Following Beijing’s decision to expel its miners in May, more than half of the hashrate – the collective computing power of miners worldwide – was removed from the network. The United States has quickly emerged as the new hotspot for the world’s crypto miners. Over the previous six months, the nation has risen from fifth to second place, accounting for roughly 17% of all worldwide bitcoin miners.
For years, detractors of the world’s largest cryptocurrency have accused it of damaging the environment. However, new data from Cambridge University reveals that the geography of mining has shifted dramatically in the previous six months, and experts tell CNBC that this will reduce bitcoin’s carbon impact.
China’s major crypto crackdown this spring triggered a chain reaction in the mining industry.
For starters, it effectively knocked half of the world’s bitcoin miners down overnight. Because there are fewer people mining, fewer computers are running and less electricity is spent overall, reducing bitcoin’s environmental effect.
Beijing’s new encryption regulations also rendered a large amount of outdated and inefficient equipment inoperable indefinitely.
And, most importantly, China’s ban on crypto mining has triggered a huge exodus. Miners are currently looking for the cheapest sources of electricity in the world, which are usually renewable.
“The bitcoin network is ruthless in its drive for the lowest cost,” said Mike Colyer, CEO of digital currency company Foundry. “Miners around the world are looking for stranded power that is renewable. That will always be your lowest cost. Net-net this will be a big win for bitcoin’s carbon footprint.”
According to the Cambridge Centre for Alternative Finance, China has long been the crypto mining hotspot, accounting for roughly three-quarters of all bitcoin miners at its height. However, once Beijing chose to deport its miners in May, more than half of the hashrate — the total processing power of miners globally – disappeared off the network.
Bitcoin now consumes around 70 terawatt-hours of energy each year, or 0.33 percent of the world’s total electrical generation. That is about half of what it was in May and is roughly comparable to Bangladesh’s and Chile’s annual energy use.
Because of the migration from China, a lot of older mining equipment that was probably long overdue for retirement will never be turned back on.
“It took off, likely forever, a large amount of the most energy inefficient rigs,” explained Alex Brammer of Luxor Mining, a cryptocurrency pool built for advanced miners.
According to Colyer, the entire bitcoin network will now be primarily made up of more efficient rigs that obtain around double the hashpower for the same amount of electricity. “This continues to dramatically enhance the bitcoin network’s security-to-energy ratio,” he added.
However, not all of China’s miners are going out of business. Many people have begun to emigrate overseas, seeking the world’s cheapest sources of energy.
“The cool thing about bitcoin that is under appreciated by a lot of the naysayers is that it’s…like a portable market; you can bring it right to the source of energy,” explained Steve Barbour, founder of Upstream Data, a company that manufactures and supplies portable mining solutions for oil and gas facilities.
Because scale miners operate in a low-margin sector where their only variable cost is generally energy, they are encouraged to relocate to the world’s cheapest power sources.
“They need to constantly reduce their electricity costs, which is their number one expense, in order to be competitive,” said Ria Bhutoria, former director of research for Fidelity Digital Assets.
According to the report, a large number of these miners are leaving for greener pastures in the United States.
The United States has quickly emerged as the new hotspot for the world’s crypto miners. Over the previous six months, the nation has risen from fifth to second place, accounting for roughly 17% of all worldwide bitcoin miners. Although China was still securely in first position in April, with a 46 percent share of the industry, America’s proportion of the market is expected to be much greater now that the Chinese authorities kicked miners out in May.
Bitcoin mining companies headquartered in the United States have witnessed a significant increase in business. According to Whit Gibbs, CEO and creator of Compass, a bitcoin mining service provider, retail hardware and hosting sales have grown by over 300 percent since mid-June.