Chinese state planners want to phase out China’s vast Bitcoin and cryptocurrency mining sector, in a move that will further push miners away from the country—which controls an estimated 74 percent of global Bitcoin mining power.
On Monday, the National Development and Reform Commission listed the enormous cryptocurrency mining sector among various other industries slated to be “eliminated,” saying the enormous wattage required to secure the Bitcoin network—and those of other cryptocurrencies—could be put to better use elsewhere, according to Reuters.
According to the South China Morning Post, meanwhile, the classification, once ratified, will allow authorities to “raise electricity prices for relevant businesses to force them to close.” The manufacturing of mining gear—which in 2017 was a $1.3 billion industry in the country—will reportedly also be prohibited. Though Reuters reports that this process will begin “immediately,” the public has until May 7 to comment.
Emin Gun Sirer, a professor of computer science at Cornell who has worked with Ethereum, wrote on Twitter that the shift away from the energy-intensive Proof of Work model was positive, and a sign that more “green” models—i.e. Proof of Stake—would become the new standard. “It’s high time some adult looked at what was happening with PoW mining, namely, racks of machines performing useless calculations whose sole purpose is to hold back other racks of machines,” he wrote.
On the flipside, Sirer acknowledged that the news would be unlikely to spell doom for the Bitcoin network. Though the majority of miners on the Bitcoin network are situated in the energy-rich provinces of Sichuan and Yunnan, many have already fled elsewhere in recent months, with mining giant Bitmain relocating to Singapore in January.
“It just means that most of the hashpower will move across a border, some will go ‘underground’ in China, tucked into back-rooms of old factories,” Sirer wrote. “Cost of coin production might go up, but that doesn’t affect coin price at all.”
Matt Hawkins, the CEO of mining software provider Cudo Ventures, said the ban demonstrated the downfall of centralizing so much mining power in the first place. “The problem with accumulating so much centralised hash power in areas such as China is that—should it be turned off—the Bitcoin network’s performance will be harmed,” he said.
He also suggested that the move would put newer, supposedly greener Proof of Work mining rigs under threat. “In the latest Antminer product, Bitmain will substantially reduce the global electricity use of Bitcoin, but only if the company is in a position to ship its products and if mining farm operators in China, and other regions throughout the world, take the risk of investing,” he said.
But it could also, he added, help spur the resurgence in amateur GPU mining—think libertarians in their bedrooms circa 2013—on networks like Monero and GRIN, which are less susceptible to companies running centralized ASICs.
David Gerard, a cautious blockchain optimist and author of Attack of the Fifty Foot Blockchain, said the ban could help the network become less centralized. “This will be good news because mining will decentralize away from China, obviously,” he said.
He did, however, raise concerns over the vast quantities of mining power that would be left in limbo by the ban. This so-called “dark hashing power,” he said, could be revived at any moment to overwhelm the diminished Bitcoin network, “should anyone care.”
Yet Gerard remained optimistic. “They probably won’t, because the Proof of Work threat model is other Bitcoiners; everyone else has a much wider variety of attacks, and particularly governments.”
The news comes several months after China enacted a nationwide ban on cryptocurrencies, crypto news sites and crypto startups, while simultaneously building out its blockchain capabilities for surveillance purposes.