When the Chinese government banned all crypto mining in summer last year, the crypto mining company BitFuFu packed its 80,000 high-powered computers into containers and trucked them across the border to Kazakhstan, where electricity was cheap and regulations lax. Then, months later, when persistent electricity shortages in Kazakhstan forced the company to slow its operations, BitFuFu abandoned these rigs and shipped shiny new equipment directly to the United States, where it is now setting up shop.
BitFuFu is far from the only crypto mining company that’s picked up and moved its servers to wherever cheap electricity is to be had, a trend that’s existed nearly as long as bitcoin has. But China’s ban in 2021 forced a mass exodus of miners, many of whom have recently found their way to the United States, drawn by the safety of political and economic stability combined with the flow of cheap capital and abundant electricity.
Prior to the ban, China accounted for almost half of all bitcoin mining in the world, and the US accounted for only about 16%. But by October 2021, the US’s share had risen to 35% — a figure that has likely grown since then. This surge in mining on American soil has been accompanied by a flurry of dealmaking as investors, anxious of missing the crypto gold rush, have poured money into mining companies as a proxy for investing in bitcoin itself.
This January, as its new US operations came online, BitFuFu announced it would soon be listing on the NASDAQ in a deal that valued the company at $1.5 billion. And it’s not alone: 2021 saw a series of eye-popping IPOs and fundraising rounds as the price of bitcoin hit a record high of $69,000, with more deals scheduled for later this year.
Bitcoin’s protocol is programmed to make mining progressively harder by ramping up the difficulty of the mathematical puzzles miners compete to solve — which means more machines, more computing power, more electricity, and more money to mine the same amount of bitcoin. Mining rigs of the sort BitFuFu shipped cost between $10,000 and $13,000 each and have an expected life span of only about three years. Most mining operations link together tens of thousands such machines. Given these costs, it isn’t surprising that miners and their institutional backers are leery of sinking money in countries where the national government could simply ban mining, as China did, or the local electricity grids could be overwhelmed — as Kazakhstan’s were. Russia emerged as another hot spot last year, but seasoned miners say the country suffers from the same political risk and arbitrary policymaking as China.
“I could have [gone] to Russia and been bitcoin mining at a cheaper cost than I am now, but I also have, you know, $100 million of assets,” said Sheldon Bennett, the CEO of bitcoin mining company DMG Blockchain, which he set up in Canada after years of working in Russia and Eastern Europe for a big four accounting firm. “Putin will do what he wants to do and he doesn’t care if he has to stomp on a few people to get it done.”
https://www.buzzfeednews.com/article/amansethi/cryptocurrency-bitcoin-mining-migration-china-kazakhstan-us
