In the Chinese region of Inner Mongolia, it is planned to ban new projects for the extraction of cryptocurrencies and existing mining centers. Thus, the Chinese government wants to begin to combat excessive electricity consumption.
Inner Mongolia, located in the north of the country, failed to meet the central government’s annual energy consumption targets and was reprimanded by the government from Beijing. In response, the Commission for Development and Reforms of the region has developed plans to reduce energy consumption – including a pause in the mining of digital assets.
By tradition, let’s start with an explanation. In essence, mining is the process of brute-forcing certain combinations that will allow you to embed a new block with transactions into the existing blockchain. The extraction of a new block guarantees the transactions of users and thus ensures the operability of the cryptocurrency network.
The more miners, the more secure the network and users’ funds. Naturally, miners are engaged in this activity not for the sake of world recognition, but for earning money. Today, the extraction of one block of Bitcoin, which is created once in approximately ten minutes, brings 6.25 BTC – that is, the equivalent of 318 thousand dollars. The reward is more than substantial, and the owner of computing equipment can search for blocks together with other people in mining pools and thus guarantee himself a stable income.
As the Bitcoin exchange rate rises, the dollar equivalent of miners’ earnings also increases. We checked the latest data: February 2021 was the most profitable month in the history of the first cryptocurrency. During this period, miners earned $ 1.36 billion.
Bitcoin miners income by months
Well, those who want to make money on this are also growing. For clarity, we present a graph of the hashrate of the Bitcoin network over the past three years. The indicator is growing and is now not so far from its historical maximum.
Bitcoin network hashrate chart
However, in the near future, the indicator may significantly decrease. Apparently, not everyone in China is happy about the country’s leading position in Bitcoin mining and the electricity costs it requires.
Banning Bitcoin mining in China
According to the Cambridge Bitcoin Electricity Consumption Index, which is an estimate from the University of Cambridge, Bitcoin mining consumes approximately 128.84 terawatt hours of energy per year. This is more than the indicators of entire countries like Ukraine and Argentina, CNBC reports.
As a result, due to the decisions of the authorities, part of the plans of the regional government body involves the closure of existing projects for the extraction of cryptocurrency by April 2021 and the refusal to approve new ones. They also include a revaluation of other energy-intensive industries such as steel and coal production.
Minimum, Average and Maximum Forecasted Annual Electricity Consumption of the Bitcoin Network
China accounts for about 65 percent of the total Bitcoin hash rate, which is the total processing power of miners’ equipment on the network. Moreover, only Inner Mongolia accounts for about 8 percent of this value due to the region’s cheap electricity. For comparison, the United States accounts for only 7.2 percent of the hashrate of the BTC network, which means that a large country loses in terms of indicator to one region of China.
If you mine other cryptocurrencies using video cards, we recommend our material on overclocking them. Ideal combinations of memory, voltage and core frequencies are indicated inside, so it’s worth checking out.
The cryptocurrency market has not reacted in any way to the news about the upcoming suspension of mining in Inner Mongolia. Recall, when China wanted to ban the initial coin offering (ICO) in 2017, the prices of digital assets sank very much, and this happened quickly and sharply. Now, it seems that traders and investors are giving much less weight to such news stories. And this is good: it means that the cryptocurrency market still has enough fuel for another leap up, and the blockchain asset industry itself is taken noticeably more seriously than it was four years ago.
Today, Bitcoin has again surpassed the level of 50 thousand dollars and pre-established there.
Bitcoin price chart per day
We believe that the situation was the result of a political factor within China, so the cryptocurrency industry has nothing to do with this. Accordingly, the lack of market reaction to the news is easy enough to explain.
In general, Bitcoin users have nothing to worry about. Even if a conditional tenth of all miners leave, the network will rebuild the complexity of cryptocurrency mining and adapt to new realities. In addition, as we know, Bitcoin is able to exist even with one miner on the network.
