In a remote corner of northwest China, Wang Hongyi plans to set up a bitcoin “mining farm” with 1,000 computer servers, hoping to take advantage of low electricity and operating costs to cash in on the boom.
He’s one of many Chinese investors seeking to profit from the popularity of the digital currency, which was worth less than US$600 a year ago and peaked at US$4,950 on the first day of this month.
Nearly 70 per cent of all new bitcoin are mined in China – miners use computer hardware to find bitcoin by creating new links in its blockchain, which is essentially a huge digital ledger.
Wang’s planned farm in Gansu – one of the poorest provinces in China – will cost about 10 million yuan (US$1.52 million) to set up.
Initially he was confident he could turn a profit because the site is located right next to a hydropower station and that will cut electricity fees – a key operating cost – to about 0.25 yuan per kWh.
He estimates he will need five staff to manage the warehouse of computers running around the clock.
But after the Chinese government last week began an all-out war on bitcoin and other digital currencies, Wang, who is in his early 30s, is having second thoughts about opening his mining farm.
Fundraising through initial coin offerings has been banned and all digital currency exchanges in China will be shut down. Some in the industry fear Beijing might go further and target mining.
“If we start this business and the government says it’s illegal, then it will be impossible for us to recover our investment,” Wang, who was in Hong Kong for a cryptocurrency conference on Wednesday, told the South China Morning Post.
Bitcoin trading platforms rush to contain damage
While the Chinese government has told cryptocurrency exchanges to stop trading bitcoin, it has not explicitly banned possession and production of the digital currency – offering hope to miners that they can continue to dig out bitcoin and sell them on overseas platforms.
Electricity is the main cost for bitcoin miners – it costs about 10,000 yuan to mine one bitcoin in China,
according to Leon Liu, chief executive of BitKan, which organised the Hong Kong conference.
Bitcoin is currently valued at about US$3,900. But if it goes back up to more than US$4,000 it would take about four months for Wang to recover his set-up costs – making it a lucrative investment.
full:
http://www.scmp.com/news/china/economy/article/2112085/chinas-bitcoin-miners-limbo-after-beijing-shuts-down-exchanges
