By September 2021, China accounted for just over 22% of the total Bitcoin mining market, according to a study by the University of Cambridge.
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Bitcoin Miners have not given up in China, even though Beijing has banned this practice.
China was once the world’s largest crypto mining hub, accounting for 65% to 75% of the total “hash rate” (processing power) of the Bitcoin network.
However, the domestic share of the world’s Bitcoin mining capabilities Plunge to zero After authorities began a new crackdown on cryptocurrencies in July and August 2021, according to data from the University of Cambridge.
Some of the measures China has taken Abolish crypto mining, A power-intensive process that leads to the creation of new digital currencies. As a result, several miners fled to other countries, including Kazakhstan, which borders the United States and China.
But as CNBC has Previously reportedSince then, several underground mining projects have emerged in China, and miners are paying attention to avoid Beijing’s ban.
now, New research According to an article in the Cambridge Center for Alternative Finance, Bitcoin mining activity in China is recovering rapidly. By September 2021, China accounted for just over 22% of the total Bitcoin mining market, according to data from Cambridge researchers.
This means that China is the world’s top player in Bitcoin mining. This is second only to the United States, which surpassed China as the sector’s largest destination last year.
There is one caveat. The research method relies on aggregate geolocation from a huge Bitcoin mining “pool” that combines computing resources to more effectively mine new tokens, identifying where activity is concentrated in different countries. To do.
According to researchers, this approach may be vulnerable to “intentional obfuscation” by Bitcoin miners who use virtual private networks (VPNs) to hide their location. VPNs allow users to route traffic through servers in other countries, making it a useful tool for people in countries such as China, where Internet use is severely restricted.
Nonetheless, they added that this limitation “has only a moderate effect” on the accuracy of the analysis.
Unlike traditional currencies, cryptocurrencies are decentralized. That is, the work of processing transactions and creating new currency units is handled by a distributed network of computers, not by banks or other intermediaries.
To facilitate Bitcoin payments, so-called miners need to agree that the transaction is valid. The process requires complex calculations to solve puzzles that become more difficult as more miners join a network called blockchain.
Anyone who solves the puzzle first can add a new batch of transactions to the blockchain and Bitcoin will be rewarded for their efforts.
The method of reaching this agreement, known as the “Proof of Work,” consumes about as much energy as the entire country, such as Sweden and Norway.
China frequently warns about cryptography. But the latest crackdown was arguably the toughest.
The world’s second-largest economy has dealt with months of energy shortages last year. This caused a number of power outages.
China remains heavily dependent on coal and is increasing its investment in renewable energy to become carbon neutral by 2060. Authorities see crypto mining as a potential obstacle to the plan.
Now, with the resurgence of Bitcoin production in China, China has become the second largest destination for those who want to find a new digital currency. 2 million Bitcoins are still being mined. However, Bitcoin prices have fallen by more than 50% from their November peak, which could now be a less profitable initiative.
Both the China National Development and Reform Commission and the People’s Bank of China have issued strong warnings about cryptocurrency mining and trading and were not immediately available for comment when contacted by CNBC.
–CNBC’s Mackenzie Cigaros and Evelynchen contributed to this report