Exploring Illegal Mining Camps in Western China

This article was originally published by 8btc and written by Vincent He.

Although China has shut down bitcoin trading platforms and deemed them illegal, its attitude toward bitcoin mining is still ambiguous. Now, 70 percent of the world’s bitcoins are produced in China, while 70 percent of China’s “stock” are in Sichuan, a western province of China, especially along the Dadu River, where there is plenty of hydropower.

As bitcoin mining requires a lot of electricity, China’s bitcoin mining camps are often located in remote areas with low electricity charges, such as Xinjiang, Yunnan, Inner Mongolia, Sichuan and other regions. As a saying goes, “Sichuan is the natural ‘mining capital’ of bitcoin.”

Due to the fact that nearly 50 percent of the revenue from bitcoin mining is used to pay for electricity, miners have turned to direct power supplies from power plants.

“The cost is very low for the direct power supply of the power station, for it does not need to be integrated into the state grid,” said a senior miner. “Many mines are built directly in or near the power station, and they build their own substations.”

A Chinese bitcoin mine’s factory building cannot be approved, nor can environmental assessments and construction reports. Mines may be suspected of illegal construction and power plants’ direct sales also violate electricity laws.

The shortest factory building is on the Dadu River embankment, only a few meters away from the river surface. The newly built cement wall is isolated from the office building of the power station and connected with a transformer unit separated from the wall of the power station.

Entering the factory building, the water mist emitted from the power plant drifted in and the staff jokingly said, “This is natural cooling water.”

The walls of the buildings in the mine are equipped with large fans running at high speed. In front of the fans in the workshop are dense mining machines. In front of some vacant machines, many workers are busy installing machines.

According to the staff, the mining machines here come from all over the country, mostly from Sichuan, Hunan, Jiangsu, Shenzhen and other regions. The owners keep their own mining machines in the mine camp. They pay the electricity fee, the deposit fee and wait for the coins.

“During the flood season, the mining machines return to Sichuan one after another,” Xiaowu said. Just like migratory birds, the mining machines migrate to Inner Mongolia and Xinjiang in winter and return to Sichuan and Yunnan in summer, where electricity prices are lower.

A mine owner revealed that, because of the slow signing of the power supply agreement with the power plant, building the plant cannot include an environment assessment or construction reporting in advance.

The Municipal Bureau of Land and Resources said that they had known the illegal construction of bitcoin mining camps occurs along the Dadu River. At present, a working group led by the Credit and Economic Bureau has been set up, which is conducting a thorough investigation.