Can You Mine Bitcoin in China?

As a possible entrepreneurial endeavor, I’ve often wondered about the viability of independent crypto-mining in a country like China.

This year, in July of 2018, a government notice was issued in China’s Xinjiang Uyghur autonomous region that illegal bitcoin mining operations needed to be shut down by August.

And when I say “illegal,” I mean any operation that is not registered with the government as a licensed business entity or has been using too much electricity without contracts with utility firms.

This follows a notice in January of 2018 requiring Xinjiang utility companies to report bitcoin operations to the authorities. This has a significant impact on several mining farms, who in turn looked to relocate to places in the U.S. and Canada.

Relocating a farm isn’t easy, as they need locations that can support the power demands. They would have to assemble the farms from scratch.

In June of 2017, the Economic Information Commission (EIC) of China issued a notice saying, “These farms contribute nothing to the local economy; all they do is consume power.”

The idea that Bitcoin mining could promote pollution has been overstated, as China is moving away from coal to solar plants. Soon solar power generation will provide a boost of inexpensive electricity for mining. Both the carbon footprint and electrical expenses will be lower. 

In January of this year, Chinese mining operations accounted for nearly 80% of all the mined bitcoin. China’s bountiful supply of hydropower and cheap coal helped to maximize returns during downtime.

But what does that mean for independent mining operations without business licenses? Is it still a viable business? To find out, I reached out in WeChat to be connected by email with the operator of a relatively small underground farm. He wished to be referred to as “Sethie.”

I first became interested in mining crypto in July 2017. I was rather late to the game therefore many people were already telling me not to get into it as the 'moment has passed' was the consensus.

Currently, 90% of our farm is still aimed at Ethereum. A few of my investors including myself, have taken a gamble with a few machines on Ravencoin. Previously we also had a few miners aimed at Horizon formerly known as Zencash.

Unlike most people think, we are a GPU mining farm only. Asic's are good products to have, but my investors and I decided that we prefer the ability to switch algorithms if needed.

We currently have around 180 GPU's. The majority are NVIDIA P104 from a variety of brands (mining specific cards). Our earliest investors ran on NVIDIA P106 and a few AMD 570 cards.

We all start with the idea that mining is easy money. But it is not, it is way more straightforward to buy coins and hope for the best. After all, with mining, you depend on the price of a coin as well.

If you are considering joining the mining industry, think of the money you spend on hardware, think of your electricity cost, think of rent you might have to pay for a location, think of the heat production, the noise the machines create, think of the time you will need to invest in tinkering with GPU's and fixing miners.

If you love computers, mining can be a lot of fun as a hobby. But the concept of mining as a way to earn a lot of cash is currently not realistic. It is more expensive to mine for hobbyist than to purchase coins.

Also, once the market does restore and coin prices go up. You make more profit with the coin you bought. Mining is a slow game. That being said, if you have the patience. It is safer to mine in a bull market than a bear market.

If my investors and I purchased coins during the bull run instead of mining hardware, we would have lost 80% of our money. Now, the hardware value is still there, and we have mined a considerable amount of coins. So we are up in general.

Yes, I have. When I started building miners. I didn't take in consideration how hot power plugs can become. So while testing stability, I burned through the sockets.

Another time while testing (always test before deploying a machine in your farm, and after deploying stay there for a few hours to monitor) I accidentally used a crappy extension socket with a max capacity of 1200w.

When my 8 GPU rig powered on I blew up the extension cord which resulted in a fire!

Local hardware is not always of the best quality. When you build several machines, you can become a bit lazy. All these mistakes where the result of me becoming 'bored' and therefore not paying close enough attention to safety. 

Also for our farm, we hired electricians, but we couldn't tell them what exactly our components were used for. So I told them we were building a server farm.

When I stated my requirements, the local electricians though my Chinese was faulty, and so build a way less powerful circuit. Logically, when the farm came back online after expanding the farm kept shutting down until I found out that the electric circuit couldn't handle the power draw.

I would give myself some advice on heat production. That I completely underestimated.

Our mining farm is underground, and it is colder there in general. But 180 GPU's produce a crazy amount of heat. We spend most money fixing the air circulation underground. This is not a giant problem when you mine at home. But when you go bigger, this is the biggest reason machines fail.

It is going to be a huge industry. But not for the home miners. We will become obsolete.

We can keep running for a while due to low electricity cost. But hash power will come from giant factories and no longer from a huge decentralized crowd of private miners.

Our farm has had a total output of around 85 ETH over the span of a year. This is not what I personally mined but all my investors combined within a year.

Reddit and Google, there are countless tutorials online. All the mistakes you will make have been made for you. I have spent a lot of time in the subreddit /r/EtherMining and /r/gpumining.

No, I would no longer recommend it financially. Only do it if you love to build machines and have relatively cheap power. It is a lot of fun to build your first machine. Just financially it can't be justified at this point in time.

Good advice. And thank you, Sethie, for the insights. I'm sure there will be many people who will benefit from what you've shared here.