China’s bitcoin miners migrate to US: NPR
China’s bitcoin miners migrate to US: NPR

China’s bitcoin miners migrate to US: NPR

An image of the Compute North plant in rural Nebraska.

John Ruwitch / NPR


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John Ruwitch / NPR


An image of the Compute North plant in rural Nebraska.

John Ruwitch / NPR

In the farmland on the outskirts of Kearney, Nebraska, there is a field full of modified 40-foot shipping containers lined up. It is off the main road and easy to miss; there are no signs and no large buildings.

But as you approach, you notice one thing: it makes a lot of noise.

Each container is lined with huge industrial fans and filled with specialized computers. Inside it is blowing and humming about 85 decibels.

“Our technicians always have some form of hearing protection when they come in,” says Dave Perrill, CEO and co-founder of Compute North, which operates the facility.

Welcome to one of the largest cryptocurrency mining data centers in the United States.

Here, thousands of computers are dedicated to solving a set of complex mathematical problems that verify blockchain transactions and in doing so create bitcoins and other cryptocurrencies. In industry parlance, it is called mining.

Until the middle of last year, most of the cryptocurrency mining like this took place in China, where the government has had an on-again, off-again relationship with cryptocurrencies. Last summer, it pulled the plug.

“We have certainly heard this news more than once that China banned crypto. But we had also heard the rumor so many times and it never came true. So when we first heard this, we thought a bit the same way, no. ? ” says Perrill. “And then all of a sudden we started getting phone calls.”

The calls were from operations trying to move mining equipment – the computers – out of China to install them in the United States. For Compute North, it was a blessing.

“We doubled in size,” said Christopher Herbig, chief engineer at the plant. “Like, we were busy nonstop all summer. It was just wild. And there’s just going to be more and more demand all the time.”

Dave Perrill (right), co-founder and CEO of Compute North, and Lars Jorgensen of TAAL Distributed Information Technologies speak at the CoinGeek Conference New York in October.

Eugene Gologursky / Getty Images for CoinGeek


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Eugene Gologursky / Getty Images for CoinGeek

China cracked down on bitcoin mining and transactions last year

Why did all these Chinese bitcoin enthusiasts call Nebraska? It turned out that major changes were taking place in China.

For years, it had been the global hub of bitcoin mining for one simple reason: Electricity was cheap.

For decades, the local government had built dozens of hydropower dams and wind farms, mostly in remote areas. Regional power grids have not yet connected cities with many of these massive renewable energy projects, a problem called reduction.

Reduction meant that a good deal of this renewable energy was wasted – until bitcoin miners came into being about a decade ago, after bitcoin officially began trading globally.

“We were somehow welcomed by the local Chinese governments because we can buy electricity from them, and we have good incentives to create local jobs,” said Abdullah Han, a Chinese bitcoin miner based in Dubai. and the founder of Meer Energy, which sells mining. hardware.

Bitcoin mining takes a lot of electricity to power all computer servers, so crypto-entrepreneurs like He sometimes set up direct data centers in rural Chinese villages to harness these unused renewable energy sources.

“We benefit from the lowest price of industrial electricity,” he says. “Local governments would give us an industrial park, and within that industrial park they would give us a lot of benefits from tax treatment and everything.”

As of September 2019, three-quarters of bitcoin mining in the world was in China, according to Cambridge Alternative Finance Benchmarks, a research center running out of Cambridge University in the UK. But a backlash was brewing. The Chinese government accused the unregulated cryptocurrency of an increase in financial fraud numbers and of financing gruesome activity such as fraud or ID theft.

A visitor walks past a logo for e-CNY, a digital version of the Chinese yuan that was unveiled during a trade show in Beijing last September. That same month, China’s central bank declared all transactions involving Bitcoin and other virtual currencies illegal, and stepped up a campaign to block the use of unofficial digital money.

Ng Han Guan / AP


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Ng Han Guan / AP

Separately, China’s central bank is also rolling out a state-run digital currency that it encourages its citizens to use.

For years, China had made it difficult for people in China to buy and sell bitcoin by banning its citizens from registering accounts on cryptocurrency exchanges and shut down third-party platforms that had provided a solution. But authorities turned a blind eye to bitcoin miners operating there at the time.

Last May, China prohibited financial institutions from using cryptocurrencies and promised to “crack down” on mining. The next month, that prohibited power generation companies from supplying bitcoin, effectively stopping all mining. China had signaled several times before it would shut down bitcoin mining, only to go back these measures. This time was different.

“The next day, we already heard about some mines that were shut down,” said Chinese miner KC Tang, who had activities in China’s Sichuan province and Xinjiang region. “We are beginning to realize that the government was serious.”

In September, China went a step further and prohibited all bitcoin transactions on land.

The United States is a particularly attractive destination for Chinese bitcoin miners

Thus began what China’s crypto enthusiasts call the “great mining.” migration“, while large and small Chinese mines pull the plug and switch west.

Tang is trying to find a new country to install his mine hardware, which he estimates is in the order of “a few million pieces”, but high shipping costs and legal complexity in terms of importing computer hardware have delayed his plans.

Kazakhstan and Russia are two popular candidates to move miners’ bitcoin-made computers because power is cheap, but infrastructure is not great. Tang says he is also concerned that Russia may seize his servers.

Despite higher power and labor costs, the United States has reliable legal protection over private property, Tang says. Elsewhere, he says: “Maybe the governments will not only shut down operations, but they will also take all your machines. You could lose everything, so the United States is a safe choice.”

And that’s why a field in Nebraska is now humming with computers.

Workers install cryptocurrency mining computers in a remodeled shipping container at the Compute North facility in Nebraska.

John Ruwitch / NPR


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John Ruwitch / NPR


Workers install cryptocurrency mining computers in a remodeled shipping container at the Compute North facility in Nebraska.

John Ruwitch / NPR

Nebraska is one of several U.S. states that welcomes foreign bitcoin miners

Almost overnight last summer, China’s share of hashrate – the computer that creates bitcoin – fell to almost zero. And last fall, the United States had the largest share, according to the UK Cambridge Center for Alternative Finance.

For Kearney, it has been a winner. Until now, the city of about 30,000 people was perhaps best known outside of Nebraska as a pit stop on I-80, almost exactly halfway between San Francisco and New York.

Mayor Stan Clouse says unemployment is low, the population is relatively young thanks to the university in the city, and there is plenty of land.

“We are quite diverse in our economic profile. But we felt that technology was an area where we needed to step up, develop a technology park, recruit technology industries,” he says.

After a failed attempt to woo an investment from Facebook, the city picked up Compute North, which opened its operations in 2019. Last summer, when cryptocurrency workers began fleeing China, it was ready for expansion.

Bureaucratic disruptions in China, environmental concerns and infrastructure bottlenecks in the United States have slowed mining. But many cities across the United States are eager to stand up for facilities for miners and make crypto-friendly regulation. Rockdale, Texas, a small town east of Austin, and Massena, in the state of New York, have already seen a sharp rise in cryptocurrency mining.

Perrill says the migration to the US is good, “because one of the criticisms of bitcoin is that it was controlled by China, quotes unquote – that if you had over 50% of the hash rate, you could potentially do scary things. So the idea that it is, you know, moved to the United States and become even more diversified, I think in general is a good story. “

Compute North employs about a dozen people – cryptocurrency operations are not labor intensive. But the plant has helped expand and stabilize Kearney’s power grid. Clouse, the mayor, says it has also increased the city’s tax revenues, allowing for new investments at the airport, which he hopes can help propel the economy forward.

Lamont Black, a professor of finance at Chicago’s DePaul University, teaches a course on blockchain – the decentralized ledger technology at the heart of cryptocurrencies. He says the flow of cryptocurrency mining to the United States will also benefit the United States’ overall blockchain ecosystem.

If the coins are minted here, he justifies, it could spur investment and innovation around the underlying technology.

“We are seeing an institutionalization of crypto that is becoming more mainstream, more regulated, and I think if we can facilitate that in countries like the United States, then I think it gives us a global competitive advantage,” he says.

And that benefit can be crucial in an industry that advocates believe could be as transformative as the Internet itself.

John Ruwitch reported from Kearney, Nebraska. Emily Feng reported from Beijing.

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