Torrential rains in the mountainous Chinese province of Sichuan during late June caused loss of life, landslides, crop damage, the forced relocation of 9000 people, and at least 193 million yuan ($30 million) in economic losses.
Global technicians also noticed a 30% concurrent drop in processing power on the Bitcoin cryptocurrency network at the time of the flood. News that many Bitcoin mining farms in Sichuan had been damaged in the floods suggested a correlation.
Now, a report from Chinese publication Jieman claims that small local Bitcoin miners in Sichuan badly affected by the floods are leaving the area and being replaced by two or three large cloud mining operations, otherwise known as “mining pools.”
As soon as floods abated, representatives from the big pools have reportedly swept into the region and have been buying up small producers’ damaged machines at a 99% mark down.
70% of China’s Bitcoin mining “hash power” (total network contribution rate) is said to emanate from Sichuan, thanks to the area’s generally cool temperatures and plentiful, cheap electricity.
According to Jiemian, until recently, Sichuan was home to an “army” of 25,000 independent Bitcoin farmers “lurking in the mountains,” toiling, largely in solitude, over banks of whirring machines.
The Sichuan region was reportedly home to 600 medium-to-large mining farms and countless small mines.
According to Jiemian, 20 000 of an estimated 5 million mining machines in Sichuan were destroyed or damaged in the floods.
Sichuan officials cut power during the floods, which may have also dropped processing power on the Bitcoin network.
Miner Li Yang says he had to abandon 2000 machines to save his own life when his mine flooded in June.
Li’s losses reportedly totalled 10 million yuan ($2 million).
Frightened small miners like Li are now relocating to Xinjiang.
But the writing may already be on the wall.
According to Jiemian, for small miners, the cost of mining a bitcoin is nearing $6000, and bitcoins sold now are only garnering around $6300. “Profit is as thin as paper,” the publication writes.
Like many Western commentators, Jiemian is also concerned about centralization in Bitcoin:
“The world of bitcoin’s computing power is forming an extreme monopoly and squeezing small mine owners.”
Li Yang, who left a job at Apple to mine bitcoins in Sichuan, and who once lamented the lonely life of Bitcoin mining on social media, (“People who don’t have money, they are not as good as ghosts. On this mountain, money is not as good as ghosts”) is now bereft:
“It was crushed by the giants and suffered from natural disasters. It can’t be done.”