The rapid decline of China as a crypto mining powerhouse has seen the US and Kazakhstan become attractive destinations for migrant miners.
The US is now the number one destination for Bitcoin miners, overtaking China following a crackdown that effectively eliminated the industry in the country.
As of the end of August, the US accounted for 35.4 percent of the global hash rate – a measure of computing power used to extract the digital currency – according to a Cambridge Centre for Alternative Finance study published on Wednesday.
That is a 427 percent increase from September 2020.
Meanwhile, Cambridge Bitcoin Electricity Consumption Index (CBECI) data shows China’s share of mining has now effectively hit zero – down from 75 percent last September and 46 percent as recently as April.
China’s fall from global mining powerhouse was set in motion this spring when a clampdown by the Chinese government took half the world’s Bitcoin miners offline.
In May, authorities intensified efforts to tighten the screws on the decentralised cryptocurrency market, ostensibly to control financial risk. By June, Chinese banks were told to stop facilitating crypto transactions and bans were issued on mining.
China’s crackdown initially led to a 38 percent fall in mining globally, CBECI said.
The latest data, covering four months to the end of August, shows Kazakhstan (18.1 percent) and Russia (11 percent) have the second and third leading global hash rates.
China’s loss, America’s gain
Bitcoin mining is an energy-intensive process. To unlock more of the currency, miners must solve increasingly complex mathematical puzzles which require high degrees of computing power – and electricity.
Earlier research by CEBCI revealed the annual migration of miners in China – moving between provinces with cheap electricity from fossil fuel to regions where hydro-electric power was abundant.
Once the ban came into effect in June, miners had to source cheap electricity elsewhere.
The US ticked a lot of boxes for migrant miners searching for a new home.
For one, Texas’ deregulated electricity grid and cheap energy prices are a major incentive to miners who compete in a low-margin industry.
The US is also flush with renewable power sources. Washington state is a hub for low-cost hydro-powered mining farms, while New York produces more hydroelectric power than any other state east of the Rocky Mountains. Texas’ grid has been rapidly adding more solar and wind power.
Nuclear power is also being harnessed, with operators of struggling plants striking deals with crypto miners to take advantage of a steady source of carbon-free and excess power capacity.
Besides that, several states like Texas and Florida have crypto-friendly policymakers and hosting infrastructure in place.
Not all miners have headed towards cleaner energy pastures, though.
Kazakhstan sensed an opportunity to cash in by welcoming homeless Chinese miners, doubling its hash rate contribution since April.
However, Kazakhstan’s growth as a mining hub comes at an environmental cost: 87 percent of the country’s electricity is generated from fossil fuels, with coal accounting for more than 70 percent of generation.
Additionally, crypto mining produces thousands of tonnes of electronic waste, as the computers used tend to become obsolete quickly. Kazakhstan does not have any rules governing e-waste, compared to most other countries.
Moving forward, a new law planning to introduce extra taxes for crypto miners starting in 2022 is likely to put a damper on global miners’ interest in the central Asian state.
Bitcoin is currently estimated to consume 0.45 percent of global electricity production. The digital token is up more than 370 percent in the past year and trading around $57,450 with a total market cap of over $1 trillion.