The bitcoin mines of China

Abstract

In the dusty, sunbaked land surrounding Ordos, a city in China's Inner Mongolia, sits one of the world's largest bitcoin mines. Encircled by coal-fired power plants, rare earth mineral extraction sites, and the skeletal remains of abandoned, half-constructed housing complexes, the Bitmain Technologies bitcoin mine is evidence of a new economic boom in the area. Every 10 minutes, a new block of data is added to the Bitcoin blockchain, the accounting ledger that records every transaction made with the currency. And every 10 minutes, a shiny new cache of bitcoins is deposited into the digital pocket of the person whose computer added the most recent block. Miners compete for the right to add new blocks by running a single calculation, the SHA-256 hash function, over and over as fast as they can. This essentially enters them into a lottery with all other miners on the network. The rewards of this lottery now amount to over US $8 million worth of bitcoins every day. Half of this goes to miners in China, who own a majority of the hashing power on the Bitcoin network, according to a new study by University of Cambridge researchers. Their proximity to manufacturers of specialized hardware and their access to cheap land and cheap electricity make Chinese miners the natural beneficiaries of the Bitcoin system, which rewards efficiency and hustle above all else.