Author: Liu Honglin
Many people still think of cryptocurrency mining as the "living by the water and grass" of the Bitcoin era - relying on wind power in the northwest in winter and hydropower in the southwest in summer. Thousands of machines are stuffed into tin houses in the desert and built by the Sichuan River, roaring day and night, and consuming electricity like a mountain torrent.
But the reality is that what is now more common in the industry is a kind of "lightweight mining": it does not rely on water and electricity, and does not go deep into the mountains. Instead, a few devices are quietly running in city office buildings. There is no roar of fans, nor the smell of burning circuit boards. It just "calculates" silently and produces tokens silently.
Because of work, Lawyer Honglin often deals with Web3 project parties, developers, and investors in Shanghai and Shenzhen. Many familiar friends would take me to visit their offices, pointing to a pile of hardware machines and introducing them to me, saying, "This is our cryptocurrency mine."
Outside the room is China's most centralized financial center, bustling with traffic. Inside the room, machines that you can't hear the sound of, or feel the heat change, are running, supporting decentralized finance and dreams.
This "lightweight mining" method is actually a state that has evolved naturally under the high pressure of supervision in the industry in recent years. On the one hand, due to policy risks, large-scale deployment has long been unsustainable; on the other hand, as many new projects abandon the Bitcoin-style PoW route and turn to lower-power PoS, distributed storage, and edge computing mechanisms, the physical form of mining itself has become "invisible."
From a compliance perspective, this is actually a typical "unclear" state - the equipment is compliant, the network is compliant, and the operation of the node itself is not illegal, but its revenue method and incentive logic do belong to the category of cryptocurrency. If you say it is not mining, it seems that you can't completely deny it; if you say it is illegal, it lacks the characteristics of substantial illegality. This gives the industry a delicate living space: it continues to operate in the gray area, not big or small, not noisy or noisy, but it is indeed alive.
To truly understand this reality, we must start with China’s regulatory path for “mining”.
As early as May 2021, the Financial Stability and Development Committee of the State Council clearly stated in a meeting: "We must crack down on Bitcoin mining and trading activities." Since then, a systematic "mining cleanup" campaign has been launched across the country. Traditional "mining areas" such as Xinjiang, Inner Mongolia, and Sichuan took the lead in responding, and successively issued power restriction notices and cleared mines. In September of that year, the National Development and Reform Commission officially included "virtual currency mining activities" in the "elimination category" of the "Guidelines for Industrial Structure Adjustment", and has since established the policy direction.
The official reason given was that such activities were "energy-intensive, high carbon emissions, and low contributions" and did not conform to the national industrial policy and the "dual carbon" goal. This characterization had a certain realistic basis at the time. At that time, the PoW mechanism dominated by Bitcoin was indeed a representative of high energy consumption and high density. Its electricity consumption once surpassed that of some medium-sized countries, and much of this electricity came from "grey" power sources.
However, with the evolution of industry technology, many crypto projects no longer rely on the PoW algorithm, but use PoS, DPoS, distributed storage and other methods to maintain the network. In this mode, the required computing resources are significantly reduced, and the deployment scenario is gradually shifting from "suburban iron houses" to "urban office buildings." You can say it is mining, but it does not consume much electricity.
To complicate matters further, the development of AI and the sharp rise in demand for computing power have turned some of the underlying infrastructure that originally belonged to the crypto industry into "objects of policy encouragement." Edge computing power, distributed storage, and general-purpose GPU nodes, which were once the infrastructure for blockchain applications, are now being taken over by the AI industry. At the computing power and architecture level, the boundary between the two is not clear - you may use the same set of servers to run an AI training model and an on-chain verification node, but the software and targets used are different.
This brings up a very realistic problem: the identification logic that regulators are used to using, such as "whether the power consumption exceeds the standard", "whether the equipment is special", and "whether it is deployed in a centralized area", is almost ineffective today. You can't tell which project is engaged in legal AI computing business, which project is using a shell to mine tokens, and which project is doing both. Reality has long smoothed the regulatory boundaries.
Therefore, in many cases, what we see is not "mining is resurrecting", but "it is not dead at all, just changing its appearance". You will see many Web3 projects that focus on AI collaboration and edge node scheduling on the surface, but are actually still running the verification logic of a certain chain when they are implemented; some projects are in the name of data security and encrypted computing, but are actually building their own token issuance mechanism.
For local governments, this situation is also tricky. On the one hand, the central government has explicitly banned "mining", and on the other hand, it focuses on supporting "computing infrastructure" and "AI large model training". If a project's business model is on both sides of the line, there is actually no clear answer as to whether to support it, how to supervise it, and whether it is a violation.
This fuzzy state has further led to many projects in reality "running away when they can, hiding when they can", which has given rise to a more hidden, mixed, and flexible "underground mining ecosystem". You can't check it, and you can't calculate it. The electricity is for residential use, the house is an office, the accounts are compliant, and the entity has a license, but it is just counting a token. At this time, if you use the traditional regulatory logic to deal with it, it can no longer keep up.
As a legal compliance practitioner in the Web3.0 industry, Lawyer Honglin's personal judgment is that among China's "three bans" policy on cryptocurrencies (ICO, cryptocurrency exchanges, and cryptocurrency mining), if there is room for relaxation in the future, "mining" may be the first to be relaxed.
It’s not because the country’s attitude has changed, but because “new miners” have deviated from the original definition. It’s hard to describe them as “high energy consumption, low contribution”. On the contrary, they may have become the “computing entrepreneurs” you encourage, taking subsidies from science and technology parks, participating in AI competitions, registering companies, paying taxes, and paying wages, but the profits generated are not only RMB, but also tokens that can be cashed globally.
What’s more, AI and Web3 are increasingly integrated, and many chain teams are actually participating in AI model pre-training, data annotation or algorithm optimization; and many AI companies have also realized that the on-chain incentive mechanism is more efficient in “crowdsourcing computing” and “edge participation”. At this time, if you forcefully split the relationship between Web3 and computing power, it will only become increasingly unrealistic.
Of course, I am not saying that regulation should be completely relaxed, but we must acknowledge that the industry has indeed changed, and we can no longer use the standards of three years ago to govern the reality of five years later. Especially when it comes to "fuzzy areas" such as computing power infrastructure and AI service capabilities, what should be done may not be a total negation, but through the "positive list + industry classification" method, it is clear which behaviors should be classified as data industry, which behaviors are subject to financial supervision, and which behaviors can be operated in compliance but must be registered and reported.
Otherwise, if we always equate the word "mining" with illegality and backwardness, we will indeed miss out on part of the future.
Mining is not just a compliance issue or an energy issue today, but also a question about "how do we understand the evolution of infrastructure?" From Bitcoin's "computing power for blocks" to the "computing power as resources" in the AI era, what we see in essence is that more and more underlying computing power nodes are becoming universal interfaces for the digital society. If the past decade was about "whoever can mine coins makes money," then the next decade is likely to be about "whoever controls the elastic computing power has the initiative in the industry."
In this era when the global computing power competition is becoming increasingly fierce, if China cannot build a mining and computing power integration mechanism that respects the underlying technical path and can be included in the regulatory vision, we may very likely be absent from the next wave of global computing power infrastructure competition.
Rather than blocking it, it is better to see its true face; rather than hiding it, it is better to incorporate it into the open rule system. This will at least allow those projects that could have been done in the open to have fewer concerns and less motivation for gray operations.
This is a new issue that really needs to be discussed.
