Bitcoin Mining Fees Soar As China Crackdown Progresses

South Korea’s lawmakers and Ministry of Finance have reportedly shot down a crypto-trading ban proposed by the South Korean Ministry of Justice (since more than 2 million South Koreans own bitcoin, such a ban would inevitably lead to many retail traders booking heavy losses).

But China’s attempt to suppress the local crypto economy is continuing unabated as the PBOC leans on local authorities to deny resources to bitcoin miners and exchanges to encourage “an orderly exit” from the business.

Today, Bloomberg  reported that ViaBTC Technology Ltd., which runs the fourth-biggest bitcoin mining collective, is jacking up maintenance fees for some of its clients Friday to 50% from 6%, according to a statement posted on its website.

The disruption in mining power has caused already soaring transaction fees to climb to all-time highs as transactions compete for space on the network.


Indeed, many miners have already fled to Canada, the US - even as far away as Iceland. But those that remain are being squeezed by market forces as local authorities seek to deny them access to the cheap, subsidized electricity that allowed Chinese miners to flourish in the first place.



In its statement, the company wrote that "Some of our long-term hosting partners are facing a crisis of farm closure as mining resources in mainland China become more scarce, leading to rocketing costs of our cloud mining operation," the statement said. "To guarantee the long run of cloud mining, ViaBTC has no choice but have to readjust our maintenance fees."

ViaBTC and other companies like it rent server space in their bitcoin mining farms to other miners.

As Bloomberg  explains, Chinese officials have reportedly asked local governments to guide miners toward an “orderly” exit from the business. ViaBTC has moved most of its operations to Iceland and America as a result. Once a hotbed for mining, China’s crackdown will fundamentally change the landscape of the bitcoin economy.



Seeing as it’s already been priced in, the China news had little impact on the price of crypto. The space was moderately higher following the news about the South Korea crackdown.



babkjl 38BWD22 Sun, 01/14/2018 - 08:16 Permalink

Correct. "The disruption in mining power has caused already soaring transaction fees to climb to all-time highs as transactions compete for space on the network." That's not how it works. Even if there were only one single BTC mining computer left, there wouldn't be any change to the fees. The fees are demand driven by how much each person is willing to pay to get a fast block confirmation. When Segwit 2X did not happen, I sold all my Bitcoins over to other cryptocurrencies with transactions fees of $0.25 or less: Dash, BCH (it's now the real Bitcoin in my opinion), LTC, IOTA, PIVX, ZEC, XRP, Doge etc. ETH is ok, but is running expensive at around $3 per fast transaction (if you are willing to wait a couple of hours, it can still be transferred for less than $0.25). 

In reply to by 38BWD22

Laowei Gweilo 38BWD22 Sat, 01/13/2018 - 21:55 Permalink

i'm not sure Canada's cheaper electricity makes up for the huge regulation risk in the future.

there are a lot of interest in the companies setting up shop here for the financial benefits (namely loose venture stock exchange regulation and easy reverse mergers), and the cheap hydro is attractive ...

.. but if President Xi is willing to crackdown on 'mining' as 'dirty,' then just imagine what tree humper PM Trudeau may eventually do.

luckily, a lot of the regulation that would pertain to this is in the hands of the provinces, and AB, SK, and MB would probably all be willingly to embrace cc mining -- so Trudeau can probably get fucked. still, there's always fed risk.

In reply to by 38BWD22

Skateboarder IntercoursetheEU Sat, 01/13/2018 - 17:39 Permalink

The work is not imaginary. It wastes loads of energy without producing any real valuable outputs for humanity. If wasting energy is the new revolutionary thing we are all proud of, hopefully god has an extinction planned for us.

p.s. to DCRB and Yen Cross, saw you guys wish me a happy new year last time. Likewise to you friends - hope all is well! Knuks and other ZH vets, happy 2018 - to another year of the slow-motion shitshow.

In reply to by IntercoursetheEU

Fizzy Head dark pools of soros Sat, 01/13/2018 - 18:22 Permalink

i'd have to agree....and add, how much energy is also wasted mining that old relic gold and silver?

cryptos and PM's share a common goal... for everyone to be their own bankers and cut out the bankers all together.


it took me 8 years to see the light.... but the crypto revolution is here to stay..right along side Precious Metals they make a good team. And anything that shuts out the bankers and uncle sam im all over it.





In reply to by dark pools of soros

BoingBoing Skateboarder Sat, 01/13/2018 - 18:31 Permalink

How much does it cost to cut down trees to make paper which is turned into dollar bills?

Add that to the cost of building a bank and multiple ATMs, and the electricity that they consume.

Now add the fuel cost of the trucks delivering and collecting dollars all around the country every day.

Add the cost of the security forces required to secure these deliveries.

And finally the cost of the military to secure the value of the US dollar globally.


Still think bitcoin mining is expensive?

In reply to by Skateboarder

Sudden Debt Sat, 01/13/2018 - 17:38 Permalink

It's dead.

Almost a trillion dollars go up in smoke.

Good for the dollar actually.

These things are bought WITH dollars and when it implodes, a trillion goes a away and can be reprinted by the FED.

That's why I think they'll continue to let it grow to at least 10 trillion.


Sudden Debt dasein211 Sat, 01/13/2018 - 18:09 Permalink

No, not exactly :)

but it made a lot of people rich and now it's the wannebe's who are picking it up want well, I might buy some back at 3000 dollars.

I also see a lot of shitcoins rising so that's always a sign of a selloff comming in bitcoin. 


I made 390K with just 52K to start with in less then 4 months on bitcoin.

How much did you already make smartass?

In reply to by dasein211

LetThemEatRand Sat, 01/13/2018 - 17:39 Permalink

Question for BTC supporters -- assuming that current mining activity (processing power to facilitate transactions) is currently paid for mostly by rewarding miners with newly issued bit coins, what happens to transaction fees when all bit coins are mined?

LetThemEatRand 38BWD22 Sat, 01/13/2018 - 17:48 Permalink

As a follow up question, a quick search says that it currently costs over $3K to mine a single BTC in the US (cheapest energy state), up to almost $10K per coin in Hawaii.  I assume it was a LOT less when a BTC was a few bucks or a few hundred bucks, so that suggests an exponential increase in cost over time as the blockchain grows.  If that's true, BTC would have to continually rise above mining cost to have a future, if I'm understanding this correctly.  The minute a BTC drops below the cost to mine a new one, no one would want to incur the expense of processing the next transaction, right?

In reply to by 38BWD22

animalspirit LetThemEatRand Sat, 01/13/2018 - 18:35 Permalink

There is no incremental cost per transaction. The amount of mining that exists is simply the result of the formula:

(exchange rate X qty issued) - electricity + amortized cost of equipment

So today that's ~$25M /day revenue ($14,000/BTC X 1,800 BTC) = $25M.
And maybe $5M/day in electricity, ... and $3M/day for equipment (giving it a productive life of 1 year).

That $25M/day issued to miners is the same, whether there is 1 on-chain transaction/day or the current level ~400,000 (?) on-chain trxs/day.

This is the problem of the eco warriors trying to argue that mining is wasteful. They are framing the discussion as if each transaction requires additional electricity. It doesn't. But each $1,000 increase in the exchange does incentivize a huge increase in the amount of mining equipment deployed, simply because that $1,000 increase in exchange rate adds $1.4M (at current exchange rate of $14,000/BTC) in revenue per day for the miners.

In reply to by LetThemEatRand

animalspirit LetThemEatRand Sat, 01/13/2018 - 18:25 Permalink

Let's say today there's $1B worth of Bitcoin mining hardware (SHA-256 ASICs) out there today, mining ~1,800 bitcoins per day (excluding fees). And because mining is so profitable over the next couple months miners buy another $1B worth of Bitcoin mining hardware.

But that $2B worth of hardware will produce the exact number of coins per day then as they produce today, ... ~1,800 bitcoins. This is because of the "difficulty retargeting", which intentionally is meant to result in a stable (i.e., known) rate of currency inflation.

Is bitcoin safer with $2B of mining hardware than it was with just $1B of mining hardware? Not really. Maybe even $0.1B of mining hardware would have been a sufficient protection. It's like if the threat for a bank vault was a cutting torch, and a 8 inch steel wall would protect against any such attach, then that vault is no less better protected with a 20 inch thick steel wall than it was with an 8 inch wall. The reason Bitcoin is currently protected by $1B of hardware is simply because the price has risen faster than the hashrate, and thus miners keep adding capacity as long as it is so profitable.

So over time as the rate of newly issued coins drops (that ~1,800 BTC/day drops to ~900 BTC at the next halvening, less a couple years from now), the result may be some miners, particularly those paying above average electric rates, will end up quitting due to the revenue per rig suddenly gets cut in half while electricity consumption per rig remains constant. But that doesn't necessarily hurt Bitcoin. Like the example above ... 2X the current level of hashrate doesn't make bitcoin safer, and 1/2 the current level of hashrate doesn't necessarily make bitcoin any less safe either.

If fees only support $0.1B of hashrate, ... then that's all the mining that occurs at that point. But if $0.1B is still sufficient to protect the chain against censorship and corruption (of the historical ledger data), then Bitcoin can keep on chugging if fees are enough to pay that $0.1B of mining.

Many smaller altcoins are proof-of-work (PoW) coins just like Bitcoin and operate today on a tiny fraction of the miner equipment investment that Bitcoin has, and have not been successfully attacked. Nobody really knows how to determine what threshold of mining equipment investment is needed to be deemed safe. There is the argument though that Bitcoin (SHA-256 ASIC), Litecoin (Scrypt ASIC), and Ethereum (GPU)≥ are way over protected today, and many other coins are insufficiently protected, ... but there simply haven't been the fatal 51% attacks simply because there's no economic incentive to do so. But Bitcoin would be among the most difficult to attack (by a large margin), so any concern about miner revenues dropping to levels too low to provide adequate protection is a long, long way off, if ever.

In reply to by LetThemEatRand

PrivetHedge LetThemEatRand Sat, 01/13/2018 - 18:46 Permalink

As the remaining bitcoins fall, the value will have to rise to pay the miners as they'll be less to go round.

At some point unless BTC carries on rising then mining for the scraps will become pointless and mining will stop, as will the (ever growing) blockchain processing. This will cause bitcoin value to fall, making more miners leave and the fall will accelerate.

It's not a long term proposition.


In reply to by LetThemEatRand

Magnum Sat, 01/13/2018 - 17:43 Permalink

Perhaps somebody will invent a crypto currency or other secure method that allows trading which is truly backed by physical gold.   Note that gold has shown fairly decent gains in recent weeks.