How Secret Bitcoin Miners Elude The Government in China
Contrary to earlier reports that cryptocurrency mining has been eliminated from China, recent data shows that up to 20% of the global Bitcoin hashrate is still resident in the country. Even though this is a significantly lower value than the number before the implementation of the 2021 cryptocurrency ban in China, it is still significant enough to attract attention.
The current miners that operate from China do so secretly, adopting calculated methods that enable them to elude the prying eyes of the government and related agencies. This shows the resilience of cryptocurrency users, some of whom claim to assume that the latest ban by China could go the way of the previous bans over the years, none of which found a conclusive follow through.
A report by CNBC identified a Chinese Bitcoin miner in the Sichuan province who claimed to be mining Bitcoin to date. The miner, who for elusive reasons was identified by the nickname Ben, explained how he manages to ensure that his activities remain underground as he continues to engage in the now illegal process, as long as the geographic region of China is concerned.
To evade detection, Ben claims to have spread his mining equipment across multiple sites. By doing so, he can diffuse the power consumption on the national grid to avoid the suspicion of any such activity by the government. Since no site consumes an unusual amount of energy, it becomes almost impossible for the authorities to suspect any form of unpermitted operations, let alone Bitcoin mining.
Apart from distributing his power consumption on the grid, Ben also connects his equipment directly to small, local power generation sources like dams. These sources are usually not connected to the national grid, and power drawn from them cannot be detected from the centralized sources from which the government monitors the country’s energy activities.
Having been able to conceal his energy footprints, the use of VPNs ensures that the IP addresses of mining machines are also made untraceable. This is a pattern that is corroborated by the Chinese cybersecurity company Qihoo 360 which reported that there are about 109,000 active IP addresses in China that are involved in active cryptocurrency mining daily, as of November 2021.
Most of those addresses, according to the report, are in the provinces of Guangdong, Jiangsu, Zhejiang, and Shandong. These are the addresses that account for the 20% Bitcoin hashrate that is still domiciled in China and operating secretly. Hence, just like Ben, there remain several individuals and groups who have figured out creative ways to elude the prying eyes of the authorities relating to their mining activities.
China’s clampdown on cryptocurrency activities is not new. In the past few years, there have been several bans and restrictions towards Bitcoin and cryptocurrencies. However, this year’s ban arrived with more vigor in terms of enforcement. There has been an active crackdown, including the invasion of sites and offices that failed to comply with the new rules, while arresting individuals that flouted the rules.
This intensified clampdown led to a massive exodus of cryptocurrency practitioners from China, especially miners. On the surface, the clearout seemed to be complete, leading to the official estimate from Cambridge University that puts China’s output in terms of Bitcoin hashrate at 0%.
With the latest reports, it is now known that not all mining power has left China as of the time of writing. Perhaps, those that remain within the geographical space could assume that the current ban may also fade away like those before it. Otherwise, the impact of the previous bans could also have pushed them to become more creative in hiding their activities from the authorities.
Iyke Aru is a seasoned author and educator in the blockchain and cryptocurrency industry. He has been in the business of crypto content writing for many years with thousands of his articles across several platforms on the internet. Iyke is based in Nigeria where he stands out as one of the most informed and credible figures in the cryptocurrency industry. Outside blockchain and crypto, you will most likely catch Iyke playing or discussing football with friends and family.
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