A few months ago, the cryptocurrency industry was shaken by the news of the massive withdrawal of miners from China. In late May 2021, it is well known that the Chinese authorities will ban Bitcoin (Bitcoin) Mining, bringing existing regulation The pressure faced by miners has reached a critical point.
The list of prohibited operations includes the purchase of cryptocurrency, as well as any related investment activities, crypto transactions and exchanges. The People’s Bank of China conducted substantive consultations with banks and payment systems, and then China’s largest financial institution was told to stop speculative transactions—especially transactions with BTC.
As a result, the hash rate of Bitcoin is shown as Biggest drop In its history. As many Bitcoin network participants shut down their equipment, China’s share of BTC mining has fallen by 55% since the beginning of the year.
This is confirmed as a Chinese secondary market filling With GPU card. Miners are actively selling graphics cards at below-market prices, including the powerful GeForce RTX 3090 and Radeon RX 6900 XT.
Of course, not all miners surrender, especially large mining pools. The logical way to get out of this situation is to “mining immigration” to other countries. But where did the Chinese miners move, and which countries can become new mining sacred sites?
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Is mining really bad for China?
Before trying to find out where the miners are leaving, it is necessary to understand why the Chinese government bans mining and what impact such a decision will have on the crypto industry and even certain sectors of the country’s economy.
After the ban, the largest mining pool took the lead to respond. Huobi, BTC.TOP and HashCow have all or partly ceased their activities. Huobi is one of the largest cryptocurrency exchanges in the country. Suspend cryptocurrency mining and some trading services For new customers from mainland China.
Mining company BTC.TOP announced the suspension of business in China on the grounds of risk, while HashCow said it would stop buying new BTC mining stations.
Bitmain, the world’s largest manufacturer of Bitcoin mining equipment, Suspension of sales in late June 2021The company made this decision after the price plummeted by 75%. The suspension only affects BTC miners, while Bitmain continues to sell altcoin mining equipment.
According to the Chinese government, the problem with the mining industry is high power consumption. China is home to most BTC mining pools, rely Coal-fired power is the main source of pollution.
But according to some commentators in the crypto industry, the real motive of the Chinese authorities is not to protect the national ecology, but to promote their own cryptocurrency. Digital element — That is, by banning BTC mining, the Chinese government “cleared” the space for its central bank digital currency (CBDC).
The development of the digital renminbi is now in full swing. In late June 2021, Beijing subway passengers will be able to Buy a ticket Use digital renminbi.Two weeks ago, the Agricultural Bank of China was the first in the country to allow its customers Convert digital renminbi into cash vice versa.
At the same time, the government seems to be actively suppressing CBDC competitors. In 2020, Ant Financial, Alibaba’s financial technology business, will have an initial public offering. Blocked Mainly because the Chinese authorities are worried that the Alipay payment system will compete with the digital renminbi.
So, in the process of achieving the country’s goal of supporting a widely implemented digital national currency, is it possible that miners are merely collateral damage? After all, the latest encryption ban does not prohibit anything new, because the existing restrictions have been clarified in 2017.
New mining center
China, where three-quarters of the BTC was mined in the past, began to reduce its share of global mining long before the prohibition measures were introduced in May.
according to Research The Cambridge Alternative Finance Center’s research on global Bitcoin mining from September 2019 to April 2021 shows that China’s attractiveness to cryptocurrency enthusiasts is gradually decreasing. This can be regarded as an affirmation of the tough policies of the national government. Despite this, the country’s share of Bitcoin mining is still high, about 46%. However, as Huobi Mining Pool CEO Cao Fei told Cointelegraph:
“This year, the main trend of digital mining is to improve compliance and capital requirements. These two trends seem to be more promising in North America. Mining is legal under local regulations.”
Cao’s words are statistically confirmed as the United States Currently, its share of the world’s mining BTC has more than quadrupled-from 4.1% to 16.8%.
The United States has been building its custody capabilities for many years, long before the Chinese ban, even though the crypto market is experiencing a severe decline.This is especially true for U.S. mining companies positive When there is not much demand for large BTC farms, such as 2017.
In addition, the United States has some of the cheapest energy sources on earth, many of which are renewable energy sources. In addition, American investors themselves are also interested in cooperating with miners.At a recent meeting in Texas, U.S. oil and gas executives Suggest Miners use the remaining natural gas to generate electricity.
Cheap electricity is also very attractive to large mining equipment manufacturers.For example, as early as 2020, Bitmain entered a partnership An agreement was reached with Foundry, a subsidiary of Digital Currency Group. Foundry provides funds for Bitmain customers from North America and provides a large number of equipment for Bitcoin mining.
Kazakhstan’s share of Bitcoin mining this year also showed strong growth-from 1.4% to 8.6%.
This country borders China, so the cost of transportation equipment is cheaper than transoceanic transportation to North America. In addition, Kazakhstan’s lawmakers have made the country more attractive to miners by allowing local banks to open accounts for cryptocurrency transactions. In addition, since the official listing of the digital currency, mining companies can officially register in the country. legalization Back to 2020.
Chinese companies have already taken advantage of this.Large cryptocurrency miner provider Canaan announced in June that it had Start mining Bitcoin in Kazakhstan. Cryptocurrency mining company BIT Mining recently announced Will expand From the Chinese market, it plans to acquire 2,500 BTC mining machines for deployment in Kazakhstan.According to experts, Chinese miners send Approximately 4,000 mining equipment was shipped to Kazakhstan.
related: Slow start: crypto regulators lag behind the blockchain industry
Another important factor for Kazakhstan as a destination for miners is that electricity prices are quite low, with a cost of $0.03 for 1 kilowatt. However, the country’s energy system is not as large as the United States.
Russia’s share of global mining has also increased to 6.5%. Like Kazakhstan, Russia shares a border with China and it is very convenient to transport mining equipment. Russian Association of Encryption Industry and Blockchain (RACIB) in July 2021 Overview The advantage of mining in the country highlights the surplus of cheap electricity.
Given the country’s diverse climate, mines can be installed in colder climates, which will reduce cooling costs while maximizing expected profits.
In addition, RACIB Sign a partnership agreement A consortium composed of China’s largest mining companies. Until recently, the consortium controlled 25% of Bitcoin’s hash rate.
Miners will move and mining will continue
Less than six months after the Chinese ban has been implemented, the miners have found a new home, perhaps even better than before, and Bitcoin’s hash rate is recovering.
Therefore, Chinese miners will not disappear, they will only change their position. “Due to the impact of changes in global policies and regulations, the BTC mining industry is currently in a transitional stage,” Cao said, adding:
“The obsolete mining machines in the industry have been retired, but at the same time, more advanced new mining machines will be introduced to the market to make up for the shortage.”
