June 24, 2021: As China cracks down on cryptocurrencies, bitcoin mining could soon become more profitable.
Last month, Beijing called for measures to end bitcoin mining amid concerns over its environmental impact. As a result, corrupt miners have already left China for other regions, such as North America. Over the weekend, China’s crackdown intensified, with officials in China’s hydropower-rich province of Sichuan ordering corrupt miners to stop operations.
According to reports, China’s bitcoin mining is estimated to have shut down more than 90% of its capacity. It is thought that all global bitcoin mining takes place in China between 65 and 75. While this may not be good news for bitcoin miners in China, it may benefit others. What is Bitcoin Mining? When you think of mining, the image of a gold mine with picks and shovels is probably the first thing that comes to mind. But bitcoin mining is nothing like hunting for gold or other precious metals.
Digital currencies have been developed through a vast network of computers around the world. In the case of bitcoins, these computers are in a race to solve complex math puzzles to move things forward. This process also generates new bitcoins, which benefit miners if they are successful. Currently, rewards to miners are limited to 6.25 BTC. It used to be 12.5 BTC, but since the total supply of bitcoins is limited to 21 million, the amount of bitcoin awarded to miners is halved every four years.
Being the first miner to mine a new block, essentially a list of bitcoin transactions is “a game of random chance,” explains Alyse Killeen, founder and managing partner of bitcoin-focused venture firm Stillmark.
The total hashrate, or processing power, of the bitcoin network appears to have gone down sharply in the wake of Beijing’s crackdown.
In the last month or so, bitcoin’s hashrate has gone down from a record 180.7 million terahashes per second — a measure of the speed of crypto mining hardware — in mid-May to around 116.2 million as of Wednesday, according to blockchain data.
“As more hashrate falls off the network, difficulty will adjust downwards, and the hashrate that remains active on the network will receive more for their proportional share of the mining rewards,” Kevin Zhang, vice president of crypto mining firm Foundry, told CNBC.
Meanwhile, the network of difficulty of bitcoin, measuring difficulty of mining bitcoin went from a record above 25 trillion in May to 19.9 trillion last week. Mining difficulty is adjusted roughly every two weeks, so there is a time lag in the data.
Crypto experts say that as more bitcoin miners go offline due to Chinese sanctions, the share of other miners in the network will increase, making mining potentially more profitable.
The record was more than 25 trillion in May, up from 19.9 trillion last week. The mining problem is adjusted about every two weeks, so there is a lack of time in the statistics. “With less mining equipment online, the network is less difficult. This makes it less competitive for other bitcoin miners. However, another big factor is the profitability for bitcoin miners. That determines the value of the bitcoin, which has fallen to record highs in recent months on the back of negative comments from Tesla CEO Elon Musk and China’s crackdown on the industry.
The value of the bitcoin has nearly halved since reaching a record high of about $65000 in April. On Tuesday, the cryptocurrency fell below $30,000, briefly ending its 2021 gains, but has since managed to trade at more than $ 34,000.
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