China was the undisputed world leader in Bitcoin mining until July 2021, when the Chinese government banned all mining operations in the country.
Chinese mining pools had control more than 60% of the Bitcoin network’s collective hashrate.
Not only did China manufacture most of the world’s mining equipment, but massive mining farms were located there to take advantage of extremely cheap electricity prices.
Estimated Hashing Power by Country
Here was the estimated mining hash power breakdown by country in July 2021 according to University of Cambridge Centre for Alternative Finance:China – 65%USA – 7%Russia – 7%Kazakhstan – 6%Malaysia – 4%Iran – 4%Canada – 1%Germany – 0.6%Norway – 0.5%
Other interesting stats are:
- The UK has a very small share of mining (0.1% GB, and 0.03%)
- The EU countries only own about 3.5% of all mining hash rate
As you can see, China was dominating Bitcoin mining by a very wide margin.
But why?
In this article, we are going to explain why China is such a mining powerhouse in Bitcoin and other cryptocurrencies. The answers may surprise you.
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Chapter 1
Cheap Electricity
Electricity cost is the most important factor for a profitable mining operation. As mining difficulty increases, the least efficient miners are forced to shut down first.
Electricity in China is extremely cheap compared to most other countries. Chinese electricity in industrial regions is either supplied by hydro-electric facilities or subsidized by the state.
China’s cheap electricity keeps Chinese miners at peak efficiency and allows them to outlast their foreign competitors.
A very large portion (if not the majority) of Bitcoin’s energy comes from China, and most notably in “green” powered areas like Sichuan and Xinjiang where renewable sources like hydroelectric, solar, and geothermal are common.
Map showing percentage of total Bitcoin mining in each province
Here is an alternative view of that data if you aren’t familiar with China’s geography
In many cases, the energy produced by these wind farms and dams is higher than the local grid can take. This means that they are producing energy that would otherwise not be used by anyone since the local grid, which takes energy and distributes it across distances, cannot hold it.
Take Sichuan, for example:
Total hydropower reached more than 75 GW in 2017, greater than the total in most Asian countries. It was also more than double the capacity of the province’s power grid, meaning lots of wasted power.
David Stanway, Reuters
One of Sichuan’s many hydroelectric dams