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In a confusing regulatory framework for BTC mining, Chinese miners are looking beyond borders By Adam Stieb – 1 Aug 2021

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Since bitcoin mining became big business, no nation has been more involved than China in the mining industry. With access to cheap electricity and resources, China’s wealthy conglomerates entered the mining landscape and took control of the industry. Last year, calculations estimating the composition of the global picture revealed that 75% of the world’s bitcoin mining took place in China.

This figure is astronomical, especially considering how the Bitcoin blockchain works. Mining is what keeps the network alive, verifying transactions and creating new coins in the process. The new coins are issued as a reward for miners who ensure that transactions between users are completed successfully.

Chinese domination

Originally, the concept of mining was supposed to be a way to decentralize the Bitcoin network. Since initially anyone could mine simply using a computer, mining was done by a plurality of people whose economic interests were aligned with the help of the net. For a transaction to be confirmed, it must be verified by a number of different miners, and once this is done, the transaction goes into the blockchain.

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However, if most of the mining is done by one party or a group of people working together, they would potentially have the ability to manipulate the blockchain for their own benefit. This has never really happened as any kind of blockchain falsification or manipulation would immediately have a negative effect on the value of bitcoin, virtually excluding any incentive to do so.

However, the keys to the bitcoin kingdom that lie in China’s lap is a precarious situation, to put it mildly. Outside of the network health considerations, we also need to think about ecological factors. Elon Musk put an exclamation point on concerns that were growing about the ecological footprint of cryptocurrency mining operations when he announced a few months ago that Tesla would no longer accept bitcoin as a means of payment.

Environmental concerns 

China is notoriously bad at meeting industrial and ecological standards. The energy consumed by the global mining industry is huge. Studies have equated bitcoin’s annual energy consumption figure with that of entire developed nations such as Sweden and Norway. With very little available to stop Chinese miners from using the cheapest energy available, regardless of the damage it is doing to the environment, these figures are starting to make sense. With about 3/4 of the mining done in China, this means that the energy consumption of bitcoin mining in China alone rivals that of small developed nation states.

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However, China’s consolidation of the mining industry is not something the world will have to contend with anymore. Already in May, Chinese authorities announced radical measures aimed at cracking down and eliminating bitcoin mining. According to Chinese sources, the crackdown was caused by environmental concerns. At the base is China’s carbon neutrality policy, which has imposed a drastic reduction in energy from coal. Energy from coal burning accounted for more than 57% of China’s energy consumption before the restrictions.

Aiming to halve coal-fired energy consumption by 2030, Chinese authorities have been quick to put their country on a compliance path. Bitcoin mining, considered non-essential to the well-being of the state economy, has proven to be one of the prime targets of the restrictive measures.

The great migration of mining

What resulted was called “the great migration of mining,” as companies that made up more than half of a huge industry were either liquidated or forced to seek greener pastures. The mining industry is being forced to a complete redefinition, this time with an emphasis on the use of sustainable energy sources. Many mining companies are settling in the United States in places like Texas, where miners can tap into some of the lowest electricity prices in the world in a relatively unregulated environment that is greatly in favor of crypto.

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Bit Mining Limited, one of the Chinese mining companies moved under the restrictions, has already made the transition to Texas, signing a $ 25 million deal in May. The company has reached an agreement with Dory Creek, LLC, a Texas company, to build and operate a 57.2 MW mining facility powered by 85% low-carbon energy.

Others are looking elsewhere, closer to China, in places like Kazakhstan and Russia. Minto, a mining operation in northern Russia, is looking to transform the industry by using DeFi technology and access to low-cost renewable energy to make mining viable for ordinary people once again. The operation is community-based and offers those looking to mine the opportunity to purchase tokens and collect rewards that are distributed to each token holder.

We are still in the early stages of a complete overhaul. It is impossible to predict what the structure of the mining industry will look like even in a year’s time. The main question is how it will respond to external pressure related to environmental concerns. This, coupled with China forcing its miners to shut down, has introduced a great deal of uncertainty into the equation. There is hope, however, that the new circumstances will lead to necessary and positive changes that will set the stage for great things in the future.

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