We’re starting to see the decrease in the mining difficulty as the result of the Chinese ban on Bitcoin’s mining. On May 21st, 2021, the Chinese Government announced it will “crackdown on bitcoin mining and trading behavior and resolutely prevent the transfer of individual risks to the society.” We’re starting to see these decisions taking their victims in the Bitcoin network.
Bitcoin’s mining difficulty fell by 16% on Sunday, May 30th. As @WuBlockchain reports, a single difficulty adjustment of more than -15% has only occurred four times in the past six years. Mainly because of the lack of electricity in Sichuan, China.
For those who don’t know what that means, bitcoin mining difficulty measures how much computational power it needs to produce a new block. Higher the difficulty = more resilient network to 51% attack and higher the competition in the mining space. Lower the difficulty, Proof of Work doesn’t need that much power to produce the next block. I’m not saying Bitcoin will become insecure as that 16% fall is still from the tremendous hash power. All of that indicates something else. Miners are selling their hardware and moving out of China (probably).
It’s worth noting that most of the Bitcoin network’s hashing power, almost 75%, is from China. As one of the largest energy-consuming countries globally, China is a key signatory of the Paris Agreement. However, without appropriate interventions and feasible policies, the intensive Bitcoin blockchain operation in China can quickly grow as a threat that could potentially undermine the emission reduction effort taken place in the country
As We can read from @WuBlockchain Twitter thread 🧵
“Inner Mongolia’s energy consumptions reductions is up to Beijing’s standard.” That’s the exact reason why the Chinese authorities are challenging Bitcoin’s mining.
What will the future hold for Bitcoin?
It’s hard to tell what the future will hold. Decrypt.co made few predictions regarding this. It’s an interesting read. My take on the matter is a bit different.
China plans to achieve carbon neutrality by 2060 and reducing carbon intensity, or the amount of carbon emitted per unit of GDP, by more than 65% by 2030. Having a ban on bitcoin mining will help for sure with the achievement. They even go as far as adding crypto miners who mines illegally to the “blacklist” of their Social Credit Systems.
China’s decision can also be connected with another project that China is working on since 2014. Its own CBDC issued digital yuan. Bitcoin represents a different approach to what China wants to offer with its CDEP. Bitcoin is open, borderless, and anyone can use it, and nobody can track you. Bitcoin/Ether is not an approach China wants to use. I wrote a separate article explaining Digital Yuan.
Having a national cryptocurrency they can control and use to track its usage will play nicely with China’s social credit system. China have much bigger plans for CDEP than only being a national currency. They want to replace the Dollar on the international stage as a currency you trade on the stock market.
There are different takes on this topic and what China’s expansion means, and why they plan to do that. One thing is sure. The future will be interesting.
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