A Baidu engineer has been sentenced to three years in prison after using the company’s servers to mine cryptocurrency, making a profit of RMB 100,000 ($14,300).

Why it matters: Mining, the process of verifying transactions on a blockchain for reward, is computationally and power-intensive, resulting in high electricity usage.

  • While cryptocurrency trading is illegal in China, mining is not. The country accounts for around 66% of all mining operations globally, with southwestern Sichuan province taking the lion’s share.

Details: An Bang, a 31-year-old from northeast China, installed software on 200 of Baidu’s servers between April and July 2018, allowing him to use the computing power to mine Monero.

  • An made the equivalent of RMB 100,000 from the mining operation, a court document showed.
  • Baidu said the company noticed unusual activity on its servers and contacted the police after investigating the issue.
  • The additional resource use cost Baidu around RMB 27,000, according to the document.
  • An was charged for illegally taking control of a computer system, and sentenced to three years in prison and fined RMB 11,000.
  • The engineer joined Baidu in 2016, where he worked in the company’s search operations and maintenance department.

Context: China last year decided not to ban crypto-mining, removing the activity from a list of those set to be eliminated by the end of 2020.

  • The move came shortly after Chinese President Xi Jinping endorsed China’s use of blockchain while cracking down further on cryptocurrency trading and initial coin offerings.
  • The majority of the world’s cryptocurrency mining takes place in China because of its wealth of cheap electricity. Sichuan and Yunnan provinces are popular because of the abundance of hydroelectric power, particularly during rainy seasons, and Inner Mongolia for its wealth of coal.

Chris Udemans

Christopher Udemans is a Shanghai-based technology reporter. He covers Chinese artificial intelligence, mobility, and cybersecurity. You can contact him at chrisudemans [at] technode [dot] com.