The Effect of China’s Crypto Crackdown

Highlights 

• The United States has overtaken China to become the leading global bitcoin mining network, according to data from the University of Cambridge
• As of 18 October, there are currently 18,846,775 Bitcoins in circulation and a maximum supply of 21,000,000 tokens which can be mined
• In 2018, China accounted for 74% of the world’s bitcoin production.

However, many newly minted bitcoin mines are relocating to places like Texas, South Dakota or Canada.

The United States has overtaken China to become the leading global bitcoin mining network, according to data from the University of Cambridge.

The changing of the guard follows China’s crackdown on cryptocurrency in recent months, including bitcoin mining, which sent the worldwide price of bitcoin plummeting. In September, China issued a nationwide blanket ban on crypto mining, in a move which forced many miners overseas.

The Effect of China’s Crypto Crackdown

Michel Rauchs, digital assets lead at the Cambridge Centre for Alternative Finance, told The Washington Post by email on Thursday that the latest mining map data draws parallels with the trajectory developing over the last two data updates. Rauchs added China’s government-mandated crackdown had clearly had a significant impact on the new order of global mining.

What is Bitcoin Mining?

Bitcoin mining is the process whereby new coins are released onto the market. As of 18 October, there are currently 18,846,881 Bitcoins in circulation at 4:52 PM AEDT and a maximum supply of 21,000,000 tokens which can be mined.

Bitcoin uses a process called proof-of-work (PoW) to mine its tokens. This process requires computers to solve complex mathematical problems and has come under heavy criticism this year for its intensive electricity usage and its subsequently negative impact on the environment. In fact, last month, The New York Times published an article which claimed Bitcoin mining uses 0.5% of the world’s annual electricity consumption.

The algorithm which generates a Bitcoin is available for download on developer websites and is available for anyone to use to generate Bitcoin tokens. However, Bitcoin mining is a highly competitive process due to the now very limited amount of bitcoin left to be mined, which is currently 2,153,225 tokens.

Bitcoin mining requires a strong Internet connection with generous download capacities as well as usable storage space.

Some Bitcoin miners operate massive facilities to increase their chance at obtaining a larger share of new coins entering circulation.

During the crypto mining boom in China, it wasn’t unusual to find giant ventilated warehouses housing hundreds of high-powered computers working around the clock.

The Shift Away From China

In 2018, China accounted for 74% of the world’s bitcoin production. However, due to the multiple government crackdowns which have occurred this year, many newly minted bitcoin mines  are relocating to places like Texas, South Dakota or Canada.

According to data from the Cambridge Bitcoin Electricity Consumption Index, the leading share of global bitcoin network hashrate is now in the United States, with 35.4% as of the end of August.

This is followed by Kazakhstan with 18.1%and Russia with 11%. Moreover, according to the Cambridge data, those three countries had already gained a market share prior to the crackdown in China.

Furthermore, the report outlined China’s restrictions has possibly led to wider geographic distribution of hashrate across the world with Canada, Malaysia and Iran also gaining a significant mining presence.

The report added that the redistribution of mining could be good for network security as well as accentuate the decentralised principles of Bitcoin.

Bitcoin’s price pushed past US$60,000 for the first time since April and is currently at US$62,316.29 at 4:52 PM AEDT, according to CoinMarketCap.