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Not So Great Wall: How China Failed Miserably To Ban Bitcoin Mining

Not So Great Wall: How China Failed Miserably To Ban Bitcoin Mining

China’s ban on Bitcoin mining in 2021 had one of the biggest impacts in the space. Following this, the price of the digital asset underwent a massive downward trend as the hashrate of the world’s mining capital fell to near zero. However, less than a year after the outright ban was announced, mining resumed in the region, suggesting that all efforts by China to stop mining activities in the country have failed.

China Bitcoin Mining Hash Rate Backup

For a long time, China had seen its hashrate drop so much that it became one of the regions where the lowest hashrate was produced. This would change towards the end of 2021, when more hashrate from the region would be recorded. It was speculated that some bitcoin miners remained in China but conducted their operations in secret.

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These covert operations have now grown in scale considering the amount of hashrate leaving the country. In the second quarter of 2022, China is slowly regaining its dominance over the mining world. It currently accounts for 21% of the entire hashrate, behind only the United States, which accounts for 38% of the total hashrate.

Beating countries like Kazakhstan, Canada and Russia was simply crucial. Since the hashrate currently recorded outside the region is produced illegally, this shows how much China dominates the mining space.

China’s hash rate is now the second highest | Source: Arcane Research

However, even though the current hashrate is a substantial growth since its decline due to the ban, that does not change the fact that it is still significantly lower than what the region was producing before the ban. It is now 46% lower than the hashrate when mining was still allowed in the country.

Why did prohibition fail?

There is much speculation as to why China has failed to properly enforce the bitcoin mining ban that was announced last year. There have been a number of factors that have been put forth as the reason behind this.

One of the most important factors is the size of the country. Even when the government puts all its efforts into eradicating all mining activities in the region, the fact that it has so much ground to cover has always played against it. It also means that miners can hide their operations in places that could take months or even years for the government to discover.

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Some of these places can be so remote that the government doesn’t even know they exist there. This is because large mining operations typically require a lot of space and these remote areas give miners the space they need as they strive to keep their mining farms anonymous.

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The amount of locked energy resources present in the area doesn’t help much either. Since this energy would otherwise go to waste, local authorities would prefer that miners use the energy and generate income from these stranded energy resources rather than let them go to waste. Therefore, bitcoin mining continues to thrive in the region.

What this shows is that a complete ban on bitcoin mining is not really possible. Even in places where the government exercises such extensive control over its citizens, there are those who still find a way to continue their operations, thus thwarting all efforts to ban mining.

Featured image from Japan Times, charts from Arcane Research and TradingView.com

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