By Isaac Singer ‘21
Monday, the Chinese National Development and Reform Commission (NDRC) released a plan assessing the status of many sectors by placing them into one of three categories: sectors to promote, those to restrict, and those the agency plans to eliminate altogether. Among sectors placed in that third category was crypto mining, the process of using supercomputers to produce bitcoin (among other cryptocurrencies) while simultaneously logging transactions in the blockchain which makes the currency secure.Because bitcoin is not backed by a central authority like the Federal Reserve, bitcoin mining is the way in which the value of transactions is secured. Transactions are grouped in “blocks” and added to a publicly accessible record known as the blockchain. Miners ensure that bitcoins are not duplicated, and must verify each transaction’s legitimacy to do so, an extremely difficult task since there are as many as 600,000 transactions daily. Beyond the volume of the work, verifying each transaction is an arduous process. To log a transaction, miners must guess a proper 64-digit hexadecimal number, called a hash, which is at or below the target hash; a 1 in roughly 6 trillion chance of guessing correctly. Miners’ computers are extremely fast and built to guess up to tera hashes per second, but the energy required to do so is a significant cause for China’s concern. The environmental impact of bitcoin mining is quite severe. The process of bitcoin mining requires massive amounts of energy and consequently is causing tremendous pollution in China, where 74% of the world’s total crypto mining computing power exists. Cheap coal in the Xinjiang and inner-Mongolian regions allows for miners to expend massive amounts of the region’s resources and cause great environmental damage, making the practice reprehensible. Top Chinese government officials have proposed a ban on all cryptocurrency mining in the past. In 2017, a ban was placed on initial coin offerings, and in January 2018 the central government encouraged local authorities to clamp down on bitcoin mining, but neither initiative has had any real impact. This is likely because the vast majority of mining sites are in underdeveloped parts of the country that rely on the crypto sector economically. While this new proposal may eventually do what it’s intended to and eradicate the practice of mining from China, there is reason to believe that the proposal will not have any immediate implications. The NDRC has had sector reallocation proposals every few years since the early 2000s, and while the intent is there, sectors deemed fit for removal in 2006 have reappeared on the 2011 list and some even on the most current 2019 release. If this trend keeps up, we may not see the end of bitcoin mining in China until the mid 2020s.While it seems that eradicating bitcoin mining from China would have negative effects on the value of Bitcoin, this move may actually help the cryptocurrency. If effective, this proposal would destroy the centralized nature of the industry and allow for a new, decentralized, safer crypto network which is not directed by the Chinese.Although bitcoin has dropped significantly from its peak, I believe strongly that cryptocurrency is far from gone, especially with this ban. A more secure, decentralized bitcoin that relies on clean energy is already in the works, which may uproot the need for paper currency. I believe this would be good for global economic growth, as criminal activity could be more easily traced and all transactions would be secure and verifiable via the blockchain, ensuring fair and legitimate trading amongst all. Beyond this, taking steps to limit current mining practices’ effects on the environment is absolutely crucial, and I feel that it is essential for bitcoin to pivot towards the use of clean energy in order to survive.But this all depends on whether or not the ban is acted upon and enforced. Only time will tell. Sources:https://www.scmp.com/tech/policy/article/3005334/china-home-worlds-biggest-cryptocurrency-mining-farms-now-wants-banhttps://bitcoinmagazine.com/articles/report-links-74-bitcoin-mining-china-sees-threat-network/https://www.morningbrew.com/latest/https://www.wired.com/story/china-says-bitcoin-wasteful-wants-ban-mining/https://techcrunch.com/2019/04/09/china-considers-ban-crypto-mining/https://www.newsbtc.com/2019/04/09/china-bitcoin-mining-ban-crypto/https://www.investopedia.com/terms/b/bitcoin-mining.asp