China's Bitcoin Mining Resurgence Despite Government Ban: A Global Impact Analogue

Resurgence in Bitcoin Mining in China Despite Government Ban

China once dominated global bitcoin mining capacity, accounting for approximately 65 to 75 of the total hash rate or computational power required for the creation of new digital currency. However, following a stringent crackdown by authorities on cryptocurrencies in July and August 2021, China's share plunged to zero. This action led many miners to relocate to countries like the United States and Kazakhstan.

But contrary to expectations, some underground mining operations have since re-emerged in China, with miners working diligently to circumvent Beijing’s prohibitions agnst crypto mining. Cambridge University research indicates that Chinese bitcoin mining activity has rapidly recovered by September 2021, making up over 22 of the total global market.

The latest findings from the Cambridge Centre for Alternative Finance underscore this resurgence. China now ranks second globally in hosting bitcoin miners following the United States, which surpassed China as the leading destination last year due to its larger share. Nonetheless, it's worth noting that the research relies on aggregated geographical data derived from large-scale mining pools combining computing resources.

The accuracy of these findings might be susceptible to deliberate obfuscation by miners using virtual private networks VPNs to mask their locations. VPNs enable internet users in restricted countries like China to route traffic through servers based elsewhere, facilitating evasion of government regulations. Nevertheless, the research asserts that this limitation would have a moderate impact on the analysis' reliability.

To provide context: Bitcoin mining is a decentralized process where computers across a distributed network collaborate to validate transactions and mint new units without the involvement of banks or other intermediaries. Miners compete to solve complex mathematical puzzles linked to blockchn technology; the first solver receives a reward in bitcoin for their contribution.

China's government has periodically warned agnst cryptocurrency activities, but its most recent campgn was notably harsher. The country is dealing with an ongoing energy shortage exacerbated by multiple power outages last year due to high coal demand and efforts to transition towards renewable energy sources.

Given China's significant reliance on coal energy, authorities perceive crypto mining as a potential impediment to their climate neutrality goal of achieving carbon neutrality by 2060. The resurgence in bitcoin production might pose additional challenges for this initiative.

The National Development and Reform Commission NDRC and the People's Bank of China, which have both issued severe warnings agnst cryptocurrency trading and mining, declined immediate comment upon CNBC's inquiry.

In , despite government efforts to curb crypto activities, the sector remns resilient within China. This resurgence highlights not only the global importance of the country in blockchn technology but also presents potential obstacles for their climate goals.

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