Crypto mining continues to grow despite multiple crackdowns
Crypto mininghashrates have touched all time highs in the past few months, despite concerns around energy consumption.
- A global energy crisis has prompted countries like Kosovo, Iran and more to shun crypto miners to prevent power outages.
- China, famously, drove out almost all of its Bitcoin miners in 2021.
AdvertisementDespite many countries showing a penchant for cracking down on crypto mining, miners seem to be more resilient than many may have expected. Metrics from various sources show that crypto mining hashrates have touched all-time-highs, despite various crackdowns by countries over the last year, and leading up to this month.
According to Coinwarz, which tracks hashrates for various cryptocurrencies, coins like Bitcoin, Monero, Ethereum and more have hit all-time-highs in terms of hashrates recently. For instance, Bitcoin’s hashrate hit over 205 exahashes on January 15, 2022, while Litecoin, Ethereum, Monero and others showed the same trend.
Hashrate is the amount of computing power miners are putting into minting new cryptocurrencies. The more people there are mining for a particular cryptocurrency, the higher the hashrate or the difficulty level of mining for the respective cryptocurrency.
Such data is usually available for cryptocurrencies that use the proof-of-work ( PoW) system, a method in which miners are rewarded for simply providing their computing power for maintaining a token’s network.
The highs in hashrate are also confirmed by data tracked by platforms like Glassnode. According to a January 3 report by CoinDesk, Bitcoin hashrates surpassed previous highs recorded in mid-2021.
The data reinforces something the crypto community has claimed for a long time — that the crypto mining ecosystem is vast and resilient. The crackdowns on mining ecosystems started early last year, with China trying to push out crypto miners from its borders. The country’s National Development and Reform Commission (NDRC) even added
Amongst the reasons for China’s crackdowns were concerns around the country’s energy consumption, and how crypto mining’s enormous energy usage could hurt its goals for sustainability in future.
Things have come to a head in the last two months or so, as an energy crisis that started in Europe has now become a global issue. In response, sovereign states like Kosovo and Iran to crackdown on crypto mining, while Kazakhastan has been forced to consider nuclear energy in order to deliver power to crypto miners.
Yet, as the data cited above shows, crypto miners have remained resilient. Data from the Cambridge Bitcoin Electricity Consumption Index ( CBECI), a continuous tracker of Bitcoin’s electricity consumption, shows that mining the world’s most valuable cryptocurrency is using about 135 TWh of electricity per year, more than the energy consumed by many small and mid-sized nations.
Green mining and repercussions
AdvertisementThat said, the numbers may not tell the whole story. China’s crackdown last year led many of its largest exchanges and crypto miners, including Huobi Global, OKEx and many more, to shift their hardware outside the country. Which is a sign that miners, too, are looking for favourable locations.
Data from the Cambridge Centre for Alternative Finance ( CCAF), reported by The Guardian in October 2021, showed that China’s crackdown had made the United States (US) the largest base for crypto mining worldwide. The country accounted for 35.4% of total hashrates at the time, followed by Kazakhstan and Russia.
At the same time, the mining ecosystem has also been looking to shift to green energy for mining cryptocurrencies. A July 2021 report from the Bitcoin Mining Council (BMC), an open forum of Bitcoin miners, said that the use of sustainable energy more than doubled during the quarter ended June 2021. About 56% of the energy consumed for Bitcoin mining during the quarter came from green energy.
Efforts like this might help ease some concerns, and the share of green energy should grow, with more countries looking to green means of power anyway. El Salvador, which famously became the first country to accept Bitcoin as legal tender last year, had been exploring ways to use energy from volcanoes to power Bitcoin mines.
While smaller countries may have to shun mining as an industry, many others might be able to power the growing hashrates through green means, while keeping the lights on for other purposes too.
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