The relationship between Bitcoin and China has always been a complicated one. China is where bitcoin mining truly built its scale from an individual hobbyist project to an economic force that could shape the world. Yet, China’s bitcoin mining ban shut down the whole industry and scattered bitcoin miners to the winds. It’s been two years now – and it should be said that Bitcoin and the hash power built on securing it is stronger than ever.
In an ironic twist of fate for the discussions about bitcoin’s environmental impact, it’s also highly likely that shifting from China’s energy mix has helped make bitcoin more “green” – and emit less carbon emissions.
Now, as of late 2023, the largest mining pool in the world is based (Foundry) in the United States, and several miners trade their shares on public markets. One of these, Riot, has an explicit mandate to bring more large-scale Bitcoin mining to the United States. While many of the old China-based mining pools in the past are still around, they no longer hold the dominant share of the hash rate they once did.
Jurica Bulovic, the Head of Mining at US-based Foundry, shared a report that the miners that belong to the pool have 71% usage of what is “green energy” or ESG-friendly energy. It’s probably better data than an analysis that relied on regional electricity trends and IP addresses, which are malleable and not an accurate indicator of mining – though of course, Foundry is just a part of the hash rate story.
What’s clear in even that regional analysis is that moving from China (coal-fired power in the majority) to a cleaner mix of energy in the United States can help improve the energy profile of bitcoin. What stranded hydropower is left – built during an era of overinvestment in ghost cities – will have to be left to power a craze in “AI”, or the Chinese party-state’s fascination for “blockchain” as a frontier tech.
Overall, the hash rate (the amount of computing power dedicated to securing Bitcoin) has steadily doubled from 2022 to 2023 – and bitcoin has moved past its geographic concentration problem to be dispersed around the world – showing that it’s a fluid technology that can survive and even thrive after significant blows.
All you ever needed was power and computing resources. China aimed to “ban” bitcoin mining in its territory, but a couple of years later, bitcoin continues to hum along – and is stronger than it’s ever been.
Chinese Miners, Not Chinese State Miners
Critics of Bitcoin, including Ripple, said that “China” overly controlled Bitcoin mining. When that angle failed, they said that proof-of-work had too many environmental consequences – ironically taking the official Chinese state position on bitcoin mining.
Chinese miners and mining pools based in China (and might have had hardware contributing from any point in the world) were never a state-controlled entity – they just had an aggregator based in the People’s Republic of China. They had a conflicted relationship, at best, with the state authorities. In many ways, this argument reflects an ugly point often floated by the Chinese party-state that those of Han Chinese ethnic origin “belong” to the Party.
Chinese miners acted with great risk to support Bitcoin. Though many may have been motivated by profit, this is part and parcel of the game theory incentives that allow Bitcoin to continue pushing transaction blocks one at a time.
Since the 2021 ban, there haven’t been overt conferences in the Mainland about mining as there once were. Chinese entrepreneurs who took a bet on a new technology that fell afoul of the Chinese party-state’s opinion now suffered the consequences.
Bitcoin Mining’s History in China
China became a concentration of bitcoin mining hash rate because some of the most sophisticated hardware and exchanges developed there first. Chief among these was Bitmain, which Micree Zhan and Jihan Wu co-founded. Zhan was the previous co-founder of a streaming startup. Jihan Wu did financial analysis and private equity.
It was a mixture of China’s startup scene and the bustling manufacturing capability that defined China’s economic rise. By 2018, their mining chips dominated the market share. They were the only mining hardware company that was given exclusive access to TSMC’s 5nm process – giving bitcoin mining cutting-edge semiconductors to work with.
The different mining pools that grew in China included f2pool, which was China’s oldest Bitcoin mining pool. It became known for having a coinbase mark named after one of its co-founders, the mysterious Discus Fish. To this day, it is the third-largest Bitcoin mining pool.
Bitmain founded Antpool to offer a hardware advantage with its application-specific chips and a software advantage for miners to mine blocks. Today, it remains the second-largest Bitcoin mining pool.
There are also various mining pools built by exchanges, many of which came from China. Binance Pool is an example of this. As exchanges grew more powerful in the Bitcoin ecosystem (partially through getting more crypto trading fees), they could offer miners more services regarding their liquidity preferences. Binance Pool is now the fifth largest Bitcoin mining pool as of October 2023.
New Horizons – And Stronger Than Ever
In 2023, however, the movement of physical miners from China to be more geographically dispersed is now more complete. The world’s largest Bitcoin mining pool is now in the United States, with corporate leadership based within North America: Foundry. Other miners are listed on public indices in North America, bringing immense hash power to securing the Bitcoin network – in jurisdictions that aren’t outright hostile to the idea.
As Brian Morgenstern from Riot puts it: “Bitcoin is empowering people all over the world just as the United States has advanced the freedom to succeed for generations. It only makes sense that the mining industry should thrive here.”
After 2021 and the State Council’s decision to push provinces towards bitcoin mining bans, some miners may have stayed. However, even “Chinese” mining pools blocked Chinese IP addresses for mining hardware.
While tracking the physical location of miners is notoriously tricky – after all, IP addresses are very malleable across borders, and there’s much incentive to hide Chinese IP addresses now – it’s clear that quite a few Bitcoin miners have left China with their equipment, and that the world’s largest bitcoin mining pool is now in the United States.
Juri from Foundry states that some of the growth Foundry’s mining pool has seen has come from its innovations for institutional-level clients, things as simple as better customer service with dedicated account executives but also adding a lot more transparency into how the pool payout structures work, or adding enhanced account security controls – a need for public-traded companies.
Coupled with more institutional interest in Bitcoin and more sophisticated financial practices for miners – you get the beginnings of the demand for Foundry. But Juri admits that some of this explosive growth to the world’s #1 mining pool was accelerated by Chinese mining pools losing hash rate while Foundry gained it.
This diversified geographical growth is a sea change from Bitcoin’s early history and an adaptation that had to come because of the Chinese party-state’s actions. Yet, it’s made bitcoin stronger than ever – resilient in showing that geographic displacement barely affects its health. What doesn’t kill you makes you stronger – this certainly seems true for China and Bitcoin mining. What China has lost – bitcoin and other countries like the United States have gained.
