Bitcoin mining activity exploded in China in the early 2010s, owing to the availability of cheap electricity. Miners flocked to Xinjiang’s western region, Inner Mongolia’s northern region, and Sichuan’s center province, recognized for its renewable hydropower.
Xinjiang and Inner Mongolia were the first to be hit by China’s bitcoin crackdown due to their reliance on coal-fired power facilities. Even ample hydropower couldn’t save Sichuan’s bitcoin miners by the end of June, when the government told them to stop operations on June 18.
According to the CBECI, Xinjiang alone accounted for more than a third of the worldwide bitcoin hash rate in 2020 and more than half of China’s mining activities. On the other hand, Miners traveled across China according to local conditions, with Sichuan accounting for up to 61% of the country’s mining activity during the wet season.
According to the CBECI, China’s proportion of worldwide bitcoin mining has declined for a few years, falling from 75% in September 2019 to 46% in April 2021. However, one of the reasons it grew so high in the first place is that low-cost electricity encouraged corporations to form mining pools. As the name implies, these pool resources from many different users to generate cryptocurrencies.
Today, the world’s largest mining pools are either situated in China or were founded by Chinese people. Chinese founders may be found in F2Pool, BitMain’s AntPool, and Binance Pool. During past crackdowns, some cryptocurrency companies shifted their incorporation locations – Bitmain, for example, is now incorporated in the Cayman Islands – but kept their servers in China.
Joining a pool has the advantage of allowing users with little computer power to partake in the profits of a mining operation. Rewards are proportional, so someone who contributes 1% of a pool’s processing capacity, for example, receives 1% of the payout for each new block added to the blockchain.
Individuals that participate in larger pools will receive less money for every block added to the blockchain, but the pool will be more likely to produce more blocks, bringing in more money. It has contributed to China’s mining pools becoming the most well-known in the world.
However, due to Beijing’s control over operations within its borders, this concentration of mining power has alarmed some. Most of the criticism directed against China’s engagement of hashing power has revolved around the concept of a 51% attack, which states that if a party controls the majority of the network’s hashing power, they can prohibit particular transactions from being confirmed.
It can lead to double-spending or the expenditure of the same currency twice because the party in control of the network can prevent some transactions from being authenticated, allowing them to steal money from other users. This issue has happened on other bitcoin networks before.
The original bitcoin network, on the other hand, has never been attacked. With all of China’s diverse mining enterprises, even Beijing may have found it difficult to marshal the country’s collective hash power for nefarious purposes. Instead, the government’s broad crackdown went oppositely.