How China’s mining ban is changing the future of crypto mining
Chinese mining companies mobilize and leave the country for greener pastures
In a historical event, bitcoin mining farms in the Chinese region of Sichuan closed down last Sunday after the government cut the electricity. This forced miners to move their operations elsewhere, and those who didn’t manage to do it in time suffered significant losses. What does this mean for Bitcoin and mining?
Miners at the mercy of the government
It’s no secret that China was home to 50 to 70% of the global hashpower. This centralization has been a matter of concern for the community and a point of leverage for FUDsters.
Now, that narrative has come to an abrupt end as miners found themselves having to move their operations out of the country. The government led by Xi Jinping issued an order to close down all energy-intensive activities, with bitcoin mining in the spotlight. The significant advantage that crypto miners have over other industries is that they can be highly mobile, moving to where the electricity is cheaper, the infrastructure more stable, and the regulatory/government more friendly.
Consequently, most miners have already relocated, while others are still looking for new destinations to place their mining equipment and devices. The US seems to be a preferred destination so far, particularly Florida, Texas, and Maryland, this last one already welcoming around three tons (6,600 pounds) of mining hardware.
However, even though they find a suitable location, managing an operation from overseas can be cumbersome and inefficient. Without a doubt, remotely-managed mining operations will gain popularity in this new mining stage, which will bring new challenges to the industry.
The consequences of centralization
Despite being the most injured party, miners aren’t the only ones suffering losses. These events have created a short-term impact on the Bitcoin ecosystem as a whole.
Think about it: For a network whose aim is to be a decentralized, peer-to-peer electronic cash and payments system, it’s not a good thing that a single country’s stance on mining can affect it this much. After the shutdown, hashrate went down 20% from 122 to 102M TH/s, indicating the influence of China’s ban on the mining industry.
Furthermore, the largest mining pools — most of them based in China — saw a significant decline in their computing power. AntPool, Poolin, Binance, and Huobi Pool dropped by 21.05%, 16.45%, 25.15%, and 31.19%, respectively. On the other hand, Foundry USA was the big winner here, managing to absorb most of the migrating hashpower and growing 5%, squeezing for the first time into the top 7 largest pools in the world.
We can easily see from these events that the geographical concentration of mining activities is a liability for the network. It creates a dependency on the region’s authorities, who can change the rules overnight, carrying significant risks to miners.
Possibilities, threats, and opportunities of the new mining landscape
Although rushed and messy, the migration of miners from China to other regions is a good thing. The country’s history with censorship didn’t help Bitcoin at all, just like it didn’t help Google, Facebook, Twitter, and every other western company whose control escaped the government’s reach. Taking that into account, it looks like Bitcoin may have dodged a bullet.
Also, the miners’ relocation will favor geographical decentralization of hashpower and bitcoin adoption in new markets. We can already see several states of the US and Latam nations taking measures to attract crypto investors to set up their operations in their territory. Plus, most mining in China used coal-fired power, so this also stops the environmental disaster narrative, favoring greener energy alternatives.
Competition is always good, as it pushes nations and states to improve their offer to investors. In cryptocurrency mining, that means cheap energy, a favorable legal framework, and high-quality infrastructure. Several states have already pushed blockchain laws that grant benefits to crypto companies that settle down in their territory.
Why do they make such efforts to attract investors? In the first place, the crypto industry is growing steadily, which translates into two clear benefits: A constant cash flow into the local economy and a sustained job generation. Secondly, it promotes renewable energy generation, which is, in turn, cleaner than fossil-fueled alternatives. For the population, that means fewer power shortages, less pollution, and better health. However, the most apparent advantage is the best one: It drives crypto mass adoption, which helps financial inclusion, transparency, and wealth accumulation.
Not everything is as simple as it sounds, though. As we mentioned before, a highly decentralized computing power may prove troublesome to administer. The more we move towards a more disseminated mining economy, the more we will need new tools to manage and distribute hashpower effectively.
The future of crypto mining
Regardless of how and where the migrating hashrate ends up, there’s no doubt that the mining landscape will take a new shape we haven’t seen before. That said, with a new form comes new challenges, and with them, new solutions.
At Titan, we believe that innovation and increasing decentralization are essential to keeping development and growth moving forward.
First of all, and to avoid another episode like the Chinese exodus, Bitcoin needs an effective way to decouple hashpower control and management from the geographical location where it’s produced. Aside from achieving complete decentralization, miners would save a significant amount of time and capital on logistics and operations.
Just imagine if entrepreneurs could manage their mining operations and hardware distributed across mining farms in El Salvador, Texas, Argentina and Ukraine, from the comfort of their home in New York. Even more so, imagine if mining rig owners could sell their computing power to any pool operator in any part of the world. That way, miners could settle down in bitcoin-friendly countries while pool managers based in other regions could keep their enterprises running even if their governments ban mining-related activities.
Indeed, for that to happen, we would need a protocol in which miners could tokenize the hashpower they produce; and a marketplace to trade it in a practical, transparent manner. Moreover, such a platform would facilitate new investment instruments, such as hashrate derivative products, mining rig rentals, and decentralized wrapped tokens.
Titan’s proposal: A network for decentralizing mining
Titan focuses on building a network that would enable these features through smart contracts and blockchain technology. 100% decentralized and community-driven, we want this platform to become the go-to hub for miners and investors to do business in cryptocurrency mining.
Titan Protocol will act as the bridge between hashpower sellers (producers) and buyers (pool administrators), who will rest easy knowing that their business is validated and secured by smart contracts and TTN staking.
Final considerations
The world of crypto mining is changing. The days ahead look exciting as they will open up a range of opportunities for the community to seize.
Nevertheless, we must ensure that we have the necessary resources and knowledge to harness the full potential of mining in the new paradigm. One of decentralized, tradeable hashpower, in which everyone, regardless of their geographical location, mining capacity, or financial possibilities, can participate in the world’s most efficient financial network.
The future of mining is coming full steam ahead. With it, the world will move towards a more sustainable energetic structure, global financial inclusion, and further network decentralization. It’s up to us, the community, to keep the engines running.
