In June China told banks to stop facilitating transactions, and issued bans on mining.At its peak in Sept 2019 China accounted for over three quarters of all Bitcoin mining.China’s crackdown initially led to a 38% fall in mining globally CBECI said.
However this was partially offset by a 20% “bounceback” over July and August, “suggesting that some Chinese mining equipment has been successfully redeployed overseas”, researchers said.China has since declared all Bitcoin transactions illegal – though that occurred after the period covered by they Cambridge research.
Miners earn money by creating new Bitcoins, but the computing power needed to do it consumes large amounts of energy.They audit Bitcoin transactions in exchange for an opportunity to acquire the digital currency.Global mining requires enormous computing power, which in turn uses huge amounts of electricity, and consequently contributes significantly to global emissions.The CBECI, which is produced by the Cambridge Centre for Alternative Finance, tracks the geographic distribution of computing power used for mining Bitcoin – receiving data from a number of commercial Bitcoin mining pools.The latest data, which covers the four months to the end of August, suggests that most Bitcoin mining (35.4%) is now US based, with Kazakhstan (18.1%) second and Russia (11%) third.
You have to almost feel sorry for cryptocurrency miners.
Changing attitudes around the world to crypto are pushing and pulling these businesses in different directions.
The decline of China as a crypto mining powerhouse has been unexpected and rapid.
The government has clearly decided it is dead against crypto in general due to its anonymous and decentralised nature plus the environmental costs that come with mining.
On the flipside Kazakhstan has welcomed these homeless companies with open arms and is seriously cashing in.
Kazakhstan has more than doubled its contribution to crypto mining since April.
But even here there are signs of strain.
Industry insiders tell me that the rapid growth is already putting pressure on electricity levels in some cities and regulation and legislation are likely to be on the way to make the country’s crypto boom more sustainable.
China’s action in June and the resulting fall in mining will, the researchers say, have been reflected in a decline in Bitcoin’s energy consumption – but as mining recovers that fall will reverse.
Currently Bitcoin consumes 0.45% of global electricity production, the Cambridge group estimates.
The researchers do not yet know how the change in the geographic distribution will alter the mix of energy sources used to mine Bitcoin – whether fossil fuel or renewables.
That, they say, will be the subject of future analysis.
Earlier research by CBECI revealed an annual migration of miners in China – moving between provinces with cheap electricity from fossil fuel to regions where hydro-electric power was abundant in the rainy season.
With the ban miners must look for cheap electricity elsewhere.
Significant amounts of mining in the US is based in areas such as Washington State where low-cost electricity from hydropower is available.
But as the BBC has reported, some Chinese miners have also migrated to the cheap electricity afforded by Texas’ deregulated electricity grid.
And Kazakhstan’s growth as a mining hub will come at an environmental cost.
According to the US Department of Commerce, 87% of Kazakhstan’s electricity “is generated from fossil fuels” with coal accounting for more than 70% of generation.
Alex de Vries, who runs the Digiconomist blog, told the BBC he thought the changes in where Bitcoin is mined was “bad news for CO2 emissions overall”.
But his calculations are based on figures showing how much pollution each kilowatt hour of electricity produces on average in a country, which is a significant simplification.
However, Bitcoin’s environmental impact is not limited to greenhouse gas emissions.
A recent study, of which Alex de Vries was a co-author, suggested Bitcoin mining produced thousands of tonnes of electronic waste because the computers used become rapidly obsolete.
Mr De Vries thinks the shifting geography of mining may not alter that much, but notes that “Kazakhstan has no national legislation on e-waste, so the handling of it is even worse than in many other countries”.