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Bitcoin

China Plans To Kill Most of the World's Bitcoin Mining Operations (bloomberg.com) 261

The Chinese government will end bitcoin mining operations in the country in the coming months in a move that could have a massive impact on the price of the world's biggest digital currency. From a report: China has been a central player in the development of bitcoin in recent years, but Beijing has spent the last six months cracking down on the cryptocurrency industry -- shutting down local exchanges and banning initial coin offerings. Leaked documents suggest the Chinese government plans an "orderly exit" for bitcoin mining operations in the coming weeks and months. In the documents, issued to the local offices of the internet-finance regulator, authorities were instructed to force mining operations out of business using measures linked to electricity pricing, land use, tax and environmental protection.
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China Plans To Kill Most of the World's Bitcoin Mining Operations

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  • by jrumney ( 197329 ) on Monday January 08, 2018 @01:24PM (#55885985)
    Given that bitcoin relies on mining to certify transactions, I suspect that the direction of impact could be rather surprising to some of those who believe in scarcity driven theories of economics.
    • by RobinH ( 124750 ) on Monday January 08, 2018 @01:50PM (#55886189) Homepage
      If the price of a transaction goes up, that would bring the price of bitcoin down (makes it more expensive to use, and therefore worth less).
      • If the price of a transaction goes up, that would bring the price of bitcoin down (makes it more expensive to use, and therefore worth less).

        If bitcoin were rationally priced that would be true. But bitcoin is a very long way away from being rationally priced. Right now it's a speculative bubble and the "value" of a bitcoin (and other cryptocurrencies) has become untethered from sanity therefore the normal rules of supply and demand are temporarily suspended.

    • by TheRealMindChild ( 743925 ) on Monday January 08, 2018 @01:51PM (#55886191) Homepage Journal
      The biggest, and maybe only problem that will arise will be the difficulty being too high when they shut down the farms, leading to a period of slow block solves until the difficulty adjusts. The network will work just fine without the chinese mining farms
      • by perpenso ( 1613749 ) on Monday January 08, 2018 @02:22PM (#55886411)

        The biggest, and maybe only problem that will arise will be the difficulty being too high when they shut down the farms, leading to a period of slow block solves until the difficulty adjusts. The network will work just fine without the chinese mining farms

        And the blockchain network will be more secure. Bitcoin has deviated from its original design in two ways and both compromise blockchain security. First, miners are no longer a diverse group of ordinary users and their personal computers, mining is dominated by a relatively small number of ASIC farms. This makes 51% attacks more plausible, we had one pool get to 50% a few years ago. Secondly, ASIC mining is concentrated in a single country, 70% of the hashate give or take. This obviously destroys the notion that bitcoin is beyond government meddling. These ASIC miners are dependent upon cheap government controlled power.

        It sucks to have invested money in ASIC hardware and colocated you gear there but this move would help to get bitcoin back on track. Hopefully closer to the globally and widely distributed mining that is necessary for blockchain security, something we do not have today.

      • There is nothing in TFA about shutting down farms. The closest we get is:

        Chinese authorities outlined proposals this week to discourage bitcoin mining -- the computing process that makes transactions with the cryptocurrency possible. Officials plan to limit the industry’s power use and have asked local governments to guide miners toward an “orderly” exit from the business, people familiar with the matter said.

        In other words the miners have plenty of time to move operations elsewhere, which seems to be what is happening judging by the rest of the article.

    • Yeah, within the last 24 hours, Bitcoin's price dropped over $2000 and has recovered about $800 of that (so down about $1200), and that was probably based in part on the news from Microsoft.

      I'm fully expecting another decent drop once enough people realize the ramifications of this.

    • The amount of bitcoin produced by mining won't change.......roughly N new bitcoins will be created every 10 minutes (by algorithmic design). If the amount of processing power available decreases, then the difficulty of the algorithm decreases. If the amount of processing power increases, then the difficulty of the algorithm increases. N is set (by the algorithm) to decrease over time to zero, at which point the transactions will be covered entirely by transaction fees (the person creating the transaction ca
  • by Anonymous Coward on Monday January 08, 2018 @01:30PM (#55886057)

    Ain't no such thing as an orderly exit from a bubble. Bubbles are driven by speculative demand, people trying to make a profit by selling it to others for higher prices. People ain't in it to buy and hold. So there's going to be no price stabilizing until the speculators leave the market.

      The slope of the price curve is going to be high on the upswing or the downswing. A government has two choices: inject money into the market, pumping it up, again attracting speculators. Or standing back and letting it reach organic market value.

  • by Eravnrekaree ( 467752 ) on Monday January 08, 2018 @01:35PM (#55886093)

    Wasn't bitcoin always one big cluster due to the fact it eventually takes the power output of nuclear plants just to mine new coins. An activity which consumes vast physical resources for no tangible benefit, which makes the interest rates of the banking system look very reasonable in comparison. I am sure that the fact that it consumes vast resources and stressing infrastructure on something with no tangible value to society is a part of the reason China is taking it off line. A lot of hype over a fundamentally broken model, that is really not a currency anyway, but a wildly fluctuating and unstable mess, any real currency that acted this way would be a laughing stock.

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      China has a problem with it because they devalued their Yen on purpose which screwed over the savings accounts of the Chinese. So in response a lot of Chinese went to Bitcoin for their savings instead of to Mother China. Mother no likey so much you not dependent on her teat.

      • Or the recent plunge in bitcoin value is because China sold all their coins, making a few billion profit.
        Now they're not in the bitcoin market they can stop pumping up the price. They don't need the drain on their power grids either. Costs them money to burn coal.

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      Wasn't bitcoin always one big cluster due to the fact it eventually takes the power output of nuclear plants just to mine new coins. An activity which consumes vast physical resources for no tangible benefit, which makes the interest rates of the banking system look very reasonable in comparison. I am sure that the fact that it consumes vast resources and stressing infrastructure on something with no tangible value to society is a part of the reason China is taking it off line. A lot of hype over a fundamentally broken model, that is really not a currency anyway, but a wildly fluctuating and unstable mess, any real currency that acted this way would be a laughing stock.

      Laughing stock? You say this as if the cost to sustain the USD isn't measured in the trillions.

    • by Anonymous Coward on Monday January 08, 2018 @02:06PM (#55886303)

      No, and this is one of the seemingly least understood aspects of Bitcoin mining. The difficulty of mining a block adjusts dynamically based upon the total amount of compute power currently mining. The more mining power, the higher the difficulty. The purpose is so that a new block is found approximately every 10 minutes. When power is added, blocks are found faster and the difficulty increases. When power is removed, difficulty decreases.

      One important aspect if how often the difficulty adjusts -- it's around every 2 weeks for Bitcoin. So if a lot of power is suddenly removed, then the rate at which blocks are found will likely dramatically increase -- and stay that way for potentially several weeks. But eventually the difficulty will adjust to match the available compute power, and orderly blocks every 10 minutes will resume.

      Some alternative cryptos have differentiated themselves versus Bitcoin by having much faster difficulty adjustment periods (e.g. as quickly as every single block).

      Bitcoin would only consume a nuclear power plant of energy if humans put a nuclear power plant's worth of energy into mining. If instead humanity puts it 5V @ 0.001W of power, the difficulty will adjust and that will be the consumption. ROI will ultimately drive the amount of compute power dedicated to Bitcoin.

      • Bitcoin would only consume a nuclear power plant of energy if humans put a nuclear power plant's worth of energy into mining. If instead humanity puts it 5V @ 0.001W of power, the difficulty will adjust and that will be the consumption. ROI will ultimately drive the amount of compute power dedicated to Bitcoin.

        But ROI is directly linked to the bitcoin price so if bitcoin goes up by another factor of 10 or more like some people believe then it will be profitable to have entire nuclear power plant of energy. At the $500k -$1M point, it becomes profitable to use all the energy of the USA to mine bitcoin assuming electricity prices stayed the same. As we can't realistically double our electricity use that easily, if bitcoin continues to skyrocket then the price of electricity would increase greatly.

        • by torkus ( 1133985 )

          I'll see your fear-mongering and raise you Fake News.

          Seriously though, the total power usage for BTC is based on some rather sketchy numbers and still represents a minuscule fraction of the worldwide power usage. More is wasted on lighting streets with no people on them.

          • by Wycliffe ( 116160 ) on Monday January 08, 2018 @03:46PM (#55887125) Homepage

            I'll see your fear-mongering and raise you Fake News.

            Seriously though, the total power usage for BTC is based on some rather sketchy numbers and still represents a minuscule fraction of the worldwide power usage. More is wasted on lighting streets with no people on them.

            The total power usage might be a rough estimate but the ROI is fairly easy to calculate based on the cost of electricity and the difficulty level. It's mostly a break even proposition based on electricity usage so if the price of a bitcoin goes to $1M, then it stands to reason that you could burn thru around $900k of electricity and still make a positive ROI. Bitcoin mining is really a form of arbitrage between the cost of electricity and the price of a bitcoin. If the cost of a bitcoin increases and stays there then the number on miners and the difficulty level will increase until it is once again a break even trade of electricity for bitcoin.

      • by mysidia ( 191772 )

        it's around every 2 weeks for Bitcoin. So if a lot of power is suddenly removed, then the rate at which blocks are found will likely dramatically increase

        Some alternative cryptos have differentiated themselves versus Bitcoin by having much faster difficulty adjustment periods

        A problem is that trading in and out of differentiated cryptos generally has to be done in BTC.
        For the most part Fiat markets only exist for a few cryptocurrencies.

        Furthermore, if the hash power drops by a MASSIVE amount suddenly

    • > An activity which consumes vast physical resources for no tangible benefit

      There are a ton of these that people seem to participate in anyway. Diamond mining for example. I don't think cryptocurrency mining is anywhere near as resource wasteful as that all things considered, especially the blood costs.

    • > I am sure that the fact that it consumes vast resources and stressing infrastructure on something with no tangible value to society is a part of the reason China is taking it off line

      I'm sure that's what their justification will be, but the simple truth behind the move is that China has had a problem with wealth fleeing the country under the table, and cryptocurrency has made that far easier to do. This crackdown is all about controlling money leaving their borders.

  • by FeelGood314 ( 2516288 ) on Monday January 08, 2018 @01:38PM (#55886111)
    The mining pools are run out of China. The physical location of the devices doing the hashing is wherever the electricity is cheapest. For example, people heat their homes in Quebec with electricity so some are mining there now and heating with the waste heat.
    The mining equipment won't vanish. If you have sunk the cost of buying the equipment, you won't turn it off because electricity got more expensive. Right now $1 worth of electricity gets you about $10 worth of crypto currency. If the price of electricity goes up 9x it still will make sense to mine. It just won't make sense to buy new equipment.

    Transaction times won't be affected. The total hashing power won't decrease. It's rate of increase might slow. BUT, even if the total hashing power fell, the currencies have what is called a difficulty level. That will decrease and a currency like bitcoin will continue to create a new block every 10 minutes.
    • Find me some mining hardware that will make enough money to make back my investment before its obsolete. It was only profitable in China because the government paid for everything.

      • Find me some mining hardware that will make enough money to make back my investment before its obsolete. It was only profitable in China because the government paid for everything.

        Especially after you pay to have that heavy ASIC device shipped from China to wherever your are. Maybe you can pay to have heat sinks removed and have domestically manufacture heatsinks attached after the ASIC blades arrives. Either way, hurts you profitability and makes ASiC obsolescence that much closer. :-)

        • What are you blabbering on about?
          It's cheaper to have heatsinks made in China and shipped to most places in the world.
          Why would you think it's cheaper than shipping alone to locally manufacture them?

          Fill up a container, stick it on a boat. You'll pay a flat rate for the container.

          • What are you blabbering on about? It's cheaper to have heatsinks made in China and shipped to most places in the world. Why would you think it's cheaper than shipping alone to locally manufacture them?

            I was actually thinking source them locally, not necessarily manufacture them locally, thoughts and typing diverged.

            Fill up a container, stick it on a boat. You'll pay a flat rate for the container.

            And while in ocean transit the ASIC experiences a drop in profitability. Also I am are talking about individuals getting their hosted in China ASICs delivered to them. As for farms, containers may be more viable but again transit time and setting up a new farming site eats in the more profitable days those ASIC would have had.

      • Well, it sounds like there might be plenty of used Antminer S9's on the market before long at a good price.

      • 1080 ti. 3.5 months breakeven at 0.15 kwh electricity prices. A few days ago.

        But, surprise, you can't find one. Bitcoin insanity is fucking with my gaming!

      • by mysidia ( 191772 )

        It was only profitable in China because the government paid for everything.

        No.... because the government paid for everything in China, they artificially inflated the hashrate and thus the
        difficulties to levels where you cannot compete ( which would not have been achieved if the government wasn't paying for everything).

        Now if the Chinese government stops subsidizing renewable power resulting in cheap mining operations: presumably the market will correct over time.

  • time to dump and don't buy any till it drops alot

  • by Anonymous Coward

    epic waste of energy.

    • In general yes. However if you use some rigs for domestic heating it's not a waste at all. A kW of electricity put into a mining rig will give you just as much heating as a kW put into an electric heater.

      • and about a third of the heating if you put the energy into a heat pump.

        • I don't know what it's like in your country, but I've never heard of a house in Britain heated with a heat pump. Certainly mine isn't. So it's not a useful comparison.

          I have a heat pump in my car, because it's an EV. But not in my house.

          • Well I know of two among immediate acquaintances and they’re not really that rare. What is the point of your annecdote?

            • 2 acquaintances! Wow, well unless you've only ever met a handful of people that confirms their rarity.

          • Most people have heat pumps in their car, EV or not. It's usually referred to as air conditioning.
            They're also very popular in New Zealand for homes. I have one that puts out 6kW of heat and consumes 1.3kW of electricity.

  • Will a hard firewall force an auto fork say they do an DPI block of bitcoin.

  • by Lucas123 ( 935744 ) on Monday January 08, 2018 @01:49PM (#55886179) Homepage
    Bitcoin and other cryptocurrencies supersede traditional fiat money systems, and so threaten government power. I suspect China will not be the last nation to come out against decentralized blockchain-based currencies.
  • by Troed ( 102527 ) on Monday January 08, 2018 @01:53PM (#55886209) Homepage Journal

    Huge mining operations are already up and running, and more planned, in Canada, Iceland, Sweden and Russia. This will not disrupt Bitcoin.

    https://www.hiveblockchain.com... [hiveblockchain.com]

    • Although China effectively banning it will make it easier for other countries to do the same.

    • Last time I checked parts of Canada had the highest electricity rates in North America. A storm damaged power lines at a cabin and it was without power for months. Ontario Hydro still charged him $100 delivery fees every month even with ZERO usage. Even after the news picked up the story they still wouldn't budge.

  • by Areyoukiddingme ( 1289470 ) on Monday January 08, 2018 @02:01PM (#55886253)

    ...authorities were instructed to force mining operations out of business using measures linked to electricity pricing, land use, tax and environmental protection.

    Let's all welcome China to the First World! We're going to redefine the phrase to include them now. How very American of them, to use electricity pricing, land use (zoning), taxes, and environmental protection regulations to crush something they don't like. We're so proud of them.

    Being a capitalist dictatorship sure sounds so much better than being a communist dictatorship, don't you think? Remember kids, it's not an edict from the Powers That Be. It's just a change in zoning. Nothing to see here.

    • by Tailhook ( 98486 )

      +10 Insightful.

  • Won't it just adjust difficulty to offset the temporary loss of miners?
  • Do people use Bitcoin to complete transactions for material goods or has Bitcoin become an investment vehicle?? I.e. What percentage of Bitcoin transactions pay for pizza (or Teslas or houses) and what percentage are people saying "I'll just buy low and sell high and make a killing like everyone else". I assume there's no way to look at the blockchain and determine this ... that would pretty much kill the idea of anonymity.
    • It's never going to be a transaction system. It takes too long to process transactions and there are global limits to the number of transactions per day (based on blocks mined and transactions per block) It's limited to about 10 per second.

      To contrast that with a real global payment network, Visa can do 65,000 per second.

    • by m00sh ( 2538182 )

      Do people use Bitcoin to complete transactions for material goods or has Bitcoin become an investment vehicle?? I.e. What percentage of Bitcoin transactions pay for pizza (or Teslas or houses) and what percentage are people saying "I'll just buy low and sell high and make a killing like everyone else". I assume there's no way to look at the blockchain and determine this ... that would pretty much kill the idea of anonymity.

      It's more a reference system right now.

      You can have smaller centralized systems like coinbase where you can do fee-less, instant transactions but it's not on the blockchain. However, the conversion from fiat to BTC is done with reference to the exchange systems.

    • blockchain isn't anon.
      but really, right now BTC is being used as a speculation vehicle and payment on black market stuff. That's about it.

  • by Kryptonut ( 1006779 ) on Monday January 08, 2018 @03:26PM (#55886967)

    Perhaps this will decentralise mining operations further around the world. Perhaps there will also be a flood of cheaper mining equipment too as a result of mining operations ending in China.

    Could be a fantastic opportunity for more smaller players to get on board.

  • They've completed their pump-and-dump scheme.

  • The sell-off that will result is not going to be pretty but after that, good riddance so the worst thing to happen to BTC ever: Chinese miners. They lied about ASIC production numbers, backed out on deals to sell them, and basically took over the entire network through lies and fraud. Nobody in the community will miss them.

The unfacts, did we have them, are too imprecisely few to warrant our certitude.

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