Bitcoin. Internet magical money is often ridiculed as “worthless” and “made up” by those who forget that all currencies are worth only because we believe in them. Bitcoin is perhaps the strongest currency in the world that is not backed by guns and ammunition, yet Bitcoin remains a controversial invention, as do the many cryptocurrencies that followed it.
Recently, the Chinese government cracked down on operations in the country. Since China is home to the largest amount of Bitcoin mining capabilities in the world, it has sent shock waves through the network and has had a big impact in many ways. Here’s what’s going down.
A graph that shows the wild swings in Bitcoin mining in different provinces in China. Source: CBECI
Chinese officials ordered miners in the Sichuan area and elsewhere to shut down operations, while ordering local authorities to cut power to the mining operations. Banks have also been ordered to close accounts or otherwise cease transactions suspected of being related to cryptocurrency operations. With the ability to make and make decisions that are normally not possible in most democracies, the move was quick and decisive.
Whispers about the changing political winds surrounding Bitcoin had held back investments in additional capacity for Chinese miners for some time. Before the move, Chinese mining operations accounted for between 60 and 75.5% of the global bitcoin hashrate. However, according to the Cambridge Bitcoin Energy Consumption Index (CBECI), the number quickly dropped to just 46%.
With many huge mining operations going offline, the power consumption of the Bitcoin network has dropped significantly. Much fuss was made earlier this year that Bitcoin is now consuming more energy than the state of Argentina. We analyzed the numbers and found that it was an in-depth analysis and one that is particularly worrying from an environmental point of view. At that time, Bitcoin consumed around 15 GW around the clock with an estimated annual consumption of around 129 TWh over a whole year. However, at the time of writing, CBECI now measures Bitcoin at just 11.92 GW for an estimated annual consumption of 87.3 TWh, which has bounced back from a low of nearly 10 GW earlier this month.