Bitcoin miners have not given up in China, despite the ban by the Chinese government.
In 2020, China was the largest crypto mining center in the world, accounting for between 67% and 75% of the total hash rate of the Bitcoin network. However, China’s participation plummeted to zero between July and August 2021, when the ban occurred.
Among some measures that the Chinese government took was to completely ban crypto mining throughout its national territory. Because of this, thousands of miners had to flee to other countries including the United States, Canada and Kazakhstan, which borders China.
However, since then certain covert mining groups have emerged with the aim of circumventing Beijing’s ban.
Recently, an investigation by the Cambridge Center for Alternative Finance (CCAF), shows that Bitcoin mining activity in China has recovered rapidly. In September 2021, after the ban, China accounted for 21.11% (30.47 EH/s) of the total hash rate of the BTC network, according to Cambridge data.
“Access to off-grid electricity, geographically dispersed small-scale operations and the use of VPN services, are among the main means used by underground miners to hide their operations from the authorities and circumvent the ban.” It details the research.
Cambridge data shows that China has once again become one of the world’s leading players in Bitcoin mining, second only to the United States, accounting for 37.84% of the total hash rate of the BTC network.
Why is China chasing crypto miners?
Unlike fiat currencies, cryptocurrencies are decentralized. This means that the processing of transactions and minting of new cryptocurrency units is handled by a distributed network of computers rather than central banks.
To execute a BTC transaction, the so-called “miners” must validate the operation. This process involves performing complex calculations to solve a “mathematical puzzle” whose difficulty will increase as more miners join the Blockchain.
This validation process involves large consumption of computing resources from computers, which in turn, need large amounts of electricity.
The world’s second-largest economy, China, grappled with a severe power shortage last year, leading to numerous power outages. Currently, China is still heavily dependent on coal and is increasing its investments in renewable energy in a bid to become “carbon neutral” by 2060. Therefore, the Chinese authorities see cryptocurrency mining as a potential obstacle to achieving that plan.
Currently, Bitcoin mining is carried out using a protocol called “Proof of Work” (PoW), which produces a high energy consumption. The Digiconomist platform estimates that the BTC network is responsible for the consumption of 204.50 TWh of energy, the same amount of electricity consumed by Thailand.
At the time of writing, Bitcoin is trading at $29,991.89, according to data from CoinMarketCap.
An example of the consequences to which undercover miners are exposed is the seizure of their mining equipment. In September 2021, the Chinese authorities reported that they confiscated 10,000 mining equipment in the Mongolia region, these equipment were stored in one of the farms that had “allegedly” ceased operations in the country.
Relate
