Crypto mining threatened by power capacity concerns

By 12th January 2018All, Blockchain, Cryptocurrency

Crypto mining threatened by power capacity concerns

The craze for cryptocurrency mining is putting increasing strain on electrical grids, raising concerns about capacity around the world and the prospect of a migration of coin mining operators to new jurisdictions.

Two of the world’s largest financial markets – the US and China – are both feeling the strain on their respective infrastructures, even if the two are reacting in different ways.

The insatiable demand for digital currencies such as bitcoin and the huge computer power needed to mine these currencies has led some local authorities to complain of excessive electricity consumption amid concerns that their electrical infrastructure is unable to cope.

The problem is especially acute in a number of counties in the US where the price of electricity is cheaper than the national average.  For example, Ron Cridlebaugh, the economic development manager of Port Douglas, a county in Washington State, told US TV channel CNBC: “Our infrastructure is actually being put to the test. We’re full.”

Consequently the county is looking to add more megawatts of infrastructure to its data centres to keep up with the demand.

The problem is not limited to the US and other countries are taking a much harder line on the issue of excessive consumption. In China, authorities are looking to remove cryptocurrency mining outright in order to preserve its power resources. 

While Beijing has long been hostile to digital currencies because of the financial risk, a report by the Financial Times shows that provincial governments in China are being instructed to “actively guide” companies in their regions to exit the coin mining market. rather than banning ther practice outright, authorities are being advised to enforce stricter rules on electricty consumption, tax and land use on mining operators. 

China mines roughly three quarters of the world’s bitcoins and authorities such as the People’s Bank of China are concerned that mining operators have established their businesses in remote areas rich in coal or hydroelectric power where electricity prices are cheap and they are able to deal directly with power providers rather than via grid operators, thus further impacting capacity. 

And while China has is keen to develop a world-leading role in technology such as robotics and artificial intelligence, it apparently views bitcoin mining as more akin to industrial manufacturing rather than high-end technology and an activity that “deviates from the needs of the real economy”.

In the face of this crackdown, cryptocurrency mining operators may look to move abroad to countries with a more accomodating regulatory regime as well as a cheap and bountiful supply of electricity and a climate cool enough to prevent computers overheating. The Financial Times cites Canada, Iceland, Russia and Eastern Europe as possible destinations for the bitcoin mining centres of the future. 

And while migration may be a suitable long-term solution to the problem, it will likely be disruptive in the short-term and another potential headwind for cryptocurrency investors who recently saw bitcoin values tumble following the news that South Korea is considering a ban on bitcoin exchanges. 

Original Source: https://www.finextra.com/newsarticle/31521/crypto-mining-threatened-by-power-capacity-concerns?utm_medium=rss&utm_source=finextrafeed