China Is Still Crypto Mining, Even After Government Crackdown

Chinese cryptocurrency miners continue to operate and are even allegedly stealing power from state organisations, according to reports on the government crackdown.

As per Bloomberg, the Zhejiang and Jiangsu provinces have ramped up their action against miners, reported to be using the power of state-owned companies, universities, and government agencies. In Jiangsu, 260,000 kWh of electricity was being used per day.

However, earlier this month, several outlets cited the Cambridge Bitcoin Electricity Consumption Index (CBECI) to suggest China’s share of crypto mining had fallen to near zero. So, what happened?

Crypto Mining in China Continues

In recent months, the Chinese government issued heavy restrictions against cryptocurrency activity in the country. Its most recent string of regulations in September banned all cryptocurrency transactions and mining activity.

At first glance, the CBECI does appear to suggest China has a 0.00% share of the collective Bitcoin hash rate. However, rather than China having completely quashed mining operations, the more likely reason is that no data is coming out of the country. The CBECI notes this, stating:

Since the government crackdown on the mining industry in June 2021, no data has been available [in China].

The index, which takes its data from a sample of the mining pools, uses the IP addresses of miners to map their location. The CBECI says this requires an assumption that “IP addresses of mining facility operators are an accurate indicator of hashrate location.”

Given the Zhejiang province conducted a “comprehensive screening” of nearly 5000 IP addresses suspected of crypto mining, Chinese mining operators who fail to use a VPN put themselves at risk of discovery via their IP address – the same piece of data used to track mining locations.

Germany and Ireland, which make up a collective 9.2% of the bitcoin hash rate, are prime suspects of VPN redirect locations. The CBECI acknowledges this in their data, stating:

To our knowledge, there is little evidence of large mining operations in Germany or Ireland that would justify these figures. Their share is likely significantly inflated due to redirected IP addresses via the use of VPN or proxy services.

So, as China continues to discover and destroy crypto mining farms (the ones that are stealing electricity from state instutions, that is), it seems unlikely that the country which made up 43.98% of the hash rate in May now has no mining activity whatsoever.

Looking further, there is another side to this story. Reports contrasted China’s crypto demise with the Unites States. The US now has the largest share of the bitcoin hash rate, overtaking China and welcoming migrating crypto miners to states such as Texas. As tensions between the US and China continue to grow, could crypto become a part of the digital arms race?

Read More: What If Bitcoin's Satoshi Nakamoto Came Back?

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