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U.S. vs China: The Battle for Bitcoin Mining Supremacy | WSJ - YouTube
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[1]
- [Narrator] This is a
Bitcoin mine hidden deep
[2]
in the mountains of Sichuan in China.
[5]
(speaking in foreign language)
[9]
- [Narrator] And its rival
[10]
is on the other side of the planet
[12]
at a former factory
[13]
that used to make denim for Levi's.
[15]
- You see the transformers
lined up on the outside.
[17]
We have a lot of megawatts.
[19]
- These two miners make money
[21]
by providing the massive computing power
[23]
that's required to process
[24]
and record a high volume of
cryptocurrency transactions.
[27]
Business was soaring as Bitcoin
hit new highs in early 2021.
[32]
- It's hard to sleep.
[33]
You go to bed at night and
you wake up and you look
[34]
and you go, "Holy crap, it's still up.
[37]
- [Narrator] Last year,
China controlled 70%
[39]
of the global processing power
[40]
that runs the Bitcoin network
[42]
and that means the majority
[43]
of the cryptocurrency's
global transactions
[45]
are routed through
these computers in China
[47]
and recorded by miners here.
[51]
So a group of US miners
is raising hundreds
[53]
of millions of dollars
to win a larger share
[55]
of Bitcoin's processing power.
[58]
- When capitalism in the
States decides it wants
[60]
to get into market, get into an industry,
[62]
it moves heavy capital there.
[63]
- [Narrator] They say
their work is also meant
[65]
to protect Bitcoin.
[66]
Industry insiders say
the Chinese government
[68]
has already cracked down on
some crypto entrepreneurs
[71]
and could potentially
disrupt global trading
[74]
by asking miners in China
[75]
to block certain users
from making transactions.
[78]
- It's better for
cryptocurrency to be spread
[81]
around the globe.
[82]
So that Bitcoin cannot be manipulated
[83]
by any single government.
[85]
- I think there will be competition.
[87]
There's more and more human resources,
[89]
technology resources that we're putting
[90]
into this particular new segment.
[93]
- [Narrator] The battle
over Bitcoin mining
[94]
will decide who controls
the infrastructure
[97]
that powers the cryptocurrency.
[103]
(speaking in foreign language)
[108]
- [Narrator] Yulong Liu started mining
[110]
during the previous Bitcoin rally in 2017.
[113]
And this is one of the sites he works with
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that has mined about 8,000 Bitcoins
[117]
over the past three years,
[119]
generating about $28 million in revenue
[121]
over that time period.
[124]
(speaking in foreign language)
[127]
- [Narrator] Miners
need cheap electricity,
[129]
which is abundant in some
parts of China thanks
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to dams and coal power plants
[133]
that were built by the
state in the past decade.
[136]
That electricity then powers fast machines
[138]
that are necessary to
solve mathematical problems
[141]
in order to eventually mint new coins.
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China is home to the vast majority
[145]
of mining equipment production
[147]
and so miners like Liu
always have speedy access
[150]
to the best technology,
[151]
like this cooling system.
[153]
(speaking in foreign language)
[162]
- [Narrator] But the
industry in China lives
[163]
with uncertainty.
[165]
Liu asked to keep the location
[166]
of the site a secret because
he says he's not sure
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if the government will crack down one day.
[172]
While mining itself isn't illegal,
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virtual currency trading
[175]
and crypto exchanges are banned in China
[178]
because they're seen as risky
[179]
to the country's financial system.
[182]
In the past few months,
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Bitcoin industry insiders have said
[185]
that Beijing accused some Chinese miners
[187]
of money laundering
[188]
and froze their credit cards,
[190]
making it difficult for
miners to pay operating costs.
[193]
The Chinese government did not respond
[195]
to a request for comment.
[198]
So to help miners develop their business
[200]
despite the risks,
[201]
Liu offers loans so miners don't need
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to go through Chinese banks.
[206]
His company Babel Finance
lends cryptocurrencies
[209]
to about 300 miners,
[211]
including the owners of this site.
[213]
- So that they can purchase more equipment
[215]
at a lower cost
[217]
and then maintaining the machine itself,
[220]
including repairs.
[222]
- [Narrator] And Chinese miners
[222]
are now facing growing
competition from overseas.
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- In the United States,
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we have massive infrastructure,
[229]
power infrastructure and
building infrastructure
[231]
that's already been built out
[232]
and we can convert facilities
[233]
into large data mining facilities.
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- [Narrator] Russell
Cann is an American miner
[238]
who scouts the US for abandoned factories
[241]
and converts them into mining facilities.
[243]
His goal?
[244]
Raise cash to develop
industrial-scale mining
[247]
in the US where until a few years ago,
[250]
most miners ran small DIY operations.
[253]
- [Xander] This is my
housing for my computers
[255]
so that the heat is vented outside.
[259]
- [Narrator] So Core Scientific
[260]
has built a team with former executives
[262]
from Microsoft and Myspace
[264]
and put together an
ambitious business plan.
[267]
- We have Ernst & Young
audit the financials.
[270]
We have a strong balance sheet.
[271]
We check a lot of boxes
for institutional investors
[274]
that a Chinese miner does not check.
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- [Narrator] The strategy worked.
[278]
In the past two years,
[279]
the company has raised $95 million
[281]
and secured a $20 million loan
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to install mining rigs in facilities
[286]
including a former denim
factory in North Carolina
[289]
and a former carpet factory in Georgia.
[292]
Core Scientific's power infrastructure
[293]
can handle the latest mining equipment,
[296]
which Cann says usually
consumes approximately
[298]
100 megawatt hours of
electricity to mine one Bitcoin.
[302]
That's the same amount of electricity used
[304]
to watch television
continuously for about 98 years.
[309]
And tunnels that were once used
[310]
to cool the factory are now being used
[312]
to keep chips from overheating.
[314]
- We've got the ability
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to process 200,000
gallons of chilled water
[319]
through these pipes to
keep the temperature
[321]
in the building down.
[323]
- [Narrator] Cann hopes all
this will help him offset
[325]
a long-running technological disadvantage.
[327]
He was usually about four
months behind his Chinese rivals
[330]
when it came to accessing the latest rigs
[333]
and the price tag was
sometimes 50% more expensive.
[337]
Others are using the
same playbook as Cann,
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creating corporations
that attract the support
[342]
of institutional investors
[343]
who then help fund high-tech mining sites.
[347]
Industry insiders and academics
[348]
who study mining say
[349]
that the US efforts can
be good for the future
[352]
of the cryptocurrency
[353]
because the original goal of Bitcoin
[355]
was to create a currency
[356]
that couldn't be controlled by one entity.
[359]
- The dream was that we
would reimagine finance
[362]
without gatekeepers and what did we get
[365]
after 11 years?
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We got different kind of intermediaries.
[368]
Now mostly nameless, mostly
under the covers in China.
[372]
- [Narrator] Emin Gun Sirer
runs a blockchain startup
[375]
and is also an associate professor
[376]
at Cornell University.
[378]
He studies the vulnerabilities
of cryptocurrencies
[381]
and says Beijing might
intervene in the market.
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- [Emin] This is an enormous issue.
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These miners, they could
receive injunctions
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that compels them to act in a certain way.
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- [Narrator] One request he says
[391]
could be to ask miners
to exclude certain people
[394]
who want to spend or accept
Bitcoins in the network,
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essentially blocking transactions.
[398]
This is what Bitcoin
academics call censorship,
[401]
similar to how content and accounts
[403]
can be blocked on social
media platforms in China.
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- The Chinese government would say
[408]
that the money at certain addresses
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must not move and it
compels the Chinese miners
[414]
to not include certain transactions
[417]
so they can selectively
sensor certain users
[420]
of a blockchain.
[422]
- [Narrator] The Chinese
government did not respond
[423]
to a request for comment.
[426]
Babel Finance says if miners in China
[428]
are asked by the government
to intervene in the network,
[431]
they would have to comply.
[432]
But that would slow down their operations
[434]
and eventually diminish their
global processing power.
[439]
But US miners aren't
immune to facing scrutiny
[442]
from financial regulators at home
[444]
that have proposed plans
[445]
to hold the industry to
the same standards followed
[447]
by traditional financial institutions.
[451]
The more immediate resistance
[452]
to US miners could come from
local communities concerned
[455]
about the environmental
impact of Bitcoin mining.
[459]
- Bitcoin mining consumes enormous amounts
[461]
of energy so all energy
that goes to miners
[464]
is energy that's being directed away
[466]
from other more useful uses.
[469]
- [Narrator] Cann says nearly
half of the electricity used
[471]
by Core Scientific comes
from carbon-free sources.
[475]
Because China's miners aren't part
[477]
of a corporate structure like in the US,
[479]
Liu says that they can operate faster
[481]
and spend less on operating costs.
[483]
- If you multiply the operational costs,
[485]
China still has the advantage.
[487]
China will be on the front
of the curve into the future.
[491]
- 2021's all about expansion
[493]
and we've built infrastructure,
[494]
we've built the software,
we've built the team
[496]
to be a long-term player in this market.
[498]
(upbeat music)
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