LONDON — A study from the University of Cambridge says China's share of global bitcoin mining has fallen this year. Meanwhile, Kazakhstan has now risen to become the world's third largest player in the industry.
The research, published Thursday, July 15 by the Cambridge Center for Alternative Finance, shows China accounted for nearly half (46%) of the power used for bitcoin mining in April, down sharply from 75.5% in September 2019. That was before the authorities. ordered a crackdown on cryptocurrency mining.
Kazakhstan saw a nearly sixfold increase in its share of global bitcoin mining. In the same period, it rose to 8.2% from 1.4%. Meanwhile, in the US, it rose to 16.8% from 4.1% and took second place. While Russia and Iran are the fourth and fifth largest countries for bitcoin mining, respectively.
Bitcoin mining, where transactions are validated and new units are produced, is a very energy-consuming process. Computers around the world are racing to solve complex mathematical puzzles to make transactions work. Whoever wins this race is rewarded in bitcoin.
The increase in the price of bitcoin over the years has prompted more people to mine the cryptocurrency, leading to the creation of an entire industry focused on the manufacture and sale of crypto mining equipment. The more people who mine bitcoin, the more energy it consumes.
That has raised concerns about bitcoin's potential impact on the environment. This is because most of the mining is done in China, which relies heavily on coal power. Authorities in several prominent Chinese regions, including Sichuan, Xinjiang and Inner Mongolia, have suppressed crypto mining in recent months.
But Cambridge researcher Michel Rauchs said bitcoin's energy mix is difficult to determine. In the rainy season, Chinese miners often flock to Sichuan, a hydropower-rich province in the southwest.
Rauchs data shows Sichuan's share of the total bitcoin mining power in China increased to 61.1% from 14.9% at the start of the rainy season to its peak. While the province of Xinjiang decreased to 9.6% from 55.1% in the same period.
It also shows many bitcoin miners had left China for neighboring Kazakhstan, the former Soviet Union, before the crypto crackdown in June. According to Bloomberg, Kazakhstan has more than 22 gigawatts of electric power capacity, most of which comes from coal and gas stations.
Rauchs, who leads digital assets at the Cambridge Center for Alternative Finance, created an index in 2019 to show how much energy bitcoin consumes. The academic said that he is working on a new model that describes the environmental impact of bitcoin mining.
Bitcoin's poor environmental credentials have made it a controversial asset at a time when social and environmental responsibility is a major concern for investors. In May, Tesla CEO Elon Musk said he would stop accepting bitcoin for vehicle purchases unless mining the transition to more sustainable energy.
Musk then tweeted in June that the company would resume bitcoin transactions after confirming miners' reasonable use of clean energy.
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