Major Bitcoin mining operations may have persisted underground in China, despite the ban on the practice last year, according to recent data from Cambridge University.
About 20% of Bitcoin’s total hash rate came from China between last September and January, data from the Cambridge Center for Alternative Finance (CCAF) revealed. Aggregated geolocational data reported by partnering mining pools are regularly collected and published by the CCAF in the Cambridge Bitcoin Electricity Consumption Index (CBECI).
After China officially banned Bitcoin mining in May last year, data had suggested that Bitcoin mining in the country had fallen to zero by July. While this lack of activity from China persisted into August, mining activities had quickly recovered to 22.3% by the following month. Only the United States, which had superseded China as the world’s largest Bitcoin miner, came in higher at 27.7%.
“Significant underground mining activity”
According to the CCAF, the data “strongly suggests that significant underground mining activity has formed in the country.” The CCAF reported that these underground miners consisted of “geographically scattered small-scale operations” operating through “access to off-grid electricity.”
The CCAF believes the temporary lull over the summer represents the period it took for miners to go underground, given the abrupt recovery in the fall.“It takes time to find existing or build new non-traceable hosting facilities at that scale,” CCAF said. “It is probable that a non-trivial share of Chinese miners quickly adapted to the new circumstances and continued operating covertly while hiding their tracks using foreign proxy services to deflect attention and scrutiny.”
These underground miners appear to “have grown more confident and seem content with the protection offered by local proxy services,” given the amount of time they have been operating since the ban has been put in place.
According to an industry insider, these underground Chinese miners have also been trying to diversify their locations. “Miners [in China] use a VPN and try not to use too much energy from a single spot, so the electrical company cannot detect any strange energy consumption,” he said.
Despite its poor performance this year, Bitcoin mining difficulty, a rough measure of Bitcoin mining activity, recently reached an all-time high.
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