Chinese clandestine miners use various means to hide their operations from the authorities and circumvent the ban. China is once again one of the world’s leading players in Bitcoin mining, second only to the United States.
Despite the ban by the Chinese government, the Bitcoin (BTC) miners of the Asian country have not given up.
In 2020, cryptocurrency mining in China accounted for between 67% and 75% of the total hash rate of the Bitcoin network. However, that nation’s share plummeted to zero between July and August 2021, when the government imposed the ban.
The Chinese government totally banned cryptocurrency mining throughout the territory. For that reason, thousands of miners fled to countries like the United States, Canada, and Kazakhstan, which borders China.
However, clandestine cryptocurrency mining groups have since emerged to circumvent the Beijing ban.
A research study by the Cambridge Center for Alternative Finance (CCAF) concludes that Bitcoin Mining in China has recovered rapidly. The study indicates that China accounted for 21.11% (30.47 EH/s) of the total hash of the BTC network in September 2021, following the ban.
According to the study, underground miners use various means to hide their operations from the authorities and circumvent the ban. They include access to off-grid electricity, geographically dispersed small-scale operations, and the use of VPN services.
Cambridge data indicates that China is once again one of the world’s leading players in Bitcoin mining. It only precedes the United States, which represents 37.84% of the total hash rate of the BTC network.
Why the Chinese Government Persecutes Cryptocurrency Miners
In contrast to fiat currencies, cryptocurrencies like Bitcoin are decentralized assets. A distributed network of computers, rather than central banks, is responsible for processing transactions and minting new cryptocurrency units.
So-called miners must validate a transaction with BTC to allow its execution. That process requires complex calculations to solve a mathematical puzzle whose difficulty will increase as more miners join the blockchain.
The validation process involves high consumption of computing resources from computers that require a lot of electricity.
China struggled with severe power shortages in 2021, leading to many power outages. Although the Asian country is still heavily dependent on coal, it is investing in renewable energy to become carbon neutral by 2060. That has led Chinese authorities to see cryptocurrency mining as a potential obstacle to achieving that plan.
Bitcoin mining occurs through the Proof of Work (PoW) protocol, producing high energy consumption. The BTC network consumes 204.50 TW/h of energy, equivalent to the electricity used in Thailand.
Bitcoin is trading at around USD 30,000 and has accumulated a 5.6% gain over the last 24 hours. While its daily trading volume is above USD 56 billion, its market capitalization is about USD 750 billion, according to CoinGecko.
Chinese clandestine cryptocurrency miners risk that the authorities may seize their equipment. In September, the latter confiscated 10,000 machines in Mongolia at one of the farms that allegedly ceased operations.
By Alexander Salazar
