One of the world’s largest utilities, Hydro Quebec, is suddenly struggling to meet demand as an influx of new Chinese bitcoin miners have relocated to the French-speaking, Canadian province from mainland China.
The same story is being seen by other power providers in the U.S., Iceland and Singapore.
The practice of bitcoin mining takes a lot of parallel processing computer power. Powering those PCs consumes a lot of energy, whether it’s from hydro, coal, or nuclear power plants.
With regulators in Beijing cracking down on Chinese firms in recent months, miners are packing up their PCs, peripherals, and mathematical personalities, and setting up shop overseas to pursue fortune through computer-based mining operations.
There are 70 bitcoin rigs set up in the province of Quebec alone now, and that’s double the volume of just a month ago, as the popularity of Bitcoin mounts steadily, a spokesman for Hydro Quebec said.
“This is evolving rapidly; we have to be prudent,” a spokesman for Hydro Quebec told reporters, adding that there are dozens of inquiries from potential bitcoin producers in the greater Montreal area.
Hydro Quebec worries that it won’t have sufficient power, over the long-term, to meet the newfound energy demand from cryptocurrency producers.
Energy Cost Reduction Key
Rising electricity costs are likely to have an impact on bitcoin mining operations too. Experts note, for example, that if electricity costs 10 cents/KWH, running a 500-watt load for two hours, or a 100-watt load for ten hours, costs ten cents.
Newer PCs use 200 MORE watts than older ones. Running one for ten hours a day will cost an extra 20 cents/day, or six bucks a month. Multiply that by the number of PCs one is running in a parallel-processing, bitcoin mining operation, and you’re starting to see that labour is not the only cost in bitcoin production. Cleverness in configuring the parallel-processing operations will help reduce overall costs.
But, clearly, bitcoin mining utilizes a lot of energy. It has been forecasted by Digiconomist’s Bitcoin Energy Consumption Index that the current, global, estimated annual electricity consumption is 37.8 TWh.
Experts say that 3.5 million households in the U.S. could be powered by the energy consumed by bitcoin mining. The global cost of bitcoin mining globally is $1.89 billion.
Bitcoin mining currently uses more energy per year than Bulgaria and Denmark, and a number of other European nations, according to a recent report.
That equates to a huge carbon footprint for the bitcoin business across the world.
Quebec officials aren’t the only ones worried about soaring energy demands by Bitcoin producers. So are producers in Singapore, which is picking up some unexpected bitcoin business.
China’s Bitmain recently announced it’s leaving Beijing for Singapore. The firm’s founding partner Wu Jihan says Bitmain already relocated other mining operations to Canada and the U.S.
A rival bitcoin miner, BTC.TOP, announced it’s opening a factory in Canada. Another Chinese firm ViaBTC has recently located facilities in the U.S. and Iceland.
Jiang Zhuoer, founder of BTC.TOP, recently told reporters he chose Canada for new operations and to the ‘relatively cheap cost’ of energy there, vis-a-vis China, and the “stability of the country and its policies”.
Indeed, the government crackdown in China on cryptocurrencies is seen as a potential obstacle to continued fast growth by drilling companies.
These are not just the minor irritations of dealing with nettlesome bureaucrats. The Chinese have their sights on bitcoin miners as systemic enemies.
The People’s Bank of China in Beijing, in its recent clampdown, claimed that initial coin offerings (ICOs) and continued sales of bitcoin could pose “a major financial threat” to the central government in Beijing, the world’s second-largest economy today.
Another Asian firm, Japan-based GMO Internet, is also eyeing Canadian operations. Japan has high energy costs and always has – as it has very little domestic energy production. One of the reasons for World War II was Japan’s search for energy security, and oil from Asia, a bit of historical context shows.
South Korean regulators are also voicing skepticism about the costs of hosting bitcoin operations, and say they may reel in the market, perhaps as early as this month, observers said.
Computer Power-Generated Mining
People mine for Bitcoins using computers, or networks of computers (and all the energy needed to power those parallel PCs) to solve complex math puzzles, which are generated by others. Networks of exchanges, like some of those cited above, have emerged around the world to facilitate this trade. A winner is rewarded with 12.5 bitcoins roughly every 10 minutes.
One of the pioneers in the field is Kenneth Goodman, co-founder of Altcoin Advisors, based in New York City. In an exclusive interview with Grizzle, he reveals how the emerging currency-making world works.
“When I was in college, I was a math major, and I took a numbers theory course,” Goodman tells Grizzle. “It blew my mind. That’s where I first learned about these cryptocurrencies. Learned about it on a high level. We’re talking about something invented by math experts and cryptography experts as a way to take the middlemen out of transactions. Or to reduce the fees middlemen receive. While Western Union may cost you 30% of what you are sending, in terms of cash, to a friend, cryptocurrencies, at the most, cost a dollar for a transaction to complete. I was a skeptic at first, but now I am convinced.”
At Goodman’s company, a technology and finance consultancy, the belief is that these kinds of cryptographically secure data structures “are the future” of finance. Bitcoin is not the only purveyor, however. Goodman believes there may be as many as 1,500 legitimate firms involved in the cryptocurrency business today.
“Cryptocurrencies are like Ticketmaster,” Goodman says. “They are intermediaries that someone trusts. They are a centralized party that brings trust to the system. There is such a huge potential in this space.”
So there you have it. Energy costs of running a Bitcoin mining operation are high, and regulators are increasingly hostile. But there’s a lot of potential money to be made off this alternative currency revolution and you need only a couple of computers and a mathematical mind to be one of the millionaires of the financial revolution.