China was previously the world’s largest crypto mining hotspot, accounting for 65 percent to 75 percent of the bitcoin network’s total “hash rate” — or processing power.
According to Cambridge University research, the country’s proportion of global bitcoin mining capacity fell to zero in July and August 2021 after officials initiated a new crackdown on cryptocurrency.
China took a number of moves, including banning crypto mining, a power-intensive process that results in the creation of new digital money. Several miners have fled to other nations, notably the United States and Kazakhstan, which borders China.
Several underground mining operations have since arisen in China, as CNBC has reported, with miners taking care to work around Beijing’s ban.
According to recent analysis from the Cambridge Centre for Alternative Finance, bitcoin mining activity in China has quickly recovered. According to data from Cambridge researchers, China accounted for little over 22% of the worldwide bitcoin mining industry in September 2021.
It means China is now again a major player in bitcoin mining, second only to the United States, which surpassed China as the sector’s largest destination last year.
There is one caveat: To establish where activity is concentrated in different nations, the research approach relies on aggregate geolocation from large bitcoin mining “pools” — which pool computing resources to more effectively mine new tokens.
According to the researchers, this method could be vulnerable to “deliberate obfuscation” by bitcoin miners who use a virtual private network (VPN) to hide their location. VPNs allow users to route their traffic through a server in another country, making them useful tools for persons in countries where internet access is highly restricted, such as China.
Nonetheless, they stated that this limitation would “only moderately impair” the analysis’ accuracy.
What does bitcoin mining mean?
Cryptocurrencies, unlike traditional money, are decentralised. That is, instead of banks and other intermediaries, a distributed network of computers handles the labour of processing transactions and minting new units of currency.
To make a bitcoin transaction possible, so-called miners must agree that the transaction is genuine. That procedure requires doing sophisticated calculations to solve a puzzle that becomes more difficult as more miners join the blockchain network.
Whoever solves the puzzle first gets to upload a fresh batch of transactions to the blockchain and receives some bitcoin in return.
What makes Beijing so concerned?
This process of achieving a consensus, called as “proof of work,” uses a lot of energy, roughly equivalent to the energy consumption of entire countries like Sweden and Norway.
China has often issued crypto-related warnings. However, the most recent crackdown was arguably the harshest.
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Last year, the world’s second-largest economy had a multi-month energy shortfall, which resulted in multiple power outages.
China is still largely reliant on coal, but it is increasing renewable energy investment in the hopes of becoming carbon neutral by 2060. Crypto mining is seen as a potential roadblock by authorities.
A revival in bitcoin production in China has propelled the country to the second-largest destination for those looking for new digital money — there are still 2 million bitcoins to be mined. With the bitcoin price down more than 50% from its November high, it may be a less rewarding undertaking now.