ViaBTC | Changes in Hashrate Relocation Brings Both Challenges and Opportunities
China, a country once accounting for the largest share of the world’s Bitcoin hashrate, was subjected to the toughest ever crackdown this May. With the government decrees issued one after another, provinces such as Inner Mongolia, Qinghai, and even Sichuan that mainly relies on clean hydroelectric power, have begun to close down crypto mining projects. Chinese miners have tearfully shut down their business, transported or sold their mining rigs, and racked their brains to find the next mining hub.
Regulatory policies in the once global center for Bitcoin mining have undoubtedly rippled through the market, causing drastic fluctuations in the hashrate of the entire network represented by Bitcoin. On June 20, all mining machines in Sichuan Province were cut off. In just one day, statistics showed that the global Bitcoin hashrate fell to 57.4 EH/s, down by 71% from the 197.6 EH/s peak in May, close to mid-2019 levels. At the same time, the global Bitcoin mining difficulty also went down. On June 13, the mining difficulty stood at 19.93T, but on July 3 after the difficulty adjustment, it plunged to 14.36 T, lowered by as much as 28%.
It’s believed that the blanket ban has ended China’s Bitcoin mining dominance, leading to the rise of Bitcoin mining in North America and other regions and countries. With that, a short video has gone viral on WeChat Moments, in which the Chinese miners were shutting down their mining rigs and shouted: “Bye, See you.” While shedding their tears, many more miners began to consider migrating their mining machines overseas, which marked the start of de-sinification in Bitcoin mining.
According to data from Cambridge Centre for Alternative Finance (CCAF) on May 21, the Bitcoin mining activities were mainly concentrated in China, which accounted for approximately 44% of the network hashrate, nearly half of the world’s total. The United States ranked second with 17.7% of the network hashrate, Kazakhstan came in third with 7.3%, Russia ranked fourth with 7.2%, Canada ranked fifth at 4.7%, followed by Iran with 4.3%, and the seventh was Malaysia that accounted for 3.2%. In comparison, other countries occupied less than 1% of the total hashrate.
However, two months after the policy crackdown, on July 21, data showed that China’s hashrate share had plunged to 0%, and the United States overtook as the new global Bitcoin mining center, taking up 35.1% of the total network hashrate. Kazakhstan came in second with 13.8%; and Russia ranked third with 11.9 %, followed by Canada with 10.8 %.
In less than three months after the crackdown, global network hashrate of Bitcoin began to rebound. On August 23, the figure rose to 152.3EH/s, approaching the normal level before China’s mining ban. Till November 15, the global hashrate has reached a plateau, as many institutional and individual miners in China began to lay out their business overseas. Foundry USA, a mining pool in North America, saw its hashrate skyrocket and thus rose to the world’s top three for the first time. In contrast, AntPool, F2 Pool, ViaBTC, BTC.com, and Binance, all mining pools with a Chinese background, remain the top six in terms of hashrate. The crypto activities is still dominated by the Chinese miners who just relocated their business after the crackdown.
It would be sensible to relocate business to countries such as the United States, Canada, and Russia. These countries have common advantages — a stable political environment and secured power supply. However, compared with China, these countries charge much more in mining farm construction. For example, the United States and Canada are notorious for higher labor costs but low work efficiency. Once a mining machine malfunctions, it will take a long time and a high price to repair.
However, a mining machine in operation is a ready source of income. That may explain why some mining farm owners do not hesitate to move their machines overseas by air transport rather than time-consuming but economic sea transport. Take Antminer S19, a 14.5 kg mining machine, as an example: the air freight is RMB 60 per kilogram, so that the shipping fee for such a device is close to RMB 900, approximately 20 times higher than the sea freight. According to the mining farm owners, such efforts are worthwhile if they want to seize the first-mover advantage in overseas markets.
Former Chinese Bitcoin miners are not the only ones who are snapping up mining machines. Having learned about Bitcoin, many overseas outsiders have also rushed to the market, claiming that they saw lucrative opportunities in the de-sinification trend in crypto mining.
In the long run, the de-sinification of crypto mining is beneficial to Bitcoin and is also what the global Bitcoin community has long expected. The essence of Bitcoin is to build a decentralized electronic payment system. Yet China had long accounted for more than half of the network hashrate, leading many insiders to worry about potential security risks. Good news is that the current hashrate distribution conducive to decentralization is precisely what they want.