Last month, Beijing called for tighter measures that would end bitcoin mining in the country. The call resulted in the shutdown of crypto mining operations across the country with reports proposing that around 90% of mining operations in China have ceased.
But is that necessarily a bad thing? With crypto miners forced to flee China for a more receptive home, in what has been dubbed the “Great Mining Migration”, there are actually a number of benefits of the China crypto crackdown.
It is estimated that around 65 – 75% of all global bitcoin mining takes place in China. Most of the mining operations in China occurred in four provinces; Xinjiang, Sichuan, Yunnan, and Inner Mongolia. While Sichuan and Yunnan provided renewables in the form of hydropower – particularly effective in the winter months – the remaining provinces relied solely on coal plants.
China has shut down crypto mining citing money laundering and high volatility as dangers of cryptocurrency, while also currently developing its own centralized digital currency.
So what of the benefits? Firstly, in the short term, bitcoin miners located outside of China stand to gain a larger share of the bitcoin mining network. As the crypto mines in China were brought offline, the hashrate of bitcoin – the measurement of the speed of cryptocurrency mining hardware – reduced from 180.7 million terahashes per second to around 90 million this month. This means it is less difficult for smaller mining operations and, most importantly, more lucrative.
The second great benefit of the China crypto crackdown can be seen in the viable new locations for the mining migration. Much speculation around the new home of China’s crypto mining operations have landed squarely on North America – more specifically, the state of Texas. Texas is widely considered to be the perfect mining location owing to an abundance of renewable energy sources, solar and wind, and a particularly cryptocurrency friendly political standing. The crypto-market in Texas is unregulated and in 2019, 20% of the power in Texas came from wind. Not only is Texas a renewable energy hub in the US, it also provides some of the cheapest electricity in the world and is the cheapest in the country.
Of course the final big advantage of the crypto crackdown in China is the creation of a more competitive market that is far more decentralised. Prior to the crackdown, the dominance of mining in China meant that around 70% of bitcoin mining was subject to the legislative and environmental factors of only one nation. In one respect, the majority of bitcoin mining was arguably subject to Chinese control. Hardly the decentralised asset that was envisioned in Satoshi Nakamoto’s original whitepaper.
Renewable energy mining and more diverse mining share are large benefits of a determined stance against crypto mining in China. Chinese crypto miners and those domiciled in China for the purpose of mining will turn to other nations to continue their operations. While North America has been proposed as their next home, crypto mining is legal in the United Kingdom and there are many crypto mining firms and operations in the UK.