Why did China Ban Bitcoin Mining?
The Chinese government banned Bitcoin mining on 6/9/2021 due to blackouts, energy shortages, and an unbalanced energy grid. Many companies (and now countries – looking at you El Salvador!) mine Bitcoin using stranded energy or renewables, but most miners in China were using coal. The Chinese government wanted this coal to power their cities, homes, and transportation instead of mining Bitcoin due to their unbalanced energy grid. So they made a shortsighted decision to ban Bitcoin mining. We talked about this back in June, here.
At first, this was pretty scary news and the market responded with fear. Network hashrate dropped like a rock and there was a lot of uncertainty around network hashrate recovery, distribution, and security.
It turns out Bitcoin can’t be killed by China. In fact, there is a common quote from many investors: “If China bans something you should invest in it”. This mantra has been true for Google, YouTube, Facebook, Twitter, and many other tech companies. Bitcoin is proving to be no exception.
Where did all the Chinese Miners Go?
It turns out that these Bitcoin miners were distributed across the world with most of them ending up in the United States, Kazakhstan, and South America. One of the beautiful things about Bitcoin is that it can survive in oppressive regimes (many Chinese citizens still own it), but flourishes and prospers in areas of freedom. Because of this, the United States of America has supplanted China as the largest provider of Bitcoin hashrate in the world.
Watch the below video graphic – it is both mesmerizing and mind blowing!
Texas Wants to Take the Lead in Bitcoin Mining
Many US politicians view the Chinese Mining Ban as a gift from the Chinese Communist Party. Many thought the United States and China would compete for hash rate over the coming years, but the Chinese Communist Party banned Bitcoin mining and removed themselves from being a major player in the greatest financial innovation in recent history. It was a shortsighted, authoritarian, and self-defeating decision that will hurt them for decades.
Greg Abbott (Texas Governor), in particular, saw the Chinese mining ban as an opportunity and wants Texas to take the lead:
Was the Chinese Mining Ban Good for Bitcoin?!
In a word – YES. Why?
The Mining Ban Removes All China FUD
The mining ban removes all the FUD we’ve heard about China controlling Bitcoin. It was never true, but this proves that Bitcoin does NOT need China. China will likely need Bitcoin in the future, though.
Bitcoin Proves It Is Resilient to State Attacks
It proves that Bitcoin can not just survive a state attack against miners from its primary host, but that it can survive, re-distribute, and THRIVE after it. Miners were moved all over the world and have found homes in locations that are more free, forward thinking, and innovative. There will likely be more state-sponsored attacks on Bitcoin, but other nations will see the opportunity and take their spot in line.
Citizens who value freedom will swarm to the countries that adopt Bitcoin, and they, and their new host country, will be better for it.
American Miners Using Cleaner Energy than Chinese Miners
Remember, most Chinese miners used coal that the Chinese Communist Party decided needed to be used elsewhere. United States miners use ~60% renewable energy to mine Bitcoin. This means that Bitcoin mining, over the course of 2 months, became significantly more earth friendly.
Many American Bitcoin miners use renewables such as wind or solar. A very popular option is to mine Bitcoin at natural gas mines. Many of these natural gas reservoirs overload their storage containers so they either have to release the natural gas into the atmosphere or burn it. Many opt to burn it off. This is a waste of energy and bad for the environment. Bitcoiners have stepped in and has started to utilize this stranded energy to mine Bitcoin and secure the network. This allows them to monetize energy that would’ve been otherwise wasted, and secure the Bitcoin network at the same time.
This is the future. Bitcoin can fund renewables, balance energy grids, and monetize stranded energy. China didn’t see this because they used coal, but the United States is building renewable and stranded energy infrastructure to make sure they capitalize on Bitcoin while also helping the planet. It sounds crazy, but they go together perfectly!
Let’s not forget how much worse gold mining is on the environment, or that the United States uses more energy on drying their clothes every year than the Bitcoin network requires to provide financial freedom and inclusivity for the whole world…
Bitcoin Hashrate Recovery Since China Mining Ban
As stated earlier, Bitcoin miners have migrated to more freedom loving countries – primarily the United States (specifically Texas, Wyoming, and the northeast), Kazakhstan, and South America. This migration took about 2 months to complete, but considering all the work required to redistribute these miners the speed was nothing short of amazing.
Take a look at the below graph of Bitcoin mining hashrate. Bitcoin hashrate has recovered to the levels we saw at the beginning of 2021. You can see exactly when Chinese miners were forced to turn off their machines, scramble for a new freedom-loving location, and start turning them back on. This is probably not the last state-sponsored attack on Bitcoin miners, but they will always be able to find homes in areas that care about freedom and innovation.
Here you can see that China has completely fallen off the Bitcoin mining map, and countries that care about freedom and innovation have stepped up to take their place. This is a gift. This will set China back decades, and unfortunately hurt their people in the short, medium, and long run. Let us not forget how important freedom is, and how critical it is to defend it or we, too, will be left behind.
We’re here to help. The 5 links below are where we encourage you to start. Onward!