The cryptocurrency industry is having an exciting month as governments and private entities make announcements that contribute to the growth of the field. First, it was reported that billionaire Peter Thiel along with other investors poured $50 million into a crypto mining startup. The company plans to build renewable bitcoin mining farms in Texas in 2020.
China escalated the conversation after President Xi Jianping publicly stated that the country should “take the leading position in the emerging field of blockchain.” South Korea followed suit as the Korea Internet Security Agency announced that it will fund blockchain-related projects next year to the tune of $9 million.
Just recently, Russia hopped on the blockchain bandwagon after its internet ombudsman decided to convert an aluminum plant into a bitcoin mining farm. The Russian official has lofty ambitions as he plans to take on China’s dominance in bitcoin mining.
Mining the number one cryptocurrency requires an exorbitant amount of energy. According to research, it takes 300 KWH of electricity to power each bitcoin transaction. To put that in perspective, that amount of energy can power a window type air conditioner eight hours a day for about a month. Thus, those who mine bitcoin can stay profitable if they run operations in countries where electricity comes cheap.
That’s why it’s no surprise that China controls 70% of crypto mining capacity. The country is also home to farms that control 60% of bitcoin’s hash rate. These mining rigs are located in the Sichuan mountains. That’s where hydroelectric power is responsible for making electricity costs one of the cheapest in the world. As a result, the historic cost to mine bitcoin was $2,400. It went up slightly this year.
Even with the initial investment involving hardware and infrastructure, Sichuan miners earn around $6,000 per bitcoin at current prices. Conditions are so favorable that it’s no wonder China leads the world in mining power.
However, that may not be the case for long as Russia wants to get a piece of the action.
The Nadvoitski Aluminum Plant (NAZ) in northwest Russia was shut down in 2018 after losing the chance to supply aluminum to the United States due to sanctions. The Rusal-owned metal factory will now be leased to the Russian Mining Company (RMC). RMC is spearheaded by entrepreneur and internet ombudsman Dmitry Marinichev. In an article published in RBC, Marinichev said,
Now the plant for Rusal is unprofitable, the electricity supplied to it is practically not utilized, and people living in the single-industry town near the plant have nowhere to work. Our idea is to redesign the plant and sell its computing power as a service, that is, provide an IT service.
The RMC plans to put up a sizeable bitcoin farm in the facility. It may be large enough to capture 20 percent of the global hash power. For comparison, a previously existing bitcoin mining farm in the country, Bitcoin Russia, was responsible for about 1.5 percent of the bitcoin mined. Thus, the plant at NAZ will likely challenge China’s superiority in cryptocurrency mining.
In addition, the RMC sees a lot of promise in mining bitcoin. The company computed that there are 4,320 blocks that can be mined per month. At the current price of $9,160 and a 12.5 BTC reward per block, the RMC projects a monthly revenue of nearly $99 million.
If the Russian plant turns out to be profitable, it is very likely that RMC will scale. That’s bad news for Chinese miners but good news for bitcoin holders.
Last modified: June 12, 2020 6:47 PM UTC