Bounties offered for referring displaced Chinese Bitcoin miners to new homes

Due to China’s crypto crackdown, relocated Bitcoin (BTC) miners are being hampered by a data center bottleneck, as competition for space in Bitcoin-friendly data centers has grown so intense that bounties are being given for recommendations to new homes, according to Bloomberg.

The Chinese clampdown has taken down many machines in the global network needed to execute the computations that validate transactions and generate new BTC. Consequently, profitability for cryptocurrency miners has increased as the amount of energy required to solve a Bitcoin block has fallen.

Profits for Chinese miners are generally increasing as a result of their inability to mine, since the difficulty level of solving a Bitcoin block and the quantity of processing power flowing through the network has dropped since China’s crackdown. The most recent change decreased the difficulty to a level last seen in June 2020, when the digital currency traded at $9,000 per coin.

Mining three times more profitable than last year

Implying that for the same amount of work this time last year, a Bitcoin miner who wins a block reward would today receive BTC worth more than three times what they were worth at that point.

However, the enormous incentive will only exacerbate the space shortage because of market conditions, as the older generation of mining hardware is still viable. Overall, China’s crypto crackdown resulted in easier and more profitable Bitcoin mining for the miners in other countries.

Consequently, some Chinese Bitcoin miners are ready to pay significant premiums over the ideal operating rate of less than five US cents per kilowatt-hour, according to Christian Kaczmarczyk, a principal at venture capital company Third Prime.

Kaczmarczyk stated: 

“People are paying an arm and a leg to find hosting right now <..> These miners from China are willing to pay 6, 7, 8, 9 cents to get in the game. They’ll pay whatever.”

To add, disruptions in the global supply chain have made obtaining necessary electrical transformers and switches more difficult on top of strict requirements for connecting to electricity grids resulting in construction timeframes that can last years.

While the influx of displaced miners seeking to migrate to the United States as a result of China’s crackdown is aggravating the situation. 

“Machines are no longer the bottleneck,” revealed Meltem Demirors, chief strategy officer at CoinShares. “Hosting facilities are. You just can’t build a massive location data center in a few months.”

China’s Central Bank

Elsewhere, The People’s Bank of China is “quite worried” about the threats to the global financial system posed by privately produced digital currencies, notably so-called global stablecoins.

These digital currencies are linked to a fixed value, such as a government-backed currency, for example, the United States dollar. Tether, for instance, has sparked alarm in the US and now ranks third in market value behind well-known cryptocurrencies Bitcoin and Ethereum.

Fan Yifei, a deputy governor of the People’s Bank of China (PBoC), told reporters, according to a CNBC translation:

“Some commercial organizations’ so-called stablecoins, especially global stablecoins, may bring risks and challenges to the international monetary system, payments and settlement system, etc.”

Moreover, he mentioned that his role at the central bank includes dealing with digital currency. The PBoC is working on a digital version of the Chinese yuan, which has already been tested in many regions in the nation in the last year.

 In contrast to Bitcoin’s decentralized system, the PBoC’s digital yuan is centrally managed.