Intro: Why is China important in Bitcoin?
On January 2, 2013, China-based mining pool BTC Guild mined its one-millionth block. Fast-forward to 2017 and 51% of all bitcoin transactions were made in Chinese yuan (Tech in Asia). Today, four of five bitcoin mining pools are located in China.
Many individuals have wondered why and how such a large percentage of BTC mining is taking place in one country. The most obvious reason is that it is cheaper to do so. However, there may be other reasons as well. Here we’ll explore some possible answers to these questions and try to answer why China is important in Bitcoin.
Intro: All About Chinese Miners
The Good, The Bad, and The Ugly: Chinese miners continue to dominate bitcoin mining and are responsible for generating most of its hash power. Over a year ago, Chinese miners accounted for 80 percent of bitcoin’s total hash power (computing power), but according to reports that number has dropped to 55 percent.
However, things have changed significantly in Q1 2018 with more than 50 percent of global hash power now controlled by at least six different mining pools based in China.
This is up from just three pools controlling over 50 percent of hash power at one point "last year". So what happened? In what ways did Chinese miners lose ground in such a short period of time? And what does it mean for bitcoin? This post will attempt to answer these questions and more as we take an all-too-brief look into how China became such a dominant force in cryptocurrency mining and why it might not be as important anymore.
Intro: What Happened in 2018?
After months of being in decline, hash rates in major cryptocurrency networks such as Bitcoin and Ethereum increased significantly. The cause was that miners were able to catch up with demand, while low supply drove electricity costs higher.
The last six months, however, have been very different. In what seems to be an unexpected turnaround, miners are now leaving large operations to go back into smaller mining pools. As a result, global hash rates are decreasing rather than increasing. What happened? This is what we found out.
Conclusion: What Next?
Currently, China’s share of bitcoin mining has dropped to less than 50% and will continue to drop until new miners are set up. However, more efficient hardware could reduce energy costs so that mining again becomes more profitable. Even if there is a price dip, it might be worth getting into now while prices are low because they’re predicted to rise again within a year or two.
If you can afford to wait for a few months before seeing your investment pay off, then buying and holding for long-term gains is still an option. There’s also an option to get involved in cloud mining – which allows you to purchase shares in existing mining farms without having to buy expensive equipment yourself. This way, you can still earn bitcoins from mining without having your own dedicated hardware – but remember that profits will be lower than those made by running your own farm.
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