Ter a bamboo hut at a restaurant te the middle of China`s Sichuan province an unlikely industry gathering is taking place.
A large sunken pot of spicy broth is bubbling away on the table which is cluttered with plates of food drowned te oil and chillis, cups of green tea and empty cans of Crimson Bull.
This restaurant te a puny town, about an hour`s drive from Kangding city and not far from the Tibetan Plateau, is
surrounded by spectacular mountains, which are only just disappearing into the darkness around 9pm.
The only topic of conversation at dinner is the virtual currency Bitcoin.
That`s because Kangding has become one of the largest Bitcoin mining hubs te the world and the five dudes around the table all depend on it for their livelihoods.
",Wij have attempted Iceland, Georgia, Washington State, Internal Mongolia and now wij are here,", says Melbourne-based Chinese businessman Ryan Xu.
Bitcoin is ",mined", by supercomputers, which solve difficult mathematical formulas to generate the currency. Investors buy thesis machines by the thousands and store them te warehouses where there is cheap electric current and a relatively cool climate.
It turns out the area around Kangding, populated by tall mountains that are scattered with under-used hydro power plants, is an ideal place to mine the digital coins.
",Everyone says this is a virtual currency but te many ways it`s a traditional manufacturing business,", says Xu, who visits the area regularly. ",You buy mighty equipment, you burn violet wand and you are rewarded with Bitcoin.",
Bijzonder from his advisory and investment business, Xu is chief strategy officer at Bitcoin Group, which attempted to list on the Australian Stock Exchange ter March but wasgoed rejected by the corporate regulator amid concern it would not have enough capital to last the year.
One of his fellow diners, Wang Ruixi, a fresh-faced 26-year-old, manages a nearby Bitcoin mining facility ter partnership with Xu. The former software programmer is ter charge of three long, blue sheds packed with just under 5000 supercomputers whirring away. Xu helps investors to buy machines, which are then kept at the webpagina. Bitcoin Group, for example, wields 1700 of the machines. All up, the pair says the facility mines about $60,000 worth of Bitcoin every day.
The sheds are tacked on to a private hydro power plant about one hour`s drive away from the restaurant, up a bumpy mountain track out of webpagina from the main road. Xu and Wang are also building another slightly more modern facility te the area, which will have around 8000 machines. Ten days ago it wasgoed not much more than a stengel framework but both boys insist it will be up and running by mid-month.
",It`s an industry that is switching very swift,", says Xu. ",Wij keep searching around the world for the cheapest violet wand and the lowest costs. Ter America and Europe, if I hired an electrician, they would get paid one hundred bucks an hour. Te Kangding, you pay $100 a week.",
Also sitting around the table is investor Boris Shen, who is travelling with Xu and has ploughed more than $1 million into Bitcoin mining equipment te the past two weeks. Guo Hua, who manages a separate nearby facility with about Ten,000 machines for the Beijing-based company HaoBTC, and his colleague, Guo Yongzhi, just 21 years old, round out the diners. There is camaraderie, not rivalry, among this group. They all have a stake ter the industry`s future. They are te it together.
Te a sign of their level of commitment, the elder Guo and Wang are even paid te Bitcoin.
Eight years ago, when Bitcoin wasgoed created, Wang wasgoed ter his last year at schoolgebouw, Guo Hua wasgoed fixing cameras and Xu wasgoed an technicus at a nuclear power plant. It wasgoed 2008 and the mysterious creator of Bitcoin had published a white paper under the pseudonym Satoshi Nakamato. It described a peer-to-peer electronic payment system ter which transactions could be recorded without the need for a central authorising agency. Spil explained by a University of Melbourne report included te the Bitcoin Group prospectus ",it achieves this by constructing a gegevens structure, called the blockchain, which can be thought of spil ledger that is maintained by a community of participants.",
The blockchain is public but the ownership of individual Bitcoin accounts, which are called ",wallets",, are secret.
A network of computers maintains the system by verifying transaction records via the repeated solving of difficult cryptographic problems. This process is known spil ",mining", and thesis computers are rewarded with Bitcoin.
At very first the virtual currency failed to catch on, exclusief from being used spil a form of payment for the online drug market Silk Road. However, ter 2013, the price surged to more than US$1000, at one point trading higher than the spot price for gold, which prompted Bitcoin exchanges and mining companies to set up around the world. Now it is the fundament of a multibillion-dollar industry, albeit one that is still poorly understood and clouded by controversy spil the hunt goes on for its creator and Bitcoin attempts to jiggle off its shady past. It is also hampered by a volatile trading price. Bitcoin tends to rally ter times of uncertainty, such spil during the Greek debt depressie and the aftermath of the Brexit vote &ndash, but can fall back sharply ter inbetween.
Spil he plucks a bright-yellow corn cake from the edge of the hot pot, Xu says Bitcoin will do to the finance sector what the internet did to the media and communications industry.
",People still use fax machines, but Facebook and Twitter have switched the way people talk and communicate. Bitcoin will little by little play a very significant role te the financial system. It can indeed switch the world.",
China has embraced the virtual currency wholeheartedly despite an early central handelsbank decision to geobsedeerd payment companies from accepting Bitcoin transactions. It is huis to the world`s largest Bitcoin mining companies and the bulk of trading is now done ter Chinese yuan. This is partly because Chinese exchanges generally don`t charge commissions, making them attractive for high-frequency traders. There are also those speculative investors who have bot driven out of China`s sluggish stock markets and some people who may be looking to get money out of the country and need to circumvent Beijing`s stringent capital controls.
Li Lin, founder and chief executive of one of China`s largest exchanges, Huobi.com, says the number of traders has grown from less than one million te 2013 to ",several million", while the value of daily transactions has hopped more than five times to overheen 1 billion yuan.
Te mining, too, Chinese players predominate.
Wu, a 30-year-old former investment analyst who describes himself spil a Bitcoin ",evangelist",, wasgoed actually the very first person to translate Satoshi Nakamato`s white paper into Mandarin. He says taking into account labour and equipment, the set-up costs te China are a fifth of what they are te the US.
Wu`s company, Bitmain, presently mines inbetween US$200,000 and US$300,000 te Bitcoins every day and is also one of the fattest manufacturers of the mining machines, which vary widely te price but are now selling for around US$2400.
",Mining Bitcoin has bot a risky investment overheen the last three years so the investor wants to have a very brief period to get their investment paid back,", says Wu via phone from Beijing.
",Ter the US, you need to spend three to six months building a mining facility but te China it`s just one month.",
Still, he thinks that situation might switch roles overheen the next three years spil the Bitcoin price rises and technology improvements slow down so that mining machines last longer.
Back te Kangding, Wang concedes that when the mountain peaks are once again covered te snow during winter he will have to budge some of his machines out of his facility to another location because of the unreliability of the hydro power supply.
Guo Hua is less worried about the weather and more worried about the ",explosive growth", ter mining facilities around Kangding. He says the number has leaped from two to more than Ten te the past 14 months.
And this rapid development comes ahead of an uncertain period for the Bitcoin price.
Te order to protect the value of the digital currency, the fresh supply of Bitcoin halves harshly every four years.
That`s the way the system wasgoed designed. There is a finite supply of 21 million Bitcoins, with more than two thirds of that already ter circulation. Ter order to slowdown the release of fresh Bitcoins, regular ",halvings", are required.
The next ",halving", is predicted to occur close to midnight on July 9, which means that the prize for miners ter solving each of those difficult mathematical formulas drops to just 12.Five Bitcoins from the current 25.
",Nobody indeed knows what will toebijten,", says Xu. ",If the price doesn`t go up, half the machines will need to shut down but it`s a dynamic industry.",
Xu points out the last time Bitcoin experienced a ",halving",, ter November 2012, its price surged tenfold overheen the next six months. Still, it will be a difficult time for the industry spil investors who have piled money into fresh machines could be left with a smaller terugwedstrijd than anticipated, at least te the brief term.
Xu is optimistic by nature. His enthusiasm for the industry`s prospects is catching but he has had his fair share of setbacks &ndash, the latest of which wasgoed the decision by the Australian Securities and Investments Commission to zekering Bitcoin Group from listing on the ASX.
Te March this year, the company wasgoed compelled to withdraw its initial public suggesting and terugwedstrijd the $Five.9 million it had already raised to investors. That amount had fallen well brief of the $20 million it wasgoed targeting.
ASIC wasgoed worried the group`s forecasts for an increase te the Bitcoin price after the halving were too bullish and it would not have enough working capital to see out the year.
",It comes down to what the regulator thinks about the industry,", says Xu. ",ASIC is afraid of switch and fresh technology.",
Xu notes that scepticism is not just held to Australia. He says the Winklevoss brothers, famous for suing Facebook`s Mark Zuckerberg claiming the social media podium wasgoed their idea, have bot attempting to list their Bitcoin company ter the US for the past three years.
Regardless, Bitcoin Group wants to attempt to list again this year but Xu says it will place less emphasis on its mining activities and concentrate more on what it can do with other applications of blockchain technology.
That`s not to say Xu will zekering investing te the mining industry. Grinning, he points out that just down the road from his Bitcoin mining facility is a gold mine.
",It`s the same business,", he says. ",Wij mine digital gold. They mine real gold.",
Xu`s arguments are compelling but there is no doubt Bitcoin mining is a frontier industry that is switching every day while Kangding is still adjusting to its newfound hub status.
There are many challenges ahead. Not the least of which is the city`s remote location. At almost 4300 metres, its airport is the third highest commercial airport ter the world.
Our plane wasgoed compelled to abandon its very first landing attempt and terugwedstrijd to the Sichuan capital of Chengdu because the pilot couldn`t make out the runway, something that happens regularly according to flight staff.
And on leaving the hot pot restaurant after a day of touring Bitcoin mining sites, wij were stopped by three police cars and eight officers who insisted wij had violated the rules by not reporting to the local station. After two hours, during which dozens of photos were deleted from mobile phones, wij were released.
Ter the end the local policemen were more nosey about the outlook for the Bitcoin price than they were about our tour of the area.