How Accidents in Chinese Coal Mines Are Affecting Bitcoin Mining

The explosions took nearly a quarter of Bitcoin's hashrate offline, but the network is operating normally and these miners could be back online in as soon as a week.

AccessTimeIconApr 16, 2021 at 6:06 p.m. UTC
Updated Sep 14, 2021 at 12:42 p.m. UTC

Disruptions in coal plants in Xinjiang and other parts of China have knocked out bitcoin miners in the region, clipping as much as 35 exahashes from the Bitcoin system’s global hashrate, CoinDesk has learned.

At the time of publication, Figures shared with CoinDesk show that the top 7 Bitcoin mining pools lost, on average, 16.5% of their hash rate as a result of the incident. Primitive Ventures partner Dovey Wan, who operates mining equipment in one of the regions, told CoinDesk the coal-fired plants are down after “a massive explosion under the plants.”

The coal plant shutdowns follow coal mine accidents in Shanxi, Xinjiang and Guizhou provinces, which collectively have left nearly a dozen dead and, in the case of the mine in Xinjian, 21 people trapped. Coal-abundant Xinjiang and Inner Mongolia are popular spots for Chinese bitcoin miners in the autumn and winter, when the rains that usually supply cheap hydro energy in regions like Sichuan are low.

The incident highlights how much of bitcoin mining is still confined to China, but given Bitcoin’s design, it should only cause minor delays for Bitcoin block times for the next couple of weeks (if at all).

Bitcoin mining profitability stable

Bitcoin’s hashrate is a lagging indicator that measures the collective energy input and work output of the network. The self-reported hashrate of all mining pools is currently around 128 exahashes per second, according to mining pool APIs, down from 165 exahashes for the Bitcoin network’s seven-day moving average.

Luxor Mining CFO Ethan Vera said the outages currently have “no effect on the profitability of miners,” but that we would see the ramifications of this event during Bitcoin’s next difficulty adjustment, which could happen later than expected on May 1, Vera said. He expects Bitcoin’s difficulty to drop in response to the slower block times the network will experience with these miners offline.

Hashrate is a metric for gauging the amount of power being used to mine bitcoin. Consequently, Bitcoin’s difficulty, a self-contained score that deems how easy or hard it is to mine bitcoin based on how much hashrate is on the network, hit another all-time high yesterday. 

“Network difficulty adjusted yesterday, so the next adjustment is not scheduled for another 14 days,” Vera explained. 

“If the hashrate [in Xinjiang] remains offline, it means we will find blocks less frequently than the target (every 10 min) and that will have some downward pressure on next difficulty adjustment. So it really depends on how long this outage lasts to determine how big of an impact it will have on mining profitability,” said Vera.

A miner who spoke to The Block estimated the mining farms in the region “should resume in about a week from now.”

Updated April 19, 2021, 14:04 UTC: This article was updated to clarify data regarding what percentage of hash rate from major mining pools went offline .


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