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The United States has overtaken China to lead the world with the largest share in global bitcoin mining networks, according to data from the University of Cambridge, published on Wednesday.
The U.S. lead follows China’s crackdown on bitcoin mining in recent months, which sent the worldwide price of bitcoin plummeting. China issued a nationwide blanket ban on crypto mining last month, in a move that has devastated the industry there and pushed many miners overseas.
“The latest data informing our interactive mining map follows the trajectory that we had seen developing over the last two data updates. Clearly, the government-mandated crackdown in China has had a significant impact on the new order of global hashrate share,” Michel Rauchs, digital assets lead at the Cambridge Centre for Alternative Finance, told The Washington Post by email on Thursday.
“It will be interesting to see if the existing trends continue or if shares change as the hashrate settles geographically,” he added. The hashrate is a measure of collective computational power, and therefore of mining performance.
Bitcoin is one of thousands of types of hard-to-visualize cryptocurrency. In its simplest form, a cryptocurrency is a computer code generated by publicly available software that allows people to store and send value online. The code verifies and groups transactions onto a public record known as a blockchain, a large file containing every transaction ever made.
The value of a cryptocurrency is usually expressed in dollars and is set by public trading conducted by exchange houses. It can vary wildly; the cost of a single bitcoin equates to roughly $50,000 today, down from nearly $60,000 in May.
Cryptocurrencies such as bitcoin, dogecoin and ethereum are akin to digital gold, and the algorithm that generates a cryptocurrency is available for download on developer websites and, in theory, available for anyone to use to create new cryptocurrency. But the process is highly competitive because the actual amount of cryptocurrency to be put in circulation is limited. These limits vary depending on the cryptocurrency and are set by whoever created the code. For instance, the bitcoin algorithm limits the number of bitcoin that can be generated to 21 million. At that point, no more will be made.
The energy-intensive computing process needed to create new currency requires enormous computer power to solve the complex mathematical equations that generate a unit of cryptocurrency. Globally, the process devours more electricity than the Netherlands does in a given year, according to the University of Cambridge.
At the bare minimum, running a bitcoin mine requires a strong Internet connection with generous download capacities and usable storage space, with some entrepreneurs operating massive crypto mines for a better chance at grabbing a larger share of new coins entering circulation.
In China, sophisticated computers humming around the clock in specially ventilated warehouses were an increasingly common site amid a cryptocurrency mining boom. At their height in 2018, China’s bitcoin prospectors accounted for 74% of the world’s bitcoin production. However, due to the current political crackdown, many newly minted bitcoin moguls are decamping to places like Texas, South Dakota or Canada, with significant implications for the evolving industry.
According to data from the Cambridge Bitcoin Electricity Consumption Index, the leading share of global bitcoin network hashrate is now in the United States (35.4%) as of the end of August, followed by Kazakhstan (18.1%) and Russia (11%), with the three countries already gaining market share prior to the crackdown in China, it said.
Canada, Malaysia and Iran also have a significant mining presence, according to the data, with China’s restrictions possibly leading to “an increased geographic distribution of hashrate across the world,” the report said, adding that it could be a “positive development for network security and the decentralized principles of Bitcoin.”
In September, Chinese authorities reiterated that all virtual currencies were considered illegal in the country, as it put in place a nationwide ban on crypto mining. In a statement published by China’s central bank, government agencies vowed to “resolutely clamp down” on the industry in the name of national security and social stability. “Virtual currency does not have the same legal status as legal currency,” it said.
Another notice released by China’s National Development and Reform Commission said the ban on crypto mining was part of China’s wider pledge to reduce carbon emissions to meet climate change goals. Bans were previously only ordered by individual provinces. China is, however, planning to launch central bank digital currencies and is piloting a digital-yuan in a handful of major cities.
Elsewhere in the world, El Salvador in June became the first country to formally adopt bitcoin as a legal tender, in a move that would allow citizens to pay taxes via cryptocurrency. In the United States, Elon Musk, the chief executive of Tesla, said that his all-electric vehicle company would return to accepting bitcoin as payment once it confirms that enough miners are using renewable energy to power their networks. A trio of U.S. senators in August proposed new tax reporting requirements for cryptocurrency transactions.
Published : October 15, 2021
By : The Washington Post