On 5 November 2018, Chinese authorities cut power to cryptocurrency mining farms in Guizhou and Xinjiang provinces for mandatory inspections. It appears this has caused Bitcoin’s network hash rate to decline 10% from 50 Exahash/s to 45 Exahash/s as of this writing on 15 November 2018.
Authorities entered the cryptocurrency mines for tax inspection, identity verification and registration, an audit of funds, and to collect customer information. Mining companies were required to sign a contract that said:
“According to the needs of the public security department’s network information security work, in the future, our company will implement higher standards for the company’s business real name system according to the work needs of the public security department. For customers with the latest standard real-name system, the data center will have to suspend reloading, restarting, moving in and out, etc.”
Beyond this, mining companies had to agree to implement optimal power supply procedures, have proper business licenses, and to follow proper social security protocols.
At least some cryptocurrency mines were given a notice that they had to relocate, or that their power would be throttled after using a certain amount. For cryptocurrency miners, this can be catastrophic, since mining can rely on slim profit margins dependent on perpetual operation.
One of the mines impacted by this situation is reportedly losing nearly USD 150,000 per day. If the 10% decline in Bitcoin’s network hash rate is due to this cutoff, that represents total losses of USD 1 million per day. However, it is impossible to confirm if the entirety of the 10% decline is due to this mining crackdown.
There is no confirmation that power has been restored and indeed, Bitcoin’s network hash rate has not increased since the mining shutdown began, perhaps suggesting cryptocurrency mines in Guizhou and Xinjiang remain in the dark.
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