Bitcoin production roars back in China despite Beijing’s ban on crypto mining
Despite Beijing’s ban, Bitcoin miners don’t give up in China.
China used to be the largest crypto mining hub in the world, accounting for between 65 and 75% of the total “hash rate” (or processing power) of the bitcoin network.
According to Cambridge University data, the country’s share in global bitcoin mining capacity dropped to zero between July and August 2021 after authorities launched a new crackdown on cryptocurrency.
China decided to end crypto mining. This is a power-intensive process that allows for the creation of digital currency. Many miners fled to countries bordering China, such as the U.S. or Kazakhstan.
CNBC has reported that underground mining operations have emerged in China. Miners are taking care to avoid Beijing’s ban.
The new research by the Cambridge Centre for Alternative Finance has shown that Chinese bitcoin mining activity is on the rebound. Data from Cambridge researchers shows that China accounted for just 22% of total bitcoin mining market by September 2021.
This means that China is now a major global player in bitcoin mining, second only to the U.S. which eclipsed China last year as the biggest destination for the sector.
One caveat: This research method relies on aggregate geolocation of large bitcoin mining pools’, which combine computing resources to more efficiently mine new tokens. It is used to identify where activity is concentrated within different countries.
Researchers said that this approach could be susceptible to “deliberate obstruction” by bitcoin miners who use a virtual private networks (VPNs) to hide their location. VPNs allow users to route traffic through servers in other countries, which is useful for those living in China or other countries where internet access is restricted.
They added that this limitation would “only moderately impact” the accuracy of their analysis.
What is Bitcoin mining?
Unlike traditional currencies, cryptocurrencies are decentralized. This means that the distributed network of computers is responsible for processing transactions and creating new currency units.
So-called miners must agree to a bitcoin transaction in order to facilitate it. This involves complex calculations in order to solve a puzzle. The blockchain is a network of miners that allows for more complicated transactions.
The first person to solve the puzzle wins a new set of transactions on the blockchain. They also get rewarded with bitcoins.
What is Beijing’s concern?
This way of reaching consensus, also known as “proof of work”, consumes a lot more energy than whole countries like Sweden and Norway.
China has repeatedly warned about crypto. China’s most recent crackdown on crypto was undoubtedly the most severe.
The second-largest economy in the world was facing a prolonged energy shortage that resulted in numerous power outages.
China remains heavily dependent on coal and is investing more in renewable energy to reduce its carbon footprint by 2060. Authorities consider crypto mining a potential hindrance to this plan.
The country is now the second most popular destination for those looking to mine bitcoins. The bitcoin price is down over 50% since November’s peak, making it less lucrative.
CNBC was unable to reach the People’s Bank of China and China’s National Development and Reform Commission immediately for comment.