Quebec poised to become bitcoin mining hub as China cracks down on energy-sapping miners

Bitcoin mining computers are pictured in Bitmain's mining farm near Keflavik, Iceland, June 4, 2016.
Bitcoin mining computers are pictured in Bitmain's mining farm near Keflavik, Iceland, June 4, 2016. REUTERS/Jemima Kelly/File Photo

Hampered by their own government, Chinese bitcoin miners are increasingly looking to Canada to house their lucrative but energy-sapping facilities.

Earlier this month, a leaked document obtained by an employee of U.K.-based blockchain platform Blockchain appeared to show China’s internet finance regulator instructing local authorities to use a variety of measures to disincentivize bitcoin miners.

“Currently, there are some so-called ‘mining’ enterprises that produce ‘virtual currencies.’ They have consumed huge amounts of resources and stoked speculation of ‘virtual currencies,'” read a translation of the document, according to Quartz.

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Multiple bitcoin miners also told Reuters that local authorities were taking various steps to clamp down on their operations.

That’s prompting them to consider expanding abroad, and it looks like one of their first ports of call might be Quebec.

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On Wednesday, Montreal-based blockchain consulting entrepreneur and bitcoin evangelist Francis Pouliot pitched bitcoin mining to representatives from the data storage, telecom and power industries at the Greater Montreal & Quebec Data Centre Summit.

He was there on Hydro Quebec‘s invitation.

Why Quebec?

It all comes down to cheap energy.

Hydro Quebec offers some of the lowest electricity rates in North America. The utility says the province has an energy surplus equivalent to 100 terawatt hours over 10 years. A single terawatt hour powers 60,000 homes in Quebec during a year.

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“We have the energy available,” Eric Filion, customer vice-president for Hydro Quebec’s distribution division, told Reuters. “It’s a question of finding land and buildings quickly.”

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Hydro Quebec wouldn’t divulge the names of miners interested in moving their facilities to the province, but said companies are eyeing operations from about 20 megawatts, the size of a data centre, to sites as large as 300 megawatts.

“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, told Reuters.

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Last week, a spokesman for China-based Bitmain Technologies confirmed that the company was in talks with regional power authorities in Quebec, with an eye towards identifying potential bitcoin mining sites in the province.

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What is bitcoin mining?

Bitcoin is a decentralized digital currency, meaning all transactions and records must be verified and stored on a public ledger, called the blockchain. In order to ensure that these records can’t be tampered with, transactions have to be verified and sealed using cryptography.

This process is carried out by bitcoin miners, who use powerful computers to navigate through complex cryptographic problems. They are then rewarded for their contribution to the public ledger with newly minted bitcoins.

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Trouble is, bitcoin mining takes up humongous amounts of energy, with its estimated annual electricity consumption exceeding that of 159 countries, according to data maintained by Digiconomist. This may explain the Chinese government’s apparent push to guide bitcoin miners out of the business.

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For miners forced to look for alternatives, energy-rich Quebec could provide the perfect alternative.

— With files from Reuters

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