrilla levels.”

“We don’t know how long and to what extent the government will suppress … to wipe us out,” confided Kirk.

A bitcoin mine in Sichuan, China | Source: The Washington Post

Follow the outlaws

Kirk is not alone.

Although Beijing expelled miners in May, then tightened its mining ban in September and November, many sources say that up to 20% of all the world’s bitcoin miners are still in China. This is a decrease from the previous high of 65-75%. ).

Data from Chinese cybersecurity company Qihoo 360 shows that underground cryptocurrency mining in China appears to be alive and well. In a November report, the team estimated that there are an average of 109,000 active mining IP addresses in China every day, with most of them in Guangdong, Jiangsu, Zhejiang and Shandong provinces.

There is still mining of cryptocurrencies in China, partly because many miners are not sure whether Beijing is really serious about the ban. And maybe one day they’ll change their minds.

Because China has repeatedly “fired” on digital currencies, but after each time the suppression is gradually forgotten and the regulations are also relaxed. The government has announced that it will crack down on cryptocurrency mining activities after the 100th anniversary of the establishment of the Chinese Communist Party. Some miners – especially those who are small operators, find that the government is only “making the price,” so they shut down, cut down mining for a few weeks, and then go back to business.

But this crypto crackdown looks different from the previous ones for a number of reasons.

First, China lacks energy sources, and electricity is an important resource in the Bitcoin mining process. The country has been grappling with severe energy shortages for a decade, resulting in blackouts.

Beijing has also made it clear that mining cryptocurrencies has had a positive impact on its climate improvement goals as it seeks to be carbon neutral by 2060. 11, government spokesman Meng Wei criticized Bitcoin mining, describing it as “extremely harmful” and promising to implement stricter measures.

A technician oversees Bitcoin miners at a mining facility operated by Bitmain Technologies Ltd. is operated. 2017 in Ordos, Inner Mongolia, China | Source: QilaiShen

Bitcoin is also exposed to competition from the digital yuan. China is testing eCNY – a digital currency created by the country’s central bank – which could give the government more power to track spending in real time. According to Fred Thiel, CEO of Marathon Digital Holdings, the Chinese government crackdown on cryptocurrency trading could be part of a larger plan to ensure that eCNY is widespread.

“The Chinese government is doing everything possible to remove Bitcoin and other cryptocurrencies from the Chinese financial system and the Chinese economy. One reason for this could be to ensure that China’s central bank digital currency is approved and financially regulated. ”

Whatever the motivation, it is clear to everyone how hostile the Chinese government is to crypto.

In provinces such as Zhejiang, Jiangxi, Hebei and Inner Mongolia, the government has taken various measures, such as the underground cryptomining mines, members of Expel Party suspected of being involved in crypto mining systems.

Authorities appear to be paying special attention to mining in research facilities, community centers and schools, where electricity is cheaper than in normal areas. In November, the government announced that it would increase electricity prices for institutions that use subsidized energy to mine crypto.

Authorities also focused on state-owned companies engaged in trade.

This week, China’s Central Commission for Discipline Inspection, the country’s anti-corruption agency, said it has identified dozen of government organizations in eastern Zhejiang Province and is using public resources to mine 12 cryptocurrencies, including Bitcoin, Ethereum, Litecoin and Monero. Of the nearly 50 fined, 21 worked in state-owned companies or in Communist Party offices.

Government entities are involved in cryptocurrency mining programs elsewhere as well.

In the coastal Jiangsu region, the provincial media regulator found that 21% of the IP addresses involved in cryptocurrency mining come from government organizations.

Despite increasing government crackdowns to weed out all cryptocurrency miners, there are still many people like Kirk finding a way to survive undetected.

Technicians repair bitcoin miners in a mining facility operated by Bitmain in Ordos, Inner Mongolia, China in 2017 | Source: Qilai Shen

Underground activities

When China began calling for a boycott of cryptocurrency mining in May, most of the industry was in the dark and miners waited for things to calm down.

The biggest players, who already had international connections and cash, quickly left the country. Many have shipped their equipment and teams to Kazakhstan, the United States, and other international destinations with inexpensive power and available storage.

Some big giants have left their equipment in warehouses in Asia and come to the “green grasslands” empty-handed. And so they ordered the latest generation of machines to be delivered to a new destination overseas.

However, smaller miners with limited incomes and fewer international connections are unlikely to relocate equipment due to pandemic travel restrictions, supply chain and shipping bottlenecks, and war trade between China and the US.

Equipment sales did not work either, as the abundance of inventory in the resale market accelerated the rise in the price of mining rigs.

Medium-sized miners were “100% open” in this year’s raid. They cannot discharge their equipment to make up for the loss, nor can they take full advantage of it as too much current makes it very easy to spot.

But for smaller excavators like the one Kirk uses, avoiding radar sightings can be easier. Some have split their mining operations into multiple farms across the country, in places where the authorities have little interest. Others supply devices to small power sources, such as small hydroelectric plants in rural areas, that are not connected to the main power grid.

A Bitcoin miner who has mined cryptocurrencies around the world, including Chinese, for years, said:

“Mining is no longer big business. Instead, the industry has become a patchwork with a density of several thousand miners in each location.

“It’s like an act of ‘fighting fire’, raising money and getting out of the country.”

The affected areas were suppressed by the Beijing government this year | Source: Openstreetmap

Mines of underground coins

Kirk – who has been mining crypto since 2015 – has 1,000 grid powered mining rigs and another 5,000 connected directly to the hydropower plant from the source in Sichuan Province.

As for the hundreds of miners using the network, Kirk has distributed them across the country to avoid detection by the authorities.

“They are everywhere. You won’t find any.”

According to Marshall Long, this is a common practice for many miners who have been mining cryptocurrencies in places like Sweden, Iceland and China for over a decade.

To see the difference, downtown Dallas electrical output is up to 200 megawatts, and when construction is complete the largest mine in the US will have a total electrical capacity of 750 megawatts.

But Kirk pointed out that the technical problem here is …