Control of 66% of the Bitcoin mining industry
The USA, Russia, Northern Europe and Canada are the nations where Bitcoin hasrate is mainly found. However, China has always been a bit more advanced in the exploitation of Blockchain and cryptocurrency technology; specifically in the mining business. And even, since 2017, Chinese miners have always had a decisive role in the future of Bitcoin. In 2019, a new report called 'The Bitcoin Mining Network', showed that China dominates Bitcoin mining; it was also discovered that 65% of the Bitcoin hashrate comes from there.
The report states:
'Regardless of the reasons, the effect is that China's current hashrate ratio is probably higher than it was in June 2019'. Although we expect this ratio to fall further as the latest generation equipment continues to penetrate the non-Chinese market, at the time of writing up to 65% of the bitcoin hashrate resides in China - the highest rate we have seen since we began monitoring the network in late 2017',
This continued through to the end of 2019, Tokeninsight published its annual report in early 2020 on the 2019 Crypt Ecosystem, which provides the company's predictive outlook on aspects of the mining ecosystem in 2020 and reveals that more than 73% of the ASIC mining equipment market share comes from China.
It is important to note that currently, the majority of Bitcoin's mining pools and the largest manufacturers of mining equipment in the world such as Bitmain are located in China.
Mining to ban in China
Remember that China had already banned trading on platforms and fundraising in cryptocurrency (Initial coin offerings or ICO) in 2017.
In 2019, miners in China were shocked by a similar news story saying that the mining of cryptocurrency could be banned in the country. According to a source in the South China Morning Post, mining is indeed part of a list of 450 industrial activities to be eliminated. The National Development and Reform Commission (NDRC) has published that these activities are deemed incompatible with the rules or laws of the country.
This new list 'reflects the country's industrial policy' with regard to cryptocurrency. According to an analysis by Jehan Chu, a partner in the specialist investment firm Kenetic, interviewed by Reuters:
'I think China simply wants to 'reboot' the cryptos industry to control it, an approach consistent with its approach to the internet.'
One of the other reasons for this ban was also the fact that the power consumption of the mining of crypto-currencies requires very important computing resources to solve the mathematical puzzles that validate the creation of the 'blocks' on the blockchain of bitcoin.
Fortunately for Chinese miners, November 2019, China finally decides that mining can flourish. However, the miners preferred to remain cautious because the government could soon come back with new and even stricter measures to eradicate the mining of cryptocurrency.
Mining in Sichuan stopped, 10% of hashrate lost
Sichuan is a region in southwestern China with an abundance of hydroelectricity, with electricity typically accounting for 60-70% of a bitcoin mine's expenditures. It is believed to be responsible for more than half of the chopping power on the Bitcoin grid. According to Sina.com, an online media outlet, 70% of the global BTC would be mined in China, compared to 70% of the local BTC in Sichuan Province, due to the electrical capacity of the Dadu River Basin.
According to Cambridge University studies, Sichuan is the source of nearly 9.66% of the world's hashrate.
Sichuan is of interest to miners who are looking for low-cost electricity, resulting from the surplus of hydroelectric power produced by the heavy rainfall during the rainy season (May to September). The mountainous region of Sichuan offers not only cheap electricity but also a cool climate. As a result, mining operations have to bear lower costs to keep the facilities cold. Half the cost. Among others, the mining giants Bitmain and AntPool have established themselves in this region.
However, China has just ordered a halt to mining activity in Sichuan. This is an order that seems to come from the local financial administration. It is in fact a national directive adopted last week that is now coming into effect.
PANnews seems to be clear in its tweet saying:
'Guide mining entities to end their operations in an orderly manner'...
The Chinese government has recently published an action plan in which it wants to define itself even more as a hub and has set a condition for the purchase of (cheaper) electricity: companies must set up near existing hydroelectric power stations.
So it now appears that Sichuan's mining industry is coming to an end. However, news from China about bitcoins is going from left to right and it is difficult to be sure about it.
Written by Laetisia Harson, Project Manager at Magna Numeris