In the Ordos prefecture of Inner Mongolia lie nine warehouses with blue roofs – the digital currency farms owned by Bitmain, a Chinese company with headquarters in Beijing. Bitmain, being one of the most important companies in the Bitcoin industry, produces specialized Bitcoin mining computers – rigs, that keep crypto afloat.
The factory was acquired by Bitmain is extremely powerful. Quite literally, it turns electricity into money. The hardware of about 21 thousand computers accounts for about 4 percent of all computing power in the Bitcoin network. The process of mining bitcoins works like a lottery. Bitcoin miners are competing to produce hashes—alphanumeric strings of a fixed length that are calculated from data of an arbitrary length. They’re producing the hashes from a combination of three pieces of data: new blocks of Bitcoin transactions; the last block on the blockchain; and a random number. This works like a raffle, where the more tickets you buy in, the higher are your chances of winning.
And upon “winning” the raffle, the miner is awarded with newly minted bitcoins, and transactions are added to the Bitcoin blockchain. The whole process requiered a ton of highly specialized hardware – the fastest and the most energy efficient chips are the ones that are the most sought after. Bitmain gained an edge in the mining rig market by supplying a superior product in large quantities. The Ordos facility is stuffed almost exclusively with Bitmain’s best performing rig, the Antminer S9, which is capable of churning out 14 terahashes per second, consuming only about 1,400 watts, which is the power requirement of the average microwave. Granted, microwaves don’t run 24/7, but it is amazing how much can be done with such a relatively small piece of hardware. An Antminer S9 houses 189 ASICs fabricated by the Taiwan Semiconductor Manufacturing Company (the world’s biggest foundry), using its 16-nanometer manufacturing process.
What makes Inner Mongolia truly the heaven for cryptocurrency mining avenues is the price of electricity. It enjoys some of the lowest electricity prices in the world, at 4 cents per KW/h. This does come at a price however – the climate of the location can be extremely brutal, especially in the summer. And the Antminer S9 is meant to operate below 38 °C, which makes things even more difficult. In the Bitmain warehouses, dust is also a problem. This is why interior of every warehouse is veiled in fine fabric.
With the Antminers needing to stay below 38 °C, Mongolia is not the ideal location for a mining facility. It had been above 40 °C for several days when I visited in July. And in the winter, it can fall to –20 °C, cold enough for Bitmain to add insulation to the facilities. Dust is a problem as well, which is why the interior of every warehouse I walk through is veiled in a fine fabric filter.
Each rig in the complex could be making $10 per day in BTC. With the amount of miners in the facility, the yearly net profit could yield about $70 million. And this is not the only Bitmain facility. But as we know, the price of bitcoin is highly unstable. For all we know, the price could drop $1000 per coin in a single week. This could spell disaster for the company and other miners very quick. And so, Bitmain has begun to diversify. In addition to Bitcoin businesses, the company has also started to dabble in artificial intelligence and is developing facial-recognition hardware that it plans to sell to the Chinese government.