An investigation by the Hashrate Index firm, dedicated to the analysis of the network and the Bitcoin mining industry, estimates that between 30 and 40 percent of the processing power or hash rate of the blockchain will be transferred from China to the States United for the remainder of this year.
The Hashrate Index report published at the end of June analyzes the consequences of the repression that the Chinese government has unleashed against Bitcoin miners in recent months. In that sense, remember that a million mining computers are now stranded in China , while the owners evaluate all the logistical problems involved in moving their equipment.
In the midst of doubts, many miners are looking to North America. Hence, analysts anticipate that more than 40 EH of the network would be managed by mining pools based in the US by the end of 2021. This is a significant readjustment, taking into account that China concentrates 65% of the hash rate and the hash rate of the United States barely exceeds 7% .
But the great northern country is not the only one that will receive migration China, because Bitcoin miners are evaluating other geographic areas. The following areas are on the list under consideration: Canada in North America; Kazakhstan, Kyrgyzstan, Russia, Uzbekistan, and Mongolia, in Asia; Ukraine and Iceland in Europe; and Argentina, Paraguay and Venezuela , in South America .
In this context , making decisions about the destination to choose is not proving easy at all , and it is known that settling in a new geographic space will be somewhat complicated.
Competition for resources and storage space, as well as lack of trust between new and former market participants, creates barriers to coordination and business operations.
Hashrate Index Report.
On this issue, Hashrate Index analysts agree with Galaxy Digital researchers in describing this migration process as a bottleneck for the Bitcoin network . They take into account the repercussions, already noticeable on the blockchain, which has experienced a significant drop in its processing power or hash rate since the crackdown in China began.
In summary, the report shows the dilemma and points out which are the main questions that miners ask themselves, among which are where to go? and how to move the machines?
Texas looks like one of the top destinations
According to the report, although it is still difficult to predict where the miners will settle, the United States seems to be the main destination chosen . Although operators are expected to spread throughout the geography, they consider that this country could provide them with a strong rule of law, with better legal protections compared to China.
In this regard, they cite the most recent summit held by Bitmain, a leading company in the manufacture of Bitcoin mining equipment. “The main discussion revolved around where displaced miners could find cheap electricity and ASIC space (…) They are looking in the United States for a combination of hydroelectric, natural gas, coal, wind and solar energy,” the study says.
Apparently, the only state that offers conditions similar to those that these miners had in provinces such as Sichuan and Xinjiang is Texas, in the southwestern United States.
Renewable energy accounted for approximately 30% of Texas’s energy mix in 2020, and this figure is expected to increase to approximately 40% by 2023. Texas is also home to one of the most favorable regulatory environments in the States. States for Bitcoin.
Hashrate Index Report.
The sights set on countries of the former Soviet Union
Of each of the countries in the list of miners, already mentioned above, their energy conditions and their laws. It is even known that many of them are as hostile as China towards cryptocurrency mining.
Kazakhstan, Kyrgyzstan, Russia, Uzbekistan and Ukraine are neighbors located in Asia included in the group under evaluation. They are all part of the Commonwealth of Independent States (CIS), a supranational organization made up of ten of the fifteen former Soviet republics.
These nations offer the advantage of their proximity to China (which facilitates logistics equipment transfer) and its cold climate that facilitates equipment maintenance. These advantages contrast with regulatory dynamics that are not very favorable.
Among this group of nations, Russia stands out, where, as in China, it is recognized to Bitcoin as property, but its use as a payment method is prohibited. This country concentrates 6.9% of the hash rate.
In January 2021 the Law on Digital Financial Assets came into force, which allows Russians to establish mining companies. Mining hardware is required by law to be owned by a foreign entity. The mining pool software and any currency exchanges must also be managed by a foreign entity.
Russia has an abundance of cheap hydropower in the Siberia region . Therefore, it is seen as a quick solution to reconnect the inactive hash rate.
South of Russia is Kazakhstan, a country that has already received some miners. Equipment manufacturer Canaan announced that it had moved part of its fleet to this area, as had BIT Mining Limited, from the BTC.com pool. The nation already has its Bitcoin mining hub (with 6% hash rate) and promises cheap coal power for its operations.
Despite this, the report indicates that Regulations could be a problem as Kazakhstan requires a lot of paperwork for imports and this would make it difficult for Chinese miners to apply to officials to prove the origin of their machines.
The country seems to be preparing for the entry of miners, since a new law was recently approved that increases the cost of electricity for those who develop the activity in this territory. The new legislation will enter into force on January 1, 2022.
The other areas of Asia that will receive part of the migration are Kyrgyzstan and Uzbekistan, along with Mongolia, according to the study. In them there are also advantages and disadvantages.
This year, Uzbekistan legalized the trading and mining of bitcoins and even made the asset tax-free ( …) While in Kyrgyzstan it is legally recognized as a basic product that can be traded and extracted, but it is not legal to use it nationally as a means of payment.
Hashrate Report Index
Three South American countries are on the list
Taking into account the regulatory challenges that may arise in neighboring countries, some miners are studying the possibility of leaving the Asian continent. The Hashrate Index researchers indicate that, after the United States, miners analyze the characteristics of Iceland and Canada, with favorable legal environments.
The conditions of South American countries like Paraguay, Argentina and Venezuela also stand out. Of these last three , the advantages of Paraguay stand out, where it is expected that at some point a pending bill will be approved and there is an abundance of hydroelectric resources, being a very attractive region for mining. They say the same about Argentina, but the scant legislation they offer to the sector is observed.
As for Venezuela, it takes into account the fact that Bitcoin mining is legal , although the country lacks a formal legal environment that addresses cryptocurrencies. Since last December, the setting of electricity rates for miners has been pending.
The risks of leaving Asia: how to move equipment
According to the analysis, even though many miners will remain In regions close to China, all the signals seem to be leading most of them outside of Asia, with the US at the top of the list.
However, despite the fact that many of These countries offer acceptable conditions to operate, moving to the Western Hemisphere and implies addressing some logistical problems . Shipping costs and the cost of building a new farm from scratch are thus included in the equation.
Calculations indicate that approximately 15,955 tons of equipment reside in China (about 1 million machines). Its transfer by sea could consume about USD 8.2 million, without adding the costs of shipping the equipment to the port from the Chinese provinces, located in the center and west of the country, far from the sea.
“Beyond shipping costs and logistics, there are still a host of other misleading variables that could affect this process,” the report says. “For example, many of these mining machines do not meet Western standards: some use aluminum transistors instead of copper, which are not legal in the United States.”
Other problems follow. Among them, the search and payment of real estate, the acquisition of support structures for the machines or space of rack , and facility management . It is estimated that the construction of a farm in North America requires a minimum investment of about USD 120,000.
Even with all these obstacles, analysts conclude that, in the end, the process will be favorable for the network of Bitcoin They predict that as a consequence of the migration the sector will face greater regulation, but the blockchain will be more decentralized.
The migration will be complicated. Unforeseen problems will arise, trends will change, and it will be at least a year, if not more, before the dust settles. But once things settle down, the scattering of miners will likely be a boon for the network in the long run, as the hash rate will be further spread across multiple jurisdictions.
Hashrate Index.
