The US has overtaken China as the world’s largest source of bitcoin mining two months after Beijing banned crypto mining this year, new data has revealed.
China’s share of the global hashrate — the computing power needed to create bitcoin — fell from 44 percent to zero between May and July, according to figures released Wednesday by the Cambridge Center for Alternative Finance. The country accounted for three quarters of the global hashrate in 2019.
The US’s share of the global hashrate rose from 17 percent in April to 35 percent in August, while Kazakhstan rose 10 percent to 18 percent over the same period.
The Chinese State Council, or cabinet, banned mining and trading of cryptocurrency in May, citing environmental and financial concerns. The decision sparked an exodus of miners seeking cheap energy and crypto-friendly politicians.
China’s bitcoin mining ban resulted in the “great mining migration,” said Sam Tabar, chief strategy officer at Bit Digital, a New York-based bitcoin miner. The company has suspended its operations in China, which it had shut down since October 2020, following the ban.
Michel Rauchs, digital asset leader at the closely monitored Cambridge tracker, noted that “the effect of the Chinese crackdown is a wider geographic spread of hashrate across the world”, adding that it can be seen as “a positive development for network security and the decentralized principles of bitcoin”.
Miners outside of China enjoyed a digital coinage in the months following the ban, as Chinese competitors scrambled to relocate their operations.
Beijing has since moved on, labeling all crypto-related activities as “illegal” last month and extending the ban to foreign operators.
China is rolling out its own digital currency, which authorities hope to test during the Winter Olympics in Beijing in February.
“The shutdown in China has been great for the industry and US miners,” said Fred Thiel, chief executive of Marathon Digital Holdings, a Las Vegas-based crypto mining company.
“Overnight, fewer players went after the same finite number of coins,” added Thiel.
On average, 900 bitcoins are mined every day by machines racing to solve complex arithmetic math problems that unlock new digital coins. Between July and September, Marathon Digital Holdings produced 1,252.4 minted coins, 91 percent more than the previous quarter.
But Thiel said competition has increased as Chinese miners settled in new locations, particularly Kazakhstan. “We are back where we were before the closure, so I expect the situation to stabilize,” he said.
But the dispersed miners have also faced roadblocks in their new homes, underscoring the challenges digital currency companies face in identifying predictable policy environments as concerns over financial oversight of the sector mount.
Didar Bekbauov, co-founder of Xive, an Almaty-based cryptocurrency mining platform, said that “Immediately after the ban, Kazakhstan received many mining machines, mainly from Chinese miners who wanted to restart their operations as soon as possible”.
Authorities have blamed the exiled crypto fighters for recent power shortages, and have slapped power-hungry miners with electricity usage surcharges. The Kazakh government has also passed a cryptocurrency mining tax that will take effect in 2022.
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