Bitcoin mining has once again proved just how powerful the principle of decentralization really is (spoiler: so far more powerful than the Chinese Communist Party ?)
The crypto world remembers the Chinese crackdown very well: the country with over 65% of the total Bitcoin hashrate (collective computational power of all Bitcoin mining machines) has banned crypto mining overnight. Beijing was citing electricity shortage and “financial stability” concerns, but the real reason why China would willfully refuse all the crypto tax money and jobs is likely to be different – it’s the digital yuan.
A state-sponsored and controlled CBDC with big ambitions to steal dollar’s spotlight, the e-CNY did not need a free borderless money as a competitor, hence the Party announced a mining ban a year ago, followed by a blanket ban on all cryptocurrency transactions.
⛏️ The Cambridge Bitcoin Electricity Consumption Index (CBECI), widely referred to as the most reliable data on Bitcoin mining, was showing no mining activity in China in July-August 2021. It went silent for many months after, but the rumours about Chinese mining continuing underground started to appear. Several outlets have published anonymous interviews with Chinese miners who did not move to the US (which became the world’s new mining leader) or elsewhere, but rearranged their operations to pass under the authorities’ radar.
Chinese clandestine mining mostly concerned smaller miners who did not have enough funds or connections to move their activity abroad, and medium-sized ones, who decided it would be easier to split their operation in parts and draw energy from small local power sources not connected to the larger grids. As to the digital footprint, it could be concealed with a VPN.
Last week CBECI updated its mining map with the data from January’22… and surprise surprise, China appeared to be responsible for over 21% of the world’s hashrate. The key mining regions are the same as in the pre-ban times: 45% of the hashrate came from Sichuan and 13% – from Yunnan, both producing a lot of hydroenergy on their many rivers, and 32% – from Xinjiang, rich in coal, wind and solar energy.
Whether the Chinese authorities will enforce the mining ban in the light of the new data, or let it slide, Bitcoin has once again proved its remarkable resilience and the power of decentralization ?