AGI – China is reviewing its role as world number one in ‘mining’, that is, in the production of bitcoin. The reason? The energy needed to extract them has risen to ecologically no longer sustainable levels. And this has entered a collision course with Beijing’s recent climate targets, which is also considering introducing a digital national currency, as an alternative to bitcoins.
This was revealed by the Wall Street Journal, which recalls that up to three quarters of the world supply of cryptocurrencies was produced in a single country, China, where a government push to reduce production is now causing massive global turbulence on bitcoins.
Meanwhile, a promise is needed: what is bitcoin mining? We immediately explain that Bitcoin “miners” must not go down into the bowels of the earth by breaking their backs to extract metals or coal. They just need a hardware device that “mines” the cryptocurrency working 7 days a week, 24 hours a day. It is in fact possible to obtain Bitcoins by having the computer processor or the graphics card perform mathematical calculations: this activity is called “mining” and its complexity increases with the passage of time.
What has changed
Until now, it was super convenient to open a mining company in China. And it was also very easy, because you could just mine Bitcoin from your laptop or set up some machines from your home to run the hashing algorithm, which allows you to mine bitcoins. However, as more and more “miners” began to enter the industry and the difficulty of running the Bitcoin algorithm increased, more and more levels of computing power and huge amounts of electricity were needed to solve the equations. and collect the reward.
China has always leveraged its large electricity supplies and low-cost equipment, to become the first world production center. Chinese bitcoin miners have taken advantage of an under-regulated and oversized electricity generation sector. They have set up mining operations close to hydroelectric power producers in the mountainous provinces of Sichuan and Yunnan, where turbines turn melted snow and seasonal showers into electricity.
Then, when the river flows eased each winter, miners packed up their computers and headed north to coal-rich Xinjiang and Inner Mongolia. But now the situation has changed. The amount of electricity needed to power a large number of computers used to create new bitcoins has come at odds with China’s recent climate targets.
Furthermore, the Beijing government, which manages its national currency, has disapproved of cryptocurrency in general, also because Beijing intends to launch a national digital currency, controlled by the central bank and designed specifically to counter cryptocurrencies. On May 21, the Chinese government promised to “crack down on the behavior of bitcoin mining and trading”.
The statement was interpreted as a warning: the days of the multi-billion dollar supply chain of cryptocurrency are numbered. In response, electricity producers are kicking miners off the grids and Chinese retailers are dumping computers designed to create bitcoins on the second-hand market at huge discounts..
This has made cryptocurrency production and its price in the markets much more vulnerable, although, according to the WSJ, this does not mean the end of bitcoin. Instead, mining is very likely to slow down in China and accelerate elsewhere.
Miners from other nations, according to data from the University of Cambridge, had already reduced the dominance of Chinese production in the past 18 months and the share of the United States is estimated to be growing and accounted for around 7% last year. The industry’s expectation is that the U.S. share could expand by as much as 40% in the next few years, although at the same time, many believe China can retain nearly half of the mining. In short, the games are open.