What is its working at a sprawling bitcoin mine in Inner Mongolia (China)..

Superb piece about a firm behind bitcoin mining.

The article is quite in the Coasean spirit. People often talked about markets but Coase saw that most exchanges are actually governed by firms. Which led to one of the most amazing insights of economics that it is firms which via lower transaction costs enable exchanges.

Likewise, we talk about how cryptocurrencies shall usher in a new world of decentralised digital currency and lead to better monetary markets. But we really do not look at the back-office of these cryptocurrencies and ask who is doing all this stuff?

This interesting article speaks about this Chinese firm Bitmain which provides 4% of the processing power in the global bitcoin network. It was fascinating to connection between old industry and new one. The region was first a coal bed and thus was a natural home to electricity which is needed immensely in these operations:

A decade ago, after a speculative coal boom fizzled, the once-thriving desert city of Ordos, in Inner Mongolia, became China’s largest ghost town, littered with unfinished or empty buildings and desperate for another way to make money. Blessed like most of China with cheap labor, land, and, most important, cheap electricity, Ordos threw open its doors to all-comers, including bitcoin, the stateless digital currency whose total market value has more than quadrupled this year to $70 billion, and whose ability to act as a kind of digital gold has captured the imaginations of governments, big banks, and small entrepreneurs.

Today, Ordos (population 2 million) has emerged as a center of bitcoin mining, the process of approving transactions and creating new coins in the digital currency’s system. Over half the world’s major bitcoin mining pools—groups of miners who agree to add up their resources to improve their odds of finding bitcoin—are located in China, according to a research paper (pdf, p. 91) by the Cambridge Centre for Alternative Finance. That has made China a dominant force in a new industry that may one day define how global transactions are ordered.

Located in a decaying industrial park on the outskirts of town, the mine employs about 50 and consists of eight single-story, warehouse-like buildings, each 150 meters (492 feet) long. Seven of them host 21,000 machines that, together, represent nearly 4% of the processing power in the global bitcoin network. The other hosts 4,000 machines dedicated to litecoin, an alternative digital currency that’s been rising in price in recent months. Next to the warehouse buildings sits a three-story office with a canteen and dormitory for the mine’s workers.

This month, Quartz took a tour of the mine and spoke with its employees. Working in such a place can be both tedious and surreal. But the work is less physically demanding—and the clean, temperature-controlled environment is less hazardous to workers’ health—than at many jobs in the area, where the economy is driven by coal mining and industries like aluminum smelting and chemical engineering. China’s largest open-pit coal mine, Haerwusu, lies about 125 miles (200 km) from the industrial park. In 2012, before coal prices began to plummet, Ordos accounted for a fifth of the country’s coal output.

While many local coal mines closed after prices dropped, the area remains notable for cheap, abundant, coal-powered energy, which helps explain the presence of a sprawling, electricity-hungry bitcoin operation in what feels like the middle of nowhere.

Emphasis is mine.

Why I highlight all this is that when we ask why certain industries come up in certain locations there are factors like these which we ignore. So for instance, history of IT industry in Bangalore takes you to a large number of public sector organisations like BHEL etc existing in Bangalore. Thus, it was a place where there was some manpower and skill set in the city. The public sector organisations in turn were organised here due to its weather, dust free environment and central location.

And dust continues to play a large role in bitcoin computing as well:

Each building is surrounded by two fine-wire mesh fences. They are designed to keep out the dust of Inner Mongolia, which can, and often does, cause the machines to break down. Layers of dust can infiltrate the machines, causing them to overheat. The machines are already running nonstop at maximum output, so even a small increase in temperature can affect their performance. In the spring, the fences also guard against a flurry of fuzzy, bullet-sized catkins, shed by the willow trees common across China. “These are very delicate machines, so we have to take a lot of precautionary measures,” said Yu Linjia, who oversees all mining operations at Bitmain. 

Entering the mine from the Inner Mongolian summer heat, which often exceeds 30°C (86°F), is a relief. The temperature inside the warehouses is kept between 15-25°C (59-77°F). The dimly lit interiors are bathed in an alien glow from the machines’ green LEDs. The noise—a constant drone from the small fans attached to each machine, as well as the huge fans built into the walls of the building—is loud and unceasing. Employees must wear ear mufflers to do their work.

If they’re lucky, maintenance workers can fix a machine by simply restarting it or reconnecting its cables. If not, they must take it off the shelf and hand it over to the repair department, which consists of six employees who work in the office building.

Overall a nice article which gives you some interesting details of the bitcoin world which is different from the usual articles on the subject.

6 Responses to “What is its working at a sprawling bitcoin mine in Inner Mongolia (China)..”

  1. Bud Hou Says:

    This is really attention-grabbing, You’re an excessively skilled blogger. I’ve joined your feed and stay up for looking for more of your great post. Additionally, I have shared your site in my social networks|

  2. Chiquita Berdes Says:

    I really like what you guys are usually up too. This kind of clever work and coverage! Keep up the wonderful works guys I’ve you guys to our blogroll.|

  3. Wes Bayani Says:

    Very good info. Lucky me I came across your blog by chance (stumbleupon). I’ve book-marked it for later!|

  4. Errol Litka Says:

    Can you tell us more about this? I’d want to find out more details.|

  5. Quentin Heiberg Says:

    Every weekend i used to pay a quick visit this web site, as i want enjoyment, for the reason that this this site conations in fact nice funny stuff too.|

  6. Kathleen Akbar Says:

    Have you ever considered writing an e-book or guest authoring on other sites? I have a blog based upon on the same ideas you discuss and would really like to have you share some stories/information. I know my readers would value your work. If you are even remotely interested, feel free to shoot me an email.|

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.


%d bloggers like this: