By September 2021, China made up just over 22% of the total bitcoin mining market, according to Cambridge University research.
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Bitcoin Miners in China are not giving up despite Beijing’s ban on the practice.
China was once the world’s largest cryptocurrency mining hub, accounting for 65% to 75% of the total “hash rate” – or processing power – of the bitcoin network.
But the country’s share of global bitcoin mining capacity dropped to zero In July and August 2021, according to Cambridge University data, after the authorities launched a new crackdown on cryptocurrencies.
It was among the steps taken by China Cryptocurrency mining canceledThe energy-intensive process that leads to the creation of a new digital currency. This resulted in many miners fleeing to other countries, including the United States and Kazakhstan, which border China.
But, as CNBC did Previously mentionedSince then, many underground mining operations have sprung up in China, with miners interested in getting around Beijing’s ban.
right Now, new search From the Cambridge Center for Alternative Finance shows that Chinese bitcoin mining activity has rebounded quickly. By September 2021, China accounted for just over 22% of the total bitcoin mining market, according to data from researchers from Cambridge.
This means that China is once again a major global player in bitcoin mining – second only to the United States, which overtook China as the largest destination for the sector last year.
There is one caveat: the research methodology relies on the aggregate geolocation of huge Bitcoin mining “pools” – which combine computing resources to mine new tokens more effectively – to determine where activity is focused in different countries.
The researchers said this approach could be subject to “deliberate obfuscation” by some bitcoin miners using a virtual private network (VPN) to hide their locations. VPNs allow users to route their traffic through a server in another country, making them handy tools for people in countries like China, where internet use is severely restricted.
However, they added that this limitation would “only moderately” affect the accuracy of the analysis.
Unlike traditional currencies, cryptocurrencies are decentralized. This means that the work of processing transactions and minting new units of currency is handled by a distributed network of computers rather than by banks and other intermediaries.
To facilitate bitcoin payments, the so-called miners need to agree that the transaction is valid. This process entails complex computations to solve a puzzle that becomes increasingly difficult as more and more miners join the network, known as the blockchain.
Whoever first solves the puzzle will add a new set of transactions to the blockchain and be rewarded with some bitcoin for their efforts.
This method of arriving at a consensus, known as “proof of work” consumes as much energy – almost as much as entire countries, such as Sweden and Norway.
China has repeatedly issued warnings about cryptocurrencies. But its latest crackdown is arguably the most severe.
The world’s second largest economy has been dealing with a power shortage for several months last year, which has led to several blackouts.
China remains heavily dependent on coal, and is increasing investment in renewable energy in a bid to become carbon neutral by 2060. The authorities consider crypto-mining as a potential obstacle to that plan.
Now, the resurgence of bitcoin production in China has propelled the country into the second largest destination for people hoping to find a new digital currency — there are still two million bitcoins to be mined. This may be a less profitable endeavor now, with bitcoin’s price down more than 50% from its peak in November.
China’s National Development and Reform Commission and the People’s Bank of China – which have issued strong warnings against crypto mining and trading – were not immediately available for comment when contacted by CNBC.
– CNBC’s Mackenzie Segalos and Evelyn Cheng contributed to this report