By Landon Manning
After the People’s Republic of China carried out its harshest-ever ban on bitcoin (BTC) mining in 2021, Bitcoin’s hash rate plummeted; however, new data suggests that production in China has quietly been roaring back to earlier levels.
The infamous Bitcoin crackdown in China was something of a watershed moment for the international Bitcoin community, with one of the world’s leading nations in terms of bitcoin mining reaching a sudden standstill, leading to wild changes in many other nations. For example, the slack in bitcoin production was taken up both by other leading nations like Russia and the United States, as well as formerly unknown countries, like Kazakhstan, who were mining bitcoin. This move has precipitated changes in the entire makeup of bitcoin production worldwide, led to new government policies as various places try to attract new capital and has also caused a great number of smaller runoff effects.
However, although the Bitcoin community showed off the true value of its resilience by how quickly and completely it could bounce back from this setback, it turns out that another significant example of Bitcoin’s resilience and power is the fact that China’s production is quietly whirring back to life. According to new data published by analysts at Cambridge University’s Center for Alternative Finance through research done by Cambridge Digital Assets Programme (CDAP) on May 18, 2022, although China’s share of the global bitcoin hash rate dropped from around 70% to effectively zero after the ban, it has seemingly recovered up to 22% today. This figure, if correct, would once again put China among the world leaders in bitcoin production, albeit a dramatic decline from the overwhelming majority they enjoyed before the ban.
This research involved data collection from several prominent mining pools, such as Poolin, BTC.com, ViaBTC, Foundry and others, attempting to verify data about the state of the underground bitcoin mining industry in China. Many have long assumed the existence of such a production. According to CDAP, “Access to off-grid electricity and geographically-scattered small-scale operations are among the major means used by underground miners to hide their operations from authorities and circumvent the ban.” Looking at only the hash rate has led to skepticism. Is it really possible that the hash rate could recover this dramatically? Could such infrastructure exist entirely outside the gaze of the authorities? With this mining pool data, CDAP hopes to confirm that the answer is a solid “yes.”
Nevertheless, there still exist doubts about the validity of this research. After all, it was this center’s data which initially made the claim that the Chinese hash rate fell to zero, whereas no shortage of individuals and publications claimed that there has consistently been at least some presence of underground bitcoin mining operations. Similarly, not only is it possible for miners in these pools to fudge their actual locations by usage of virtual private networks (VPNs) and other proxy services, but there are also plenty of opportunities for miners to tell outright lies which are hard to verify. Since this industry is formally outlawed in China, there is little reason for any miner to self-report their activity, which almost certainly contributed to the initial assumption that mining had dropped off so dramatically.
Despite these doubts, however, it is probably safe to assume that Cambridge researchers were acting in good faith to try and recreate a faithful map of a very murky industry, and have probably taken active countermeasures to stop the data from getting spoiled by these concerns. It is important to not miss the forest for the trees on this point: Regardless of the size or the capacity of the underground bitcoin mining scene in China, it is a certainty that some percentage of hash rate resides in the country. In spite of the efforts of one of the world’s most powerful governments, carrying out a comprehensive ban and continuing to raid mining equipment to this very day, the mining businesses persist. The economic vision of a decentralized world, free of meddling from all governments, cannot be stamped out in China or in any other country. As the illicit hash rate in China continues to endure and even grow in strength, one thing is clear: Bitcoin is here to stay.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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