“In fortune misfortune lurks; in misfortune fortune lies in wait,” as the Chinese saying goes. It was not until reading the Wall Street Journal that I learned how China became the leader in Bitcoin which now accounts for up to 70% of the world’s output. The answer is the 7-magnitude earthquake in Lushan, Sichuan in 2013, which affected nearly 2 million people, killed 193 and caused immeasurable loss of property. It inspired sympathy around the world and an influx of donations. An individual donated 91 Bitcoins, worth approximately RMB 70,000 back then, through Jet Li’s One Foundation as disaster relief. After Jiang Zhuoer, a 26-year-old man who worked for China Mobile in Shanghai, learned this, he purchased computers and started mining for Bitcoins in his spare time. It did not take long before he started getting Bitcoins worth US$500 to US$700 every month. The news spread, and the rest is history.

But individuals who are on their own do not make much of an impact. It takes favorable conditions, as well as the necessary hardware and software, for a country to become a leader in Bitcoin. There have been two key figures. As we all know, Bitcoin was developed by Satoshi Nakamoto, who claims to be Japanese American. Regardless of his true identity, which remains unresolved, it was under this name that the whitepaper “Bitcoin: A Peer-to-Peer Electronic Cash System” was published in October 2008. Together with the footnotes, the paper was only 9 pages long, but it encapsulated the essence of Bitcoin. Three years later, Wu Jihan, a 27-year-old man who majored in economics and psychology at Peking University, translated the whitepaper into Chinese, thus laying the foundations for the concept of virtual currencies in China.

But ideas are cheap, as a Western saying goes. To turn something into a money-making venture, it is necessary to have the skills to put ideas into practice. How can one turn Bitcoin, an abstract concept, into a money-spinner? Wu Jihan lined up Micree Zhan, who was six years his senior. Zhan graduated from the Department of Electrical Engineering of Tsinghua University, and was somewhat well-known in high-tech circles. Wu founded a company called Bitmain and invited Zhan to join on one condition: that Zhan would not receive a salary. That meant Zhan would shoulder the risk associated with research and development in exchange for a 60% stake in the company. In other words, Wu, the founder of the company, became a minority shareholder. Rumor had it that Zhan decided to join Wu’s company after spending two hours reading the article about Bitcoin on Wikipedia.

On the surface, the conditions offered by Wu seemed to be generous and selfless. But in fact, Bitmain was a company that had no capital at all back then. Its most valuable asset was Zhan’s brain. Until products became available on the market, the company would have no income, and Zhan would have to shoulder all the pressure from development and operation. So, it was Zhan who was making a risky bet. That he wasted no time in accepting such one-sided conditions shows that he was full of confidence about the project. But what kind of product would Bitmain produce?

The answer is computers specializing in mining Bitcoin. Why didn’t the duo go in Jiang Zhuoer’s direction but choose to produce Bitcoin miners instead? The Wall Street Journal article explains that the rationale is the same as that of Levi Strauss, one of the inventors of blue jeans. In the early 19th century, a gold mine was discovered in California, which attracted people from all over the world. Instead of joining the masses to dig for gold in the wilderness, Strauss saw that the business of producing jeans worn by miners would be more sustainable. More than a century has passed after the gold rush, but Levi’s hard-wearing jeans remain fashionable. Not only have Levi’s jeans stood the test of time, but they have also been far more lucrative than gold-digging.

To produce Bitcoin miners, specifically designed computer programs are needed. This is exactly Zhan’s expertise. A booming OEM industry was being developed in Shenzhen. Donald Trump had not become president yet, so importing chips from the US to build Bitcoin miners was not difficult at all. Miners produced by Bitmain achieved instant success in China and overseas, and both Wu and Zhan were on the Forbes Rich List 2020. At one point, there were plans for Bitmain to get listed in Hong Kong. But Wu and Zhan disagreed about the prospects of making miners, so the plan was shelved after much frenetic activity. This, however, has not affected Bitmain’s status as the leader in the production of Bitcoin miners. Even the largest Bitcoin mine in the US also uses its machines.

Bitcoin mining is an around-the-clock operation. Compared with mining machines and workers, an inexpensive and stable supply of electricity is even more necessary. However, given the short supply of electricity in China currently, how is it possible to cope with the needs of mining? The problem is more the inequitable distribution of electricity supply than scarcity itself. It is mostly the economically booming eastern regions, such as Guangdong, Jiangxi, Zhejiang, and Hunan, that lack electricity. Inner Mongolia, Xinjiang, and Shanxi in the north are rich in coal mines, while Sichuan, Guizhou, and Yunnan in the southwest are rich in water, so none of these areas is in want of electricity. These geographical discrepancies have given rise to a nomadic form of Bitcoin mining with Chinese characteristics. In summer, it is done in Guizhou and Sichuan, since electricity is cheaper in the Southwest in summer due to abundant rainfall. In the dry seasons of winter, the mining machines are loaded onto trucks and transported northward to Xinjiang and Inner Mongolia.

Of course, China’s legal system is still being “perfected”. The Wall Street Journal reports that the operators of some mines do not even want to pay electricity bills, so they simply steal electricity from the grid. It goes without saying that such practices lead to severe penalties if the perpetrators get caught. An even more ubiquitous practice is the illegal mining of coal for power generation and Bitcoin mining in the remote areas of Outer Mongolia and Xinjiang. It is difficult for outsiders to grasp the complexities of the mutually beneficial, symbiotic relationships between local governments, coal mines, and Bitcoin mines, and only when accidents happen during the illegal coal mining that Bitcoin mining activities are brought to light. In the eyes of those in power, Bitcoin mining is of no benefit to production in the real economy, while the consumption of such huge amounts of electricity amid an outcry about electricity shortages also comes into conflict with Xi Jinping’s national strategy, i.e., that China should achieve “carbon neutrality” in 2030. A nationwide crackdown on Bitcoin mining is thus inevitable.

It is difficult to predict whether China will remain the leading country in Bitcoin in the future. In a matter of ten years, China got to dominate the entire industry chain of virtual currencies after the foundations were laid in 2011. It can thus be seen that China has no shortage of top talent like Jiang Zhuoer, Wu Jihan and Micree Zhan. In an environment where nothing is off-limits, where the social atmosphere is relatively open and where everyone has high hopes for the future, these distinguished individuals compete with great minds from all over the world in a free and open network, and have achieved spectacular success.

But now it has become pointless to debate whether there are still such endless opportunities, made possible by openness, that are up for grabs, and whether the best brains in the younger generation still have the courage to commit themselves to ambitious undertakings with like-minded peers they have just met. Amid all the talk about crackdowns and antitrust actions, Jack Ma from Alibaba, Wang Xing from Meituan and Zhang Yiming from Bytedance have found themselves in different kinds of trouble one after another. The atmosphere being such, young people couldn’t wait to “lie down” (tangping) rather than follow in the footsteps of the ambitious Bitcoin trio. The situation being such, how can one be optimistic about the future?

This article is translated from Chinese by Apple Daily.

Click here for Chinese version

We invite you to join the conversation by submitting columns to our opinion section: [email protected]

Apple Daily reserves the right to refuse, abridge, alter or edit guest opinion columns for accuracy, length, clarity, and style, and the right to withdraw and withhold columns based on the discretion of our editorial page editors.

The opinions of the writers do not necessarily reflect the opinions of the editorial board.

---------------------------------

Apple Daily’s all-new English Edition is now available on the mobile app: bit.ly/2yMMfQE

To download the latest version,

iOS: bit.ly/AD_iOS

Android: bit.ly/AD_android

Or search Appledaily in App Store or Google Play