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2019 has been a relatively good year for miners, generating $5.4 billion in total revenue. But, according to the year-end report of CoinShares, one country has dominated bitcoin mining throughout the year more than any other.
The research paper entitled “The Bitcoin Mining Network”, which explores trends, average creation costs, electricity consumption and sources in bitcoin mining, discovered that nearly 65 percent of bitcoin hashrate originates from China.
“Regardless of the reasons, the effect is that the current Chinese hashrate ratio is likely higher than in June 2019. While we expect this ratio to fall again as latest generation hardware further makes its way into the non-Chinese market, at the time of writing, as much as 65% of Bitcoin hashpower resides within China – the highest we’ve seen since we began our network monitoring in late 2017,” the report read.
For many years, China has consistently been a major market for bitcoin miners due to its cheap electricity and affordable resources. Companies like Bitmain, F2Pool, and Canaan that account for a large portion of the Bitcoin network’s hashrate are all based in China.
Distribution of the Bitcoin network’s hashrate (Source: Blockchain.com)
However, in April, the National Development and Reform Commission (NDRC) of China included bitcoin mining on a list of industries it plans to phase out over time. The unexpected move of the Chinese government left mining companies wondering the future of China’s mining sector.
In a strange turn of events, following Chinese President Xi Jinping’s call for increased efforts in blockchain development, China essentially unbanned bitcoin mining in the last quarter of 2019.
Since then, China’s bitcoin mining sector has prospered. Eventually, it recovered from a slow several months in mid-2019 to establish dominance over the cryptocurrency mining industry once again.
Whether much of the Bitcoin network’s hashrate coming from China is necessarily negative or positive depends on perspective. But, as a purely permissionless and decentralized network, it is always favorable to have more geographically distributed hashrate.
In the hardware side, the dominance of Bitmain has started to subside, which opens the space up for increased competition. Companies like Hut8, Bitfury, and Canaan are competing to take the top spot in the bitcoin mining sector.
“Since our last report in June 2019, we estimate that Bitmain’s market share by hashrate has fallen from ~70% to ~66%. To add context, Bitmain’s own estimates (via Frost and Sullivan) claim that as recently as in in 2017, their market share was around 75%,” said the CoinShares research team.
Hence, while the dominance of China in bitcoin mining has increased, in the hardware department, the industry has begun to see a more competitive environment.
The expansion of major mining facilities to other major mountainous areas such as Washington, British Columbia, and Norway also serve as signs that the geographical distribution of bitcoin hashrate will improve over time, as the sector evolves.
“Among these regions we find the major mining centres of: Washington and New York States in the United States; British Columbia, Alberta, Newfoundland & Labrador, and Quebec Provinces of Canada; Iceland; Northern Scandinavia (Norway and Sweden); The Caucasus (Georgia and Armenia); the Siberian Federal District of Russia; Yunnan – and most importantly of all regions, Sichuan – provinces of China,” CoinShares researchers wrote.