Bitcoin is extremely popular in China, and as with many new technologies and innovations, the adoption rate is quite high in the country. More than just bitcoin trading, China is known to also have a lot of bitcoin mining companies on its territory. However, the government now wants those companies out of the country.
Mining is the process where a lot of very powerful computers come together to solve extremely complicated algorithms and math problems, in order to discover new “blocks” in the blockchain. Each block that is newly discovered will result in a payout in bitcoin to the miners. Miners also verify and confirm transactions that occur in the blockchain and in the bitcoin network. In this case, the miners take a small fee for each transaction they confirm.
Bitcoin mining is very expensive for a few reasons. First, it uses a lot of energy. The electricity consumption of cryptocurrency mining has been discussed over and over again, especially by environmentalists who claim that the technology is costing the planet too much. As the world becomes more and more affected by pollution and global warming, it is essential to rethink our economy and our society in a greener way. This is why bitcoin mining is bothering a lot of activists. Another issue with mining are the costs. It is extremely expensive to mine, as it requires costly equipment ($3,000 and up) and electricity costs are very high. In addition, storage space and cooling equipment have to be taken into account. Lastly, the rewards are decreasing over time as the mining difficulty is going up. Therefore, it is becoming less and less profitable to mine bitcoin. In the beginning, it was possible for an individual to mine bitcoin on his own computer, and obtain good returns. Nowadays, it requires ASICs mining rigs and is usually not very profitable.
Electricity and power usage is why China wants to get rid of the mining companies. Mining companies have moved to China in the recent years because electricity costs are extremely low in the country and therefore, profit is higher. Other reasons why companies move to China are because of cheap labor and cheap chip manufacturing companies. But the energy consumption is too high and officials hope “to limit the industry’s power use and have asked local governments to guide miners toward an “orderly” exit from the business”. This comes four years after China attempted to ban bitcoin in 2013, which lead to one of its biggest fallout in price.
What will be the future of bitcoin mining? With block mining rewards set to halve in 2020 and governments across the world wishing to reduce energy consumption, it will be interesting to see what this means for mining, but most importantly for the cryptocurrency industry as a whole.
TLDR: China is trying to stop bitcoin mining companies in the country. Large mining companies have moved to China because of low electricity costs, but the government is now concerned with the industry’s power usage.