The ‘underground’ story behind China’s ban on crypto-mining
Last year, China imposed an absolute ban on attributes related to the largest cryptocurrency, Bitcoin. In June 2021, China told banks to stop facilitating transactions and issued bans on mining. China’s share of global Bitcoin mining has fallen to effectively zero as per research presented by the Cambridge Bitcoin Electricity Consumption Index (CBECI).
Consider this – At its peak in September 2019, China accounted for over three-quarters of all Bitcoin mining.
Despite the outright bans placed by China, data from the Cambridge Bitcoin Electricity shows that after a government crackdown in 2021, China’s “underground” Bitcoin hashrate hit 22% of the world’s total hashrate in January 2022.
Fair to say, looks like Bitcoin mining appears to have survived the ban.
At press time, the network hashrate looked like –
China’s “underground” Bitcoin hashrate surge surpassed that of Kazakhstan’s and stood second only to the United States’ 37.8%.
The CCAF said in a statement –
“The data strongly suggests that significant underground mining activity has formed in the country. Access to off-grid electricity and geographically scattered small-scale operations are among the major means used by underground miners to hide their operations from authorities and circumvent the ban.”
Traffic from China contributed to around 20% of Bitcoin’s overall hashrate from September 2021 to January 2022. Given this abrupt recovery in Chinese traffic, the temporary lull resulted in miners going underground.
“It is probable that a non-trivial share of Chinese miners quickly adapted to the new circumstances and continued operating covertly while hiding their tracks using foreign proxy services to deflect attention and scrutiny.”
These miners, by working in the shadows, soon gained confidence over time.
“As the ban has set in and time has passed, it appears that underground miners have grown more confident and seem content with the protection offered by local proxy services.”
Rising from the ashes
Indeed, this is the case here. After exhibiting almost no activity (0%) in August 2021, mining activities made a swift recovery up to more than 30% of the Global Bitcoin hashrate. Nonetheless, other locations did, however, take this opportunity to welcome this “exodus” of miners.
For instance, Kazakhstan’s share of the network climbed above 18% in August 2021, according to the CBECI.
BTC too rejoiced following this move as it surged by more than 2% in just 24 hours.
Now, while Bitcoin has surpassed the $30k-mark, the king coin still has a long journey ahead.