You can count on the Sichuan Basin in Northwestern China being rainy every autumn. The question is: how rainy?
This year, the seasonal downpours are proving particularly torrential, as extreme flooding in recent days has led to evacuations and fatalities in the region.
Also affected have been bitcoin and cryptocurrency mining operations in the area, according to local reports. Notably, Sichuan is one of the world’s biggest centers for bitcoin mining activity.
Red Li, co-founder of Chinese crypto publication 8btc, confirmed that a few mining facilities appeared to be “wiped out” from the flooding. Li posted to Twitter several photos depicting destroyed local infrastructure and washed out, mud-covered bitcoin mining rigs.
Some mining facilities were wiped out by flood in Sichuan yesterday. pic.twitter.com/lZ12tapVga
— Red Li (@redtheminer) August 21, 2019
The Beijing-based Poolin, currently the fourth largest bitcoin mining pool in the world, also highlighted the catastrophe. The company posted videos to its Twitter account showing what appeared to be a Sichuan mining facility being enveloped by flooding and workers digging through muddy rigs in the aftermath.
2/2 clip of personnel digging out miners from the mud: pic.twitter.com/QebXEqBjrN
— Poolin (@officialpoolin) August 21, 2019
Double-Edged Water Sword
Back in June, cryptocurrency research company Coinshares published a report suggesting the majority of the world’s bitcoin mining operations are powered by renewable energy sources. With that said, many Chinese miners rely on hydropower for cheap renewable energy.
That cheap hydropower has a catch: it depends on Chinese wet seasons being wet. Many of these miners and their businesses depend on being located in areas where heavy seasonal rain is not just the norm, but the needed reality. If Sichuan was dry year round, miners wouldn’t be relying on hydropower there (but solar power would then be an option).
So sometimes when it rains it pours, and when disastrous amounts of rainfall hit popular mining centers in China, these operations’ lifesource becomes a possible death knell like was seen this week. Some Sichuan mining facilities were notably rocked by flooding last year, too — it’s the name of the game, it seems.
Fortunately, the damage appears to have been isolated to a few facilities. Among other things, that means the Bitcoin hash rate hasn’t been affected much by the flooding. As of August 21st, the hash rate hovered around 77.5 quintillion hashes per second according to Blockchain.com — not far from the 82.5 quintillion hashes per second seen on August 18th.
A Lesson in Anti-Fragility
Flooding in Sichuan hardly qualifies as a black swan event because such flooding is almost expected to happen.
Still, mining operations that take preparations against the region’s seasonal fury can still find their efforts reduced to rubble by nature’s power because only so much can be done in the face of natural disasters. Flooding can hit hard and fast and acutely take local populaces by surprise, for one.
Zooming out on bitcoin, for the cryptocurrency to work as a non-sovereign global money system, it has to be able to keep chugging along even if parts of its network are affected by disasters or black swan events.
If a central spoke on the centralized VISA network got affected by a hack or extreme weather, an entire continent of users might lose access to their money for a time. On the flip side, flooding can hit a bitcoin mining capital and Bitcoin doesn’t even come close to losing any uptime. Such anti-fragility is one of the cryptocurrency’s biggest value propositions.
A Wet Season / Dry Season Problem?
Some disregard the environmental implications of Bitcoin mining because they point to the network’s reliance on renewable energy. But it’s not so simple, and China’s weather patterns show why.
When rainy seasons give way to dry seasons in China, many miners shift from using hydropower to burning fossil fuels, e.g. through coal plants.
PwC blockchain expert Alex de Vries has previously argued that dynamic could lead to the “construction of new coal-based power plants” in China, which would grow Bitcoin’s environmental implications.