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Chinese bitcoin miners eye sites in energy-rich Canada

CoinGuyCoinGuy Administrator
edited January 12 in Bitcoin Mining
China's Bitmain Technologies is eyeing bitcoin mining sites in Quebec, a company spokesman told Reuters, as expectations of a potential Chinese crackdown on cryptocurrency mining make the energy-rich Canadian province an attractive alternative.

China has grown into one of the world's biggest sources of cryptocurrency mining but there are signs Beijing is increasing scrutiny of the sector's players and may ask local authorities to regulate their power use. Bitmain Technologies, operator of some of the largest mining farms in the country, is among several companies looking to expand overseas.

Bitmain spokesman Nishant Sharma said in an e-mail on Friday that the company was looking at sites in Quebec and is in talks with regional power authorities in the province. It is also planning to expand in Switzerland.

Bitcoin mining consumes large quantities of energy because it uses computers to solve complex math puzzles to validate transactions in the cryptocurrency, which are written to the blockchain, or digital ledger. The first miner to solve the problem is rewarded in bitcoin and the transaction is added to the blockchain.

While Beijing has not issued any official edict on the bitcoin mines, two Chinese miners told Reuters that local authorities had grown more unwilling to allow expansion and had started to shut down some mines in late 2017, as China clamped down on cryptocurrencies.

Last September, Chinese authorities banned so-called initial coin offerings and ordered Beijing-based cryptocurrency exchanges to halt trading.

"We, and from what I understand many of our peers, are already making plans to go overseas," said Li Wei, chief executive of ZQMiner, a Wuhan-based company that sells bitcoin mining equipment and has mines in three Chinese provinces.

Globally, regulators are increasingly voicing concerns about cryptocurrencies, which are not backed by any central bank, because of their volatility and worries about risks to investors. China, which has strict capital controls, is also worried that cryptocurrencies could facilitate illegal fund flows and breed financial risks.

In Canada, Hydro Quebec described a potential sales pipeline of around 30 large cryptocurrency miners after a campaign by the public utility to attract data centres to the province triggered a flurry of interest from bitcoin miners in 2017.

"Of the world's top five largest blockchain players, we have at least three or four," David Vincent, director of business development at Hydro Quebec distribution, said in an interview on Wednesday.


Stephane Paquet, a vice president of Montreal International, which promotes foreign investment in the province's largest city, has called Quebec a place for "green bitcoin."

According to Hydro Quebec, the province has an energy surplus equivalent to 100 Terawatt hours over 10 years. One terawatt hour powers 60,000 homes in Quebec during a year.

Neither Hydro Quebec nor Montreal International would divulge names of interested miners. Vincent said companies are eyeing operations from about 20 megawatts, the size of a data centre, to sites as large as 300 megawatts, about the size of a small aluminum smelter.

He expects some of the large companies to begin operations in Quebec this year and in early 2019. Bitmain's spokesman said that Bitmain has been mining in Canada since 2016, but did not say where.

The challenge for miners is finding existing facilities in Quebec that already have buildings and other infrastructure in place to use the large energy supply required for cryptocurrency mining. A new facility would take about a year to be operational.

"We have the energy available," said Eric Filion, customer vice-president for Hydro Quebec's distribution division. "It's a question of finding land and buildings quickly."

Hydro Quebec, which offers some of the lowest electricity rates in North America, charges an industrial rate of $0.0248 per kilowatt hour (Kwh) (2.48 U.S. cents) for data centres and $0.0394/kwh (3.94 U.S. cents) for cryptocurrency customers. Customers would have to assume other start-up costs, Filion said.

Textiles and pulp and paper factories are particularly attractive to cryptocurrency mining companies.

Alain Bourdages, a company vice president at Montreal-based Resolute Forest Products Inc , said by phone that the company has been contacted by cryptocurrency companies about possibly sharing their existing production sites, or ones that are no longer in use.

"We are looking at this prudently," he said. "It's an interesting opportunity that could generate value."

In central Canada's Manitoba province, provincial government-owned utility Manitoba Hydro has fielded more than 100 inquiries from cryptocurrency miners in the past three months about specific sites, a company spokesman said.

The interest includes North American brokers who represent Chinese investors, attracted by Manitoba's cheap power and potential reduced cooling requirements, spokesman Bruce Owen said. It is working with two large-scale cryptocurrency operations that want to set up in Manitoba, he said.

Manitoba's power rates may soon rise, however. Manitoba Hydro is asking the province's utilities board to approve a rate increase of 7.9 percent across the board, effective April 1, 2018. That is far larger than utility rate changes proposed last year in other provinces, including 0.7 percent in Quebec, according to Manitoba Hydro data.


  • CoinGuyCoinGuy Administrator
    Report from Bloomberg via Montreal Gazette

    As Bitcoin upstages electric cars in energy usage, Hydro-Québec prepares

    The global power needed to create cryptocurrencies this year could rival the entire electricity consumption of Argentina and be a growth driver for renewable energy producers from the U.S. to China.

    Miners of bitcoin and other cryptocurrencies could require up to 140 terawatt-hours of electricity in 2018, about 0.6 per cent of the global total, Morgan Stanley analysts led by Nicholas Ashworth wrote in a note Wednesday. That’s more than expected power demand from electric vehicles in 2025.

    “If cryptocurrencies continue to appreciate, we expect global mining power consumption to increase,” Ashworth wrote in the note.

    While the figure is too small to be a major driver of global utility shares, it represents an important growth story for companies investing in wind and solar power combined with energy storage — a list that includes NextEra Energy Inc., Iberdrola SA and Enel SpA, according to the note. Other potential beneficiaries include big oil companies that are investing in renewable energy and green-power developers that are backed by initial-coin-offering capital raises.

    Miners will probably concentrate in low-cost power regions, including China and the U.S. Midwest and Pacific Northwest, the report said. Miners earn bitcoin-denominated rewards for performing the complex calculations needed to confirm transactions in the cryptocurrency.
    Interest from Quebec

    One eager entrant is Hydro-Québec, Canada’s biggest electric utility. It’s in “very advanced” talks with more than 30 cryptocurrency miners — many of them currently operating in China — and expects to announce agreements in 2018, Marc-Antoine Pouliot, a spokesman, said Wednesday in a phone interview.

    Within four years, Hydro-Québec envisions miners soaking up about five terawatt-hours of power annually — equivalent to about 300,000 Quebec homes — from the surplus created by the region’s hydroelectric dams. “If we have to invest in our transmission network, these investments will be paid for by the miners,” Pouliot said.

    Not all analysts, however, expect this sort of power surge from digital currency creation. When bitcoin skyrocketed in 2017, the electricity demand for mining it climbed to about 20.5 terawatt-hours a year, according to a report published this week by Bloomberg New Energy Finance. That figure would have to jump sixfold this year to reach Morgan Stanley’s estimate.

    While higher prices let more companies get involved in mining, it’s impossible to know where prices are headed next, said Isabelle Edwards, an analyst at BNEF. If they stay high, energy consumption will remain high, but the electricity needed to mine a single bitcoin could fall if there are improvements in computing technology. Meanwhile, if prices fall, it’s “almost inevitable that some miners will go out of business,” Edwards said.

    For its part, the Morgan Stanley report offered some caution, too.

    “There are plenty of uncertainties which means energy consumption could inflect in either direction,” Ashworth said. “This is clearly not an exact science.”
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