‘Miners are being turned off’: TAAL COO Lars Jorgensen talks China’s ban and BSV energy efficiency

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China, the country that houses majority of the hashrate supporting digital currency networks, wants all block reward miners out of the country. The government crackdown has forced miners to leave China and find a new home—with the necessary infrastructure and low electricity costs—for their mining machines.

This is not an easy task for digital currency miners, so to find out about the turmoil in the mining industry, we spoke with Lars Jorgensen, Chief Operating Officer of TAAL Distributed Information Technologies Inc. (CSE:TAAL | FWB:9SQ1 | OTC: TAALF), to learn more about China’s mining ban and what it means for the industry, as well as how energy efficiency ties into Bitcoin mining and the Bitcoin network.

“The fact is that the miners are being turned off,” said Jorgensen. “It doesn’t really matter what you mine, they are being turned off.”

“This suddenly puts more pressure on the whole hosting situation, because now all of these really large mining farms from China will be pushing out to find hosting possibilities somewhere else.”

There have been rumors that miners are looking to relocate to the United States—Texas in particular—because of the regulatory security they will have in North America as well as the cheap electricity prices that they can take advantage of in places like Texas and Canada. However, these ideas ignore the fact that digital currency mining is resource-intensive. Beyond the need for cheap electricity, miners will need a facility to support their thousands, tens of thousands, and sometimes hundreds of thousands of machines that they run. Unfortunately, a lot of the locations miners are fantasizing about in the United States do not have the infrastructure in place to support enterprise mining operations.

“To build a site, let’s say you are looking for a 50 to 100-megawatt site, you are probably looking at 9 to 18 months to scale the site up and have it ready. Miners cannot have their machines just sitting around doing nothing for 9 to 18 months, that’s way too expensive; it’s not hard to imagine that a lot of miners will look for an interim solution, such as moving to Kazakhstan, even though that is really not where they want to go. They will make a detour to Kazakhstan and they will stay there until the North American sites are ready to go,” said Jorgensen.

Setting up shop in Kazakhstan opens a new can of worms since Bitcoin’s environmental friendliness is once again a hot button issue. Lately, there has been a big push for Bitcoin miners to find ways to become more environmentally friendly, such as using renewable and cleaner energy sources. That being said, a majority of Kazakhstan’s energy production comes from coal, a fossil fuel that is not environmentally friendly. When Coal is burned, greenhouse gases are released into the atmosphere and according to GreenAmerica.org, this increases levels of CO2 and other gasses, trapping heat, and catalyzing global climate change.

Even though Kazakhstan may be the interim solution that miners opt for, it moves the block reward mining industry even further away from the environmentally friendly industry that it is aiming to be—especially when it comes to BTC. Companies like TAAL, who have opted for data centers in countries with stronger law and regulation, are reaping the benefits of the exodus as profits are going up, and the disruption and cost of shutting down and moving is not happening.

Energy efficiency: BSV vs. BTC

The debates around the environmental friendliness of digital currency mining have spawned discussions about which digital currency is the most energy efficient.

“If you look at the energy consumption per transaction that is put through the network it is obvious that the more transactions that you can process in one go, the more efficient the network,” said Jorgensen.

“A block with 1 million transactions does not require more energy to mine than a block with one or no transactions, so the more you can pack in, the more efficiency you can get out—here’s another way to think of it:

“A block is mined about every 10 minutes across all versions of bitcoin, and if you think of this like a transportation system for transactions, a train departs every 10 minutes—no matter how many passengers you have. There can be one passenger (transaction) or there can be a million waiting for the next train, it doesn’t really matter, the train just goes—the train departs every 10 minutes.”

“So what does it cost to transport a person or a transaction? Nothing. It’s totally free because the train runs every 10 minutes and the train does not need more energy whether there is one passenger or a million passengers on the train—and that’s why BSV is superior. It has the biggest platform for its trains, everybody fits into this platform, so everyone who wants to board the next train, the BSV platform is big enough and the train that arrives at the platform is big enough to transport everyone at once, there’s plenty of room.”

“While over on BTC, they have space for 1MB and the platform is not bigger than that, if you want to board the train and the platform is full, you are going to need to queue up and wait for the next train.”

“And if you look at it like this, a transaction does not cost any energy because the infrastructure is there anyway and it runs whether there are transactions there or not.”

Every blockchain network requires hashrate to reach consensus, and the more hashrate supporting the network, the more electricity will be consumed. But ceteris paribus—all other things being equal—if electricity costs across blockchain networks were equal, the metric for efficiency would be how much work and how many transactions take place within one block. When considering efficiency in this regard we must look at what a blockchain network is being used for and what the fruits of its labor are.

BTC struggles in this area because it is a speculative vehicle with low transaction throughput. So while BTC consumes a significant amount of energy, it does not produce much in return. BTC does little to nothing in regard to increasing efficiency across industries and because it can’t scale, business solutions can’t be easily built on it.

On the other hand, while BSV is the backbone for enterprise operations and is a chain on which solutions that make industries more efficient are being built on top of. Real commerce and utility take place on BSV and governments around the world are interested in using BSV to optimize their processes. When you consider the impact that BSV mining has on a variety of industries and take a look at how it reduces inefficiencies and provides solutions in various sectors, you can see why BSV is one of the most efficient digital currencies given the amount of energy it consumes.

“BSV is not the store of value use case here, there is real life transactions put on the chain. There is so many use cases in BSV for everyday life, where you don’t need to know if the solution was built on blockchain or not and you won’t really care if the solution was built on blockchain or not, it will just bring value in everyday life,” said Jorgensen.

“If you want to speculate on coins, BSV might not be the choice for you, but if you want to put real-life value-adding solutions on a blockchain, then BSV is the only choice.”

But why ban Bitcoin?

China wants digital currency miners out of its country, miners have a solution in mind that will realistically take longer than expected to get off the ground (moving to North America), and an interim solution in mind that isn’t environmentally friendly (coal mining in Kazakhstan)—but what caused the Chinese government to take the decision to ban digital currency mining in the first place?

“China wants to run its own digital currency, and I think banning cryptocurrency mining is an efficient way to get everybody to march in the same direction when it comes to crypto, if they introduce their own digital currency and the other ones are gone, there will be no competition in the Chinese market, and the only true one would be the digital yuan,” said Jorgensen.

China is in the midst of launching a central bank digital currency called the DC/EP which is often referred to as the digital yuan. However, the Chinese government faces stiff competition from incumbents in the digital currency space, such as stablecoins that have been battle tested and pre-date the digital yuan. But by banning digital currency mining in China, and with China urging banks in the country to crackdown on accounts that deal in cryptocurrency as well, the only viable and legal blockchain-based currency in the country becomes the country’s very own DC/EP.

China’s ban on digital currency mining, its banking crackdown on accounts that use digital currency, the location that the digital currency miners leaving China are going to re-locate to, and green energy solutions in digital currency mining are all areas to watch as Chinese miners are forced to leave the country and the environmentally friendliness of bitcoin is continually called into question.

Each event is bound to have a significant impact that is felt across the entire digital currency market as miners are forced to shut off their machines and hashrate begins leaving blockchain network in droves.

Until the miners find facilities with cheap electricity where they can host their machines, we are likely to see a lull in the digital currency markets. But even when the miners relocate, environmentalists will still be calling for more energy efficient solutions to take place in the digital currency space.

Watch: CoinGeek Zurich panel, BSV is real green Bitcoin