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Cryptocurrency Mining

China has decided to stop cryptocurrency mining in the interests of financial stability. Mining is the process that validates cryptocurrency transactions by solving cryptographic puzzles in return for receiving newly minted coins. The four main mining regions were Inner Mongolia, Sichuan, Xinjiang and Yunnan.

The ban has had a dramatic effect. The computational power used by mining machines is measured as a ‘hash rate’, and this is reported to have halved in recent weeks. There is also a ‘difficulty rate’ which changes in line with the number of computers involved in mining. This has also fallen to a new low.

The Cambridge Bitcoin Electricity Consumption Index says China used to account for 65% of bitcoins earned through mining but thinks that 90% of China’s mining has stopped. Chinese miners grew so large because China had excess energy available, and it made the computers and specialist chips used for mining. Although the central government was concerned about the loss of financial control, banning cryptocurrency trading in 2017, miners were a good source of tax revenue and fees for local governments.