In a stroke of luck for the bitcoin industry, the crackdown by Beijing on China’s dominant cryptocurrency mining industry has helped secure the blockchain in completely unforeseen ways.
One of the elephants in the room when it came to bitcoin mining specifically, was that so much of it was concentrated in China.
Given that one of the few vulnerabilities of the blockchain is a 51% attack, where a majority of the nodes that secure the bitcoin blockchain validate fraudulent transactions such as a double spend, the prospect that a non-economic actor such as a government could takeover bitcoin mining capability to attack its blockchain was always a constant worry.
But China’s ban on cryptocurrency mining in May was exactly what the industry needed to trigger an exodus of miners and a global race to relocate millions of the ASIC (application specific integrated circuit) machines that secure the blockchains of cryptocurrencies.
That exodus has helped the bitcoin blockchain to become more decentralized and seen mining machines moved hastily to places such as the U.S., Canada, Kazakhstan and Russia.
The move out of China may also help to normalize the mining economics of bitcoin – in China, it was not uncommon for mining facilities to literally steal electricity from the power grid, with corrupt provincial officials looking the other way on the practice in exchange for a piece of the action.
And the frenzied liquidation by Chinese miners provided an incredible opportunity for miners overseas to stock up on equipment at fire sale prices.
Take for instance the Antminer S19, a popular model among industrial cryptocurrency miners which fell by 41.7% from May to July, according to an analysis by mining company Luxor mining.
More importantly, cryptocurrency mining, specifically bitcoin mining, has become more decentralized than ever.
The U.S. has emerged as the leader in industrial scale cryptocurrency mining, but Russia, Kazakhstan and Canada are all significant as well.
More distant locations where cheap electricity is abundant have also risen up, including Venezuela and Paraguay, which owing to their abundance of energy, can afford to use the older machines that are being released from China.
The crackdown by Beijing, far from undermining bitcoin, has probably done more to secure the integrity of its blockchain.