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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.
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. Miners—many of which are situated in the energy rich provinces of Sichuan and Yunnan—have also begun to flee amid the clampdown, with mining giant Bitmain relocating to Singapore in January.
Rather than adversely affect the Bitcoin network, the ban might just continue this trend. “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,” tweeted Emin Gun Sirer, a Princenton researcher who worked with Ethereum. “Cost of coin production might go up, but that doesn’t affect coin price at all.”
Still, Sirer reckoned that the ban would bring about a shift from the energy-intensive Proof of Work model to more “green” models like Proof of Stake—which aren't supported by Bitcoin. “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.
Matt Hawkins, the CEO of mining software provider Cudo Ventures, agreed, saying Bitcoin’s performance would suffer. “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.
Worse still is the threat of attackers redeploying switched-off miners, or “dark hashing power,” to engineer a surprise “51 percent attack” on the network that could be used to edit transactions. This is unlikely, however, said blockchain skeptic David Gerard. “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,” he said.
According to the South China Morning Post, the ban, if 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.