After ICOs and Local Exchanges, China Now Eyes a Major Crackdown on Cheap Bitcoin Mining
When China says it NO it’s a BIG NO!! Earlier this year, Chinese financial regulatory bodies and government issued a major crackdown on operations of ICOs as well as several cryptocurrency exchanges in the country. China supported its stand by backing it with reasons of Bitcoin’s use in illegal money laundering activities. As a result, many Chinese traders had to withdraw from trading in the cryptocurrency market.
However, in spite of the ban on all cryptocurrency trading activities in the country, a large proportion of global Bitcoin mining activities still remain concentrated in China, and now it seems that the Chinese government has all eyes on it. As per the reports of Beijing’s Caijing magazine, all the hydropower stations functional in China have been asked to cut down electricity supply to people and organizations involved in Bitcoin mining process.
As on date, Bitcoin networks are said to be heavily dependent on Chinese miners, who are currently said to be controlling over 80% of hash rate* distribution. Over the past year and so, There has been a lot of discussion about the Bitcoin mining process being concentrated and centralized in the hands of giant institutions. Moreover, Bitcoin mining requires high-end computational hardware of ASIC chips that are very expensive and out of the affordability range of normal miners.
Also, a major drawback of the Bitcoin mining process is that because of the use of such high-end computational machines, mining a block in Bitcoin consumes a lot of electricity. Statistics show that mining one block of Bitcoin consumes as much electricity as required for one week by an American household. Thus a lot of profit-chasing miners and organizations are headquartered in regions that offer cheap electricity.
*Hash Rate is the speed at which a computer is completing an operation in the Bitcoin code. A higher hash rate is better when mining as it increases your opportunity of finding the next block and receiving the reward.*
As a result, the state-run Sichuan Electric Power Corporation based in Chengdu (China), has circulated an order asking all hydropower stations to cut-down on the low-cost power supply for Bitcoin-related operations. The document issued by the corporation translates into saying that “bitcoin mining is an illegal activity” and "each State Grid connected generator that is involved in powering bitcoin mining is also regarded as an illegal practice, which shall be prohibited.”
Sichuan Province, which provides an abundant water supply for electricity generation, is one of the most preferred destinations for miners. There have been times that during peak electricity production excess water was gone into wastage which was noticed by miners who later flocked their wings and concentrated in this region. This created a win-win situation as miners would get cheap electricity and the Corporation could earn more money by selling the excess of electricity.
Many believe that such a crackdown on mining process might be pushed by the government for halting all sort of Bitcoin-related operations in the country. Others believe that this order is specifically for small hydropower stations whose first priority is to supply electricity to residents over businesses and may have either violated this process. However, things are unclear at this point in time whether this is a temporary narrow focus or the beginning of a major crackdown for mining in the country.