Bitcoin energy consumption has crashed by about 50 percent in China which, until recently, dominated the world for mining hash rate control until the government cracked down and started banning mining and transactions in the No. 1 cryptocurrency.
Before China put teeth into its crackdown and threatened punishment for violators, Bitcoin was consuming up to 130 terawatt-hours (TWh) of electricity per year, according to Cambridge University’s Bitcoin Electricity Consumption Index. That helped put China among some of the world’s leading countries by energy consumption, Decrypt reported.
Bitcoin now consumes 68 TWh of electricity per year, down 51 percent since May 10, from an all-time high of 141 TWh.
As a result of the crackdown, China is kicking out more than half the world’s bitcoin miners – and many of them could be relocating to Texas, CNBC reported: “Texas is an ideal destination for miners, thanks to its abundance of solar and wind power, its unregulated market, and its crypto-friendly political stance.”
“We have seen an increase in Chinese-linked mining entities selling Bitcoin since this began, almost certainly due to the costs of relocation,” said Jason Deane, bitcoin analyst at Quantum Economics, in a Decrypt interview.
Most miners in China are “shutting down their machines, and selling them,” said Nishant Sharma, founder of BlocksBridge Consulting, a consultancy focused on cryptomining, in a Reuters report.
Bitcoin’s latest selloff points to a possible period of flat trading in a cycle known as “crypto winter.” Each cycle’s rally has been driven by a new group of buyers, and each selloff has seen many of them leave the market, Wall Street Journal reported. Bitcoin’s biggest problem isn’t a crackdown by China on cryptocurrencies or Elon Musk’s tweets, said J.P. Morgan analyst Nikolaos Panigirtzoglou. Its problem is money leaving the asset class.
The bitcoin mining hashrate — the speed of mining — hit a 13 month-low after the decline in China’s mining activity. The total hashrate on the bitcoin network is at 101.9 TH/s, Yahoo News reported on June 27. The last time the network saw a hashrate that low was in early June 2020.
A higher hashrate is important because it makes a network more resilient to attack, Coinesk reported. It means more resources are being devoted to process transactions on the blockchain. The higher the hashrate, the harder it is for a bad actor to source the necessary hashing power and, as such, the harder the network is to attack. Higher hashrate means a malicious agent would need to spend vast sums of money to outcompete other mining facilities in order to gain a 51 percent majority control and stop other people’s transactions, or double-spend their own coins.
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The estimated hashing rate decline is attributed to the recent Chinese bans on bitcoin mining.
“Good news: the reduction in Bitcoin mining hashrate from China is visible but survivable. There’s a lot of mining capacity elsewhere,” tweeted Balaji S. Srinivasan, an angel investor, entrepreneur, former chief technical officer of Coinbase and general partner at Andreessen Horowitz. “Bad news: blocks may be slower for a while. But holders are unaffected.”
Hacker News @newsycombinator tweeted early Monday that “BTC Hashrate dropped another 27% down ~62% form peak now at 2019 levels.”
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