Perhaps it’s not obvious so I’ll say it: That didn’t happen. Moving mining operations isn’t exactly easy. The bulk of mining operations isn’t a handful of hobbyists messing around; Bitcoin has long since graduated from that. Most miners are more properly characterized as commercial operations, paying triple net leases for warehouse space and depending on fancy power purchase agreements for electricity.
Bitcoin mining operations look like this (check out this amazing photojournalism effort from my colleagues):
The reason the data looks like this is due to the data collection method employed by the CCAF. The CCAF partnered with bitcoin mining pools to collect geolocational mining facility data based on IP addresses (pools allow a lot of different miners to contribute to mining, and the reward is then split among them according to their processing contribution to smooth out individual miner income). Therein lies the issue and the CCAF warns as much, stating:It is no secret in the industry that [miners] in certain locations use virtual private networks (VPNs) or proxy services to hide their IP addresses in order to obfuscate their location. Such behaviour may distort the sample and result in an overestimation (or underestimation) of hashrate in some provinces or countries.
So the real story of what I think happened here is actually quite boring.
- Chinese miners were afraid that the government crackdown was serious, so they lied or spoofed their location data and moved underground.
- After some time, Chinese miners realized, “Hey, this doesn’t seem that scary,” so they felt comfortable sharing their real data.
That’s it. Like I suggested: actually quite boring.
That’s not really the whole truth though. The more visible bitcoin mining operators did move at least part of their operations, and the growth of non-China, mostly U.S.-located mining is well documented. To highlight that, hashrate – the computational power of the Bitcoin network – has grown 40% since the China ban. The CCAF, recognizing the oddity of the data, published a wonderfully titled blog post about their update leaving us with this:Most notably, however, is China’s apparent comeback. Following the government ban in June 2021, reported hashrate for the entire country effectively plummeted to zero during the months of July and August. Yet reported hashrate suddenly surged back to 30.47 EH/s in September 2021, instantly catapulting China to second place globally in terms of installed mining capacity (22.29% of total market). This strongly suggests that significant underground mining activity has formed in the country, which empirically confirms what industry insiders have long been assuming.
The operative word here being “reported.” So yeah, it turns out that China can in fact ban bitcoin mining again. Here’s to more China FUD (fear, uncertainty, doubt) in our future. Alternatively, maybe everyone is messing with us and using VPNs to change their location to China to make my job difficult.
