China’s Bitcoin Mining Dominance is Dropping
China is gradually losing its grip as the dominant hashrate custodian for Bitcoin as new miners have started setting up rigs in other parts of the world. Some of the originally resident miners in China are also relocating.
Right from the early days, most of the network effect that sustained the Bitcoin network by verifying transactions came from China. Technological exposure, compatible weather, and low cost of electricity attracted most of the early Bitcoin miners to China.
A Vibrant Hub For Bitcoin Mines
As the industry grew, the capacity of these miners expanded, leading to the installation of large Bitcoin mining farms. This concentration of miners in China implied that the lion’s share of the hashrate of the Bitcoin network was domiciled in the country.
Recent developments have seen this hashrate dominance drop significantly, taking away the concentration of power, and reducing the influence of Chinese miners on the Bitcoin ecosystem. Perhaps, this could be a good thing for the Bitcoin network in the long run, as it will make it more decentralized.
As of April 2020, the hashrate dominance of Chinese miners on the Bitcoin network was around 65%. One year later, this dominance has dropped to about 55%. The United States now accounts for about 11% of the mining hashrate as new mining farms are being installed, running on renewable energy.
The hashrate drop in China does not come as a surprise, as certain glaring factors have been seen to be working against the Bitcoin mining farm operators in recent times. First is the unfriendly legislation towards Bitcoin and cryptocurrencies.
In China, the government has not been shy about its ban and restriction on cryptocurrency activities. This on its own is discouraging for potential new entrants. Therefore, as the industry expands, new miners rather seek regions where they are not threatened by government regulations that could pull the rug off beneath them at any moment.
Fulfilling Energy Commitments
In February, that was a proposal to shut down all Bitcoin mining activities in the autonomous region of inner Mongolia. This region accounted for about 8% of the global Bitcoin hashrate. Some of these steps come as a result of China making efforts to meet up with its carbon emission commitments.
This commitment does not end with the Chinese government alone. There are talks of a possible boycott within the Bitcoin market in the future of coins mined by mines that are powered with environmentally unfriendly energy sources. Hence, there is a migration towards renewable energy, even by already existing mines.
The mining hashrate is becoming more evenly distributed across the globe, with regions like North America appearing more in the picture. As mentioned above, this is a good development for the Bitcoin and cryptocurrency industry.
Back to the Satoshi Idea
A more distributed network will ensure the reduction of FUD (Fear Uncertainty and Doubt) in the market. This will make for a more balanced marketplace, especially with the influx of mainstream participants that is giving rise to the expanding market that we are seeing today.
China’s prominence in the life and development of Bitcoin cannot be denied. With the forces working against the development of the industry at the local level, this influence is bound to diminish. Even the development of a national cryptocurrency could see the state making effort to reduce the influence of Bitcoin in the region.
A diminishing mining dominance in China simply means that the network is becoming more decentralized. Perhaps, this is a pathway towards the original idea of Satoshi Nakamoto that involves a democratic network that is void of centralization.