(gentle music)
- [Narrator] In late June footage from crypto mining farms
in China started popping up on Douyin,
the Chinese version of Tiktok.
Machines that mine cryptocurrencies like Bitcoin
were being dismantled and packed up.
These facilities in China
have produced up to 3/4 of the world's supply of Bitcoin.
But that started to change when about a month earlier,
one of China's most senior officials
at the central government
pledged to crack down on Bitcoin mining.
But he didn't specify what measures he would take
against crypto miners.
However, some local authorities began taking action.
- (woman speaking foreign language)
- [Narrator] A government backed news outlets
showed social media footage of miners turning off machines
after authorities in Sichuan province,
ordered electricity providers to stop supplying power
to these facilities.
- All of this equipment came offline.
There have been huge ripple effects.
- [Narrator] After Beijing's warning,
the global mining hash rate,
that's the measurement of the computing power
used to mine Bitcoins dropped by almost 50%.
- The sudden drop just means everyone who continues mining
now has a bigger piece of the pie.
- [Narrator] So miners around the world are taking advantage
of the Exodus of Chinese miners
to expand their own businesses
and hoping that the power behind cryptocurrencies
is becoming less dependent on a single country.
First, you need to understand how crypto miners make money.
- Bitcoin miners are effectively participating
in a global lottery, every time they start mining Bitcoin.
- [Narrator] Brandon Arvanaghi
used to be a security engineer
at a crypto exchange, and now runs a company
that helps miners set up facilities.
- Miners are solving these complex math problems
that secures the Bitcoin network.
What these mining farms do is they're able to do things
in bulk.
If we do it at scale,
the odds are that we'll eventually win the lottery.
- [Narrator] So crypto mining farms
are usually made up of thousands of specialized computers
and the miners who get the right answers first
are rewarded with new cryptocurrencies.
And these new coins can be then sold on to exchanges.
The vast majority of these specialized machines
have been manufactured in China,
giving miners there a quicker and cheaper access
than others around the world.
- These computers are consuming a lot of electricity.
It was so appealing to mine in China
because of the almost free power
from these hydro plants, for example.
- [Narrator] So with easy access to both machines and power,
a large share of global Bitcoin mining
has happened in China.
The Beijing's tightening grip on the industry
is forcing its homegrown miners to look for a way out.
Since 2017, crypto trading has been outlawed in China
because of the potential risks
cryptocurrencies pose to financial stability
and the possibility of the assets being used
for illegal activities.
And now mining has come into sharper focus
because of the massive amount of electricity consumed
by farms, posing a threat to Beijing's commitment
to limit its carbon footprint.
So miners in China are selling their machines overseas
or moving their operations to countries like the U.S,
Russia and Kazakhstan.
This exit from China has benefited miners elsewhere.
- We are immediately earning more Bitcoins every day.
- [Narrator] Ben Gagnon is a Chief Mining Officer
at Bitfarms.
A publicly traded Bitcoin mining company in Canada.
And he says business after Beijing's announcement
has been booming.
- It is still kind of hard to believe
that all of this equipment came offline
as that market share and the hash rate has been cut in half.
Our share of the Bitcoin revenues has effectively doubled.
- [Narrator] This has also meant
access to some of the best machines
that were once hard to get.
- All the machines that are being manufactured
and are contracted to these Chinese customers
that no longer have a place to be installed.
- [Narrator] Prices of these mining machines
have also dropped substantially.
For instance, one of the most popular models,
which used to cost more than $10,000
was available for around half the price.
With the market awash with cheap machines,
Gagnon says crypto miners are looking to expand
across North America and Central Asia.
- All around the world, I think people are excited.
They're looking to gain that market share,
and either you can work with Chinese miners
or to purchase their equipment from them
and earn that revenue for themselves.
- [Narrator] But expansion comes with one big item
that isn't so easy to come by.
- [Ben] Now, the bottleneck is really on power.
So if you buy these machines
and you don't have a place to plug them in,
it's not really a good use of your investment.
- [Narrator] Gagnon says, it's a race against time
to set up the power infrastructure
before other miners come back online.
- 'Cause it just takes a lot longer
to develop this infrastructure outside of China.
A lot of groups are doing what we're doing right now,
and they're focusing on the energy infrastructure.
They need to negotiate it, they need to secure the permit.
So it's a long path forward.
- [Narrator] But the crypto industry overseas
could face similar pressures as in China.
For instance, in the U.S,
authorities have proposed plans to hold crypto exchanges
to the same standards as traditional securities
and financial services.
Well, some local communities have expressed concerns
about the environmental impact of mining facilities.
Despite the challenges ahead,
once these new mining farms are created,
crypto mining will likely no longer be concentrated
in just one place.
- Concentration in China is the most dangerous outcome
because as you can see
the entire mining industry in that state can shut down.
- [Narrator] As for China's homegrown miners,
the once golden place for mining
will become a less viable option.
- These miners in China are now looking for new homes
in favor of places that are secure.
They know the costs are far too high, they need stability.