Chinese Bitcoin miners taking advantage of 16 Billion kWh power bonanza could lead to record high hash rate

While many countries in the Northern Hemisphere crank up the air conditioning and power costs surge during the summer, in China’s mountainous southwestern province from May to September, it’s the wet season and hydroelectric power plants have an excess of capacity. In fact, in 2017, in one Prefecture of Sichuan, according to this notice they generated 16.3 billion kWh of excess electricity which went to waste.

This means electricity is cheap in Sichuan – as low as $0.037 per KwH. For comparison, the average price paid by consumers in the US is $0.12 per KwH – 30 times the price in South West China. Cheap electricity has attracted Bitcoin miners – lots of them.

In an interview with CoinDeskHashage, a company based in the city of Chengdu in Sichuan, operates six mining farms with a supply of about 200,000 spaces for machines. Xun Zheng, the company’s CEO, said that across the individual miners and larger mining farms it spoke to, there’s a total demand of more than 1 million spaces for mining machines.

Demand for the “AK-47” of mining – the S9

Adding to this level of interest is also the relatively cheap cost of buying second-hand bitcoin ASICs.

Used AntMiner S9s are in the highest demand. Even though they are relatively old machines and newer, more efficient ASICs are available, in China they are the pack horses of the mining world. A used S9 can be bought for just $150, and for that you get a machine with a hashrate of 10 trillion hashes per second (TH/s).

Tyler Xiong, chief marketing officer of mining pool and wallet service Bixin, said the last round of miners shutting down operations at the end of 2018 has resulted in the increased availability of second-hand equipment:

“S9 is now like the AK-47 in ASICs,” Xiong said. “It now has the best performance over cost ratio in the market.”

New highs in hash rate coming

Plenty of firms are getting in on the cheap power bonanza. Xiong said that Bixin was planning to take advantage by increasing the size of its mining farm. Zheng said his firm also plans to deploy around 20,000 ASICs to mine on its own behalf – in addition to hosting other people’s farm.

It’s likely that the Bitcoin network hash rate will increase from its current level of 44 EH/s in the coming months. Predictions are that it could go as high as 70 EH/s in the summer, which is well above the network’s historical high of 61 EH/s, recorded in the summer of 2018.

Of course, there are always dangers in cryptocurrency mining. Miners are exposed to both increased difficulty in hash rate and dips in the price of Bitcoin. In the report, it noted that if the price of Bitcoin falls below the threshold of $3,000 this summer, miners may be forced to pull the plug.