China's mining shutdown has led to a broader distribution of the Bitcoin hash rate. The U.S., Kazakhstan, and Russia have become the top mining markets.
The U.S. is now the largest Bitcoin mining powerhouse
(Pic by @lukemichael on Unsplash)
In the wake of China's Bitcoin crackdown, the U.S. has positioned itself as the epicenter of Bitcoin mining globally, according to the latest data shared by the University of Cambridge.
According to the Cambridge Bitcoin Electricity Consumption Index (CBECI), U.S. miners now hold a 35.4% share of the Bitcoin mining market in terms of total global hash rate distribution. The U.S. nation's positioning comes after the Chinese government banned cryptocurrency mining earlier this year.
CBECI data also shows Kazakhstan (18%) and Russia (11%) as important Bitcoin mining centers outside the United States. These three nations have gained considerable market share in the wake of the Chinese crackdown. According to the research, these prohibitive measures reduced China's share "effectively to zero."
Estimated absolute hash rate (monthly average) Exahashes per second (E.H./s) - source: CBECI
The hash rate is the unit to measure the processing power of a Blockchain network. A lower hash rate means less competition among miners to validate new blocks. It also means the network is less secure, as the scale of resources needed to perform a 51% attack is reduced.
China loses its crown
China has long maintained a stance against cryptocurrencies. The government has maintained a ban on trading such assets since 2017. Still, this year it has doubled down on those measures, first by shutting down mining operations in the region, then by ruling virtually all crypto activities as illicit. Earlier this year, these prohibitive policies harmed the network strength of the leading cryptocurrency and the trading performance of the Bitcoin market.
"The immediate effect of the government-imposed ban on cryptocurrency mining in China was a 38% drop in the global network hash rate in June 2021. Which roughly corresponds to China's share of the hash rate before the crackdown," noted Michel Rauchs, digital assets leader at the Cambridge Centre for Alternative Finance (CCAF), in a report.
These figures suggest that Chinese miners ceased operations simultaneously following the government announcements. However, there is a possibility that covert mining operations are still ongoing despite the ban. However, this crackdown also led to an exodus of miners and provided an opportunity for other jurisdictions to join the industry.
Average monthly hash rate share, Aug'21 - Source: CBECI
In April 2021, the U.S. had only 16.8% of the global hash rate share, meaning that the U.S. market share has increased by 105%. Similarly, Kazakhstan and Russia have increased their share by 120% and 61%, respectively.
Good sign for Bitcoin
Beyond the three new mining centers, Canada (9.55%), Ireland (4.68%), Malaysia (4.59%), Germany (4.48%), and Iran (3.11%) represent the next most significant hash rate shares. Rauchs opined along these lines that the data indicates that miners have already successfully located overseas, which is a positive step for the security of the Bitcoin network. The effect of the Chinese crackdown is a broader geographic distribution of hash rate worldwide, which is a positive development for network security and Bitcoin's decentralized principles.
It seems that China's reign in the bitcoin mining industry is shrinking as companies in the sector see the need to distribute their operations rather than centralize them in one place. Recall that by 2019, China came to account for more than 70% of the Bitcoin network's total global hash rate.
Although the immediate trend suggests that there will be no clear winner, this
distribution of miners and hash rate share seems to be helping the Bitcoin price, which has recovered about 83% since the crash in July (coinciding with the China crackdown) trade above $55,000.
