Chinese Bitcoin Miners Still Operating Under the Radar

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In Brief
  • China recently cracked down on its domestic miners.

  • Miners have worked out different methods to evade the crackdown.

  • Many miners may take their operations to foreign shores.

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Chinese bitcoin miners are still running operations in the country even after the latest ban was instated. Most are surviving off a combination of grid electricity, hydro-power, and internet protocol address manipulation to protect their livelihoods.

Chinese bitcoin miners are working in stealth, surviving by using off-grid power sources. Recently, there has been migration and a mass exodus of Chinese miners to more crypto-friendly jurisdictions in North America and Central Asia. This is following a blanket ban on cryptocurrency in China. Many less-resourced miners found themselves left out in the cold.

Some miners have remained in the Communist state. This is due to pandemic travel restrictions, supply chain issues, and a dearth of overseas contacts and money.

How are they doing it?

The surviving miners are using a combination of grid power and hydro-power. The miners that use hydro-power tap power off dams dotted across the provinces of Sichuan and Yunnan. These dams are inconspicuous and less likely to attract government attention. This is especially feasible during the rainy season, which occurs from May to the latter part of fall. Miners construct their own infrastructure to make the power from the dams compatible with their mining equipment.

One miner has two sites (8 megawatts and 12 megawatts). The sites use VPNs to evade detection by the government. China Telecom acts as a watchdog for the Chinese government concerning mining activity.

A Chinese cybersecurity firm Qihoo 360 has recently released a report. It shows that mining continues to flourish despite a countrywide ban. According to the report, there are 109,000 active mining internet protocol (IP) addresses every day. Some miners are turning to mining pools to conceal their operations.

Overseas mining pools helping

Mining pools are also becoming increasingly popular for Chinese miners to evade detection. When a block is solved, the mining pool’s name is often attached to the block on the public ledger. This name does not have to be attached, though. And by not attaching it, Chinese miners avoid detection. Data packets emanating from Chinese data centers are encrypted to appear as ordinary web traffic to anyone monitoring the exchange of data. Overseas mining pools also help Chinese data centers with technical issues. They can disguise the number of unique IP addresses emanating from a data center. Having many IP addresses is also a red flag to the government.

Time will tell whether seasonal fluctuations in rainfall will lead to a further exodus of mining equipment and miners. Moving to Inner Mongolia and Xinjiang, as was done in the past to access coal-powered electricity, is impossible.

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David is an electronic engineer with nine years of experience. He joined BeInCrypto to combine his passion for writing and his interest in fast-moving industries, cultivated from his university days. He hopes to make crypto easy to understand.

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