- Insider interviewed two Bitcoin mining executives to understand the state of the industry after China’s crackdown.
- The CEO of Riot Blockchain stated that the ban has led to a drop in Bitcoin’s hash rate, which makes mining more profitable and easier than ever.
- U.S. mining companies are also facing a large amount of demand from Chinese miners who want to start mining operations.
- For more stories, please visit www.BusinessInsider.co.za.
Since the birth of Bitcoin, China has taken a strict attitude towards the encryption field.Industry experts said that although June was completely Prohibition of mining operations It has always been one of the country’s most influential initiatives on the Bitcoin network.
Just look at the Bitcoin hash rate chart, which is a measure of the computing power that mining contributes to the network, to understand the impact of the ban: as the country’s authorities implemented the ban, it has dropped significantly since June.
Block cryptocurrency, CoinMetrics
However, for the mining industry, the decline is not entirely negative. In fact, as more and more Chinese miners suddenly close down, this makes it easier and more profitable for those who are still able to operate. “As miners, we are all competing with each other for a fixed cake, so when the competition just drops, you just get a piece of the bigger pie,” said CEO Jason Rice. Riot Blockchain, One of the largest listed mining companies.
He described to Insider how the network hash rate dropped by 50% in a few weeks in June following the cessation of China’s mining industry. Due to the way Bitcoin is designed, the decrease in hash rate has also led to a decrease in the difficulty of the network, which means that it is easier to mine with less competition, resulting in higher profits.
Les stated that although he sympathizes with the miners in China, the birthplace of the Bitcoin mining industry, the crackdown and the drop in hash rate have created “huge” opportunities for miners who are not affected by the ban.
“I can’t imagine going through something like this. Suddenly you invested so much time and money, you established this business, and with a stroke of the pen, the government decided that your business was completed,” he said. .
Due to the ban, Chinese miners are scrambling to transfer their operations to other countries. Les said his Linkedin inbox was flooded with inquiries from miners looking for facility space in the United States.
“A Chinese miner just showed up in Texas and asked,’Can you take us to nearby mining facilities? We need production capacity,” he added.
Moving out of China is particularly beneficial for mining companies that can host third-party miners in their facilities, such as Riot.
“As a host, we are in a good position because now we have more and more potential customers looking for space,” Rice said.
Whit Gibbs, CEO and co-founder of Compass Mining, told Insider that it is interesting that China’s mining ban has also helped Bitcoin move towards the basic goal of becoming a truly decentralized network.
Gibbs said that “the most dangerous thing about Bitcoin” is that more than 50% of the hash rate is located in any country and is susceptible to the whim of a country’s regulations. Over the years, many Bitcoin enthusiasts have worried that the computing power is heavily concentrated in China. Now, miners are flocking to countries such as the United States, Kazakhstan, and Russia.according to Cambridge Centre for Alternative Finance (CCAF), the share of the United States in the total Bitcoin From September 2019 to April 2021, the hash rate increased from only 4.6% to 16.8%. “It makes Bitcoin more secure,” Gibbs said.
