Kirk mines for bitcoinSichuan in China, hoping that one day he won’t be caught by authorities. 

As other cryptocurrency miners have done underground since Beijing cracked down on the industry earlier this year, Kirk — who asked only to be identified by his nickname to ensure his safety — is getting creative to evade detection. 

Kirk spreads his mining equipment over multiple locations so no single operation is left out of the nation’s electric grid. Kirk has “behind-the-meter” and draws electricity from local, small power sources, which aren’t connected to larger grids like dams. He also took steps to disguise his geographical digital footprint.

Kirk said to CNBC that although he was used to “getting round things” when it came to China’s business world, these six months have really upped the stakes. 

“We never know to what extent our government will try to crack down…to wipe us out,” Kirk said.

There are however Beijing exiled its crypto miners in MayAnd then doubled down on its mining ban in September again in NovemberMultiple sources inform CNBC that up to 20% of the global bitcoin miners are still in China. This represents a significant drop from its peak in around 65%You can find more information here 75%The global market is much larger than the one in which it operates, however. official estimate from Cambridge UniversityThat puts China at 0%. 

Data from Chinese cybersecurity company Qihoo 360This shows that underground crypto-mining is alive and well across China. The research group reported that on an average, 109,000 IP addresses are used for crypto mining in China every day. According to the research group, most of these addresses are located in Guangdong and Jiangsu.

Many miners in China didn’t know if Beijing meant to ban crypto mining. 

China has repeatedly lashed out against digital currenciesHowever, each time it was less painful and rules became more relaxed. This spring, the country announced that it was cracking down crypto mining. It did so in conjunction with the 100th anniversary of the founding Chinese Communist Party. At that time there was pressure for lawmakers to be strong. Some miners – especially smaller-scale operators who didn’t have the resources or the connections to migrate abroad – figured a lot of the crypto talk by the government was bravado, so they powered down, laid low for a few weeks, and then came back online, taking a few extra precautions when they did. 

This crypto crackdown seems to be different because of a few important reasons.

China has a shortage of power which is vital for the bitcoin mining process. This country is currently facing its worst. energy shortagePower cuts can occur in as little as a decade.

Beijing made clear, however that crypto mining does not support its aggressive climate goals. carbon neutrality by 2060. Meng Wei, the government spokesperson for November, denounced bitcoin mining, calling it an “extremely harmful” practiceVoiding to take stricter enforcement actions.

As well, the threat of competition from digital currency is growing. This country is testing its own central bank digital currencyThe government could have greater control over spending and be able to monitor it in real-time. Fred Thiel is the CEO of Marathon Digital Holdings. He also belongs to the Bitcoin Mining Council.

Thiel speculated that “China’s government will do everything possible to make sure bitcoin and other cryptocurrency disappear from China’s financial system and economy.” Thiel speculated that part of the goal is to secure China’s adoption of the digital currency of its central bank. Another aspect is likely to allow financial surveillance to monitor all economic activity.

Regardless of the motivation, it is evident that the government has become increasingly hostile to crypto-related ventures.

The provinces of Zhejiang, Jiangxi, HebeiPlease see the following: Inner MongoliaFor example, there have been varying levels of government action such as asking local officials to run their own self-compliance checks, screening IP addresses for illicit mining activity, raiding illegal underground crypto minesPlease see the following: arresting expelling party members suspected of participating in crypto mining schemes.

Authorities are paying particular attention to mining at community centers, research institutions and schools. There, electricity prices can sometimes be lower than the going rate. The government pledged to increase energy prices for those institutions using subsidized electricity to mine in November.

Also, authorities are zeroing in on state-owned businessesParticipating in the trade.

This weekChina’s Central Commission for Discipline Inspection (the country’s anticorruption watchdog) said that it has identified many state-owned entities within Zhejiang’s eastern province. These were mining for 12 cryptocurrencies including monero, ether and litecoin. 21 people were from state-owned companies or Communist Party offices.

State-owned entities were also tied in to crypto mining schemes.

The communication watchdog of Jiangsu found that 21% were IP addresses belonging to state-owned entities in the region’s coastal region.

Many, including Kirk, are able to survive despite the growing government efforts to eradicate all crypto miners.

For context, this means that downtown Dallas draws 200 megawatts. After the buildout has completed, America’s largest mineIt will be able to produce a maximum power output of 750 megawatts.

Kirk says grid pricing can be “really costly”. It is possible to make much more profit by using off-grid electricity, as it’s easier to run on the sly.

China’s wet season runs from May to the end of the fall. Monsoon-level rains translate into a lot more hydropower which can be captured better from behind the meters.

Beijing’s ban on crypto was issued at a time when miners were heading to Sichuan or Yunnan to mine crypto. This is due to the decentralized cluster of thousands dams. Compared to the coal plants in the northern provinces of Xinjiang and Inner Mongolia, which were once bastions of the crypto mining network, these dams are less trackable and harder to identify – and therefore less accountable to government regulation.

Kevin Zhang said, “There’s definitely a lot miners attached to hundreds and thousands of hydro dams in Sichuan.” Foundry is a digital currency platform that helped to bring more than $400 million worth of Chinese mining equipment into North America.

Kirk uses hydropower for most of the rigs. Two sites are located in Sichuan. One site has 12 megawatts, while the other is 8 megawatts. Kirk tells CNBC in China that a mine exceeding one megawatt is considered large.

To hide their IP addresses, miners use a virtual private networks (or VPN) to conceal their digital footprint. But Beijing is wise to the use of VPNsThey were used to bypass government censorship. The authorities have cracked down on them.

Underground miners now turn to mining pools to conceal their activities. They join cryptocurrency miners around the globe to share their computing power and also become part of mining pool. Multiple sources inform CNBC that although many Chinese mining pools have suspended their services, some pools continue to sign up Chinese miners.

Kirk explained that “they hide their hashrate.” The industry term hashrate refers to the combined computing power of all bitcoin miners.

The block is usually signed by the pool which won it. CNBC is told by multiple sources that when Chinese miners combine their computing power for solving a block of transactions, pool members no longer sign their names.

Kirk continued, “A pool does not have to disclose any data.” You’re basically saying to the world my income is half what it actually is. It’s not something you brag about.

This might explain China’s rapid drop in the market for bitcoin. Since the bitcoin mining index uses data that is freely shared by miners, it could also help to explain China’s nil share.

Multiple sources say that although pools don’t speak out about their work with Chinese miners they are very useful to these underground operations.

There are larger groups that still provide care. Kirk stated that they can provide technical assistance to assist you if your people aren’t skilled enough to do it.

CNBC interviewee Long says many foreign pools offer them technology that hides their activities.

Long explained that they encrypt their packets when it leaves the datacenter, making it appear like regular web traffic.

Kirk describes how he was able to use a pool of people in his network to help him set up a server so that it looked like it had more “connections points” It is suspicious that an IP address can have thousands of connection points sending massive amounts data. This makes it look suspect, especially in rural Sichuan. Kirk insists that miners can use pools to circumvent this problem.

Kirk stated, “As soon as they perform their magic, only five machines will be visible, which does not make it suspicious because anyone household can possess that.”