Did China Make the Right Decision, Take the Right Stance on Crypto Mining Activities?
China is one of the most important countries in the cryptocurrency market. It has a very active community and also a large number of investors. Indeed, the market is huge. Nonetheless, the government has taken a very strict stance towards digital currencies in the country, banning trading activities and also Initial Coin Offerings (ICOs). But did China take the correct decision?
China: An Important Player In The Crypto Market
China is the home of around 70% of the cryptocurrency mining market. However, some reports spread regarding a possible ban from the government. According to Enrique Dans, a technology expert, the country’s National Development and Reform Commission (NDRC) has recently published a list of sectors that it aims at promoting, restrict and eliminate.
One of these industries mentioned by the NDRC is the crypto mining sector. According to Commission, crypto mining activities area waste of resources and it is extremely harmful to the environment.
Mining virtual currencies, specifically Bitcoin (BTC), it is very energy-consuming. In order to power the ASIC miners needed to process transactions, miners usually take energy from local power plants, which creates some issues in the regions nearby. For instance, some miners were using cheaper electricity that was used to power industrial parks or even cities. This situation didn’t happen only in China. Other countries such as the United States experienced similar issues.
China has also been criticized for its failure to meet environmental goals. Several countries are complaining to the Chinese government that it has not done enough to stop polluting. Crypto mining activities produce between three and 15 tons per year of carbon dioxide, as Enrique Dans explained.
As mentioned before, China has banned Initial Coin Offerings (ICOs) due to the fact that they were operating in an unregulated market and they were open to fraud. Thus, it might be possible to see a government taking the necessary measures to stop with the crypto mining activities in the country.
Bitcoin would have different challenges if mining companies in China are banned from operating. The hash rate in the market would drop substantially and it would have an effect in Bitcoin’s security. Thus, it would be important to see how these miners operating in the Chinese territory would relocate their mining farms and rigs in another jurisdiction.
Other cryptocurrency projects, including Ethereum (ETH), are trying to stop being dependent on the Proof-of-Work (PoW) consensus algorithm to run its network. Ethereum is now trying to move towards Proof-of-Stake. Although is not an easy thing to do, developers are working in order to make it possible in the near future.
Now, China will have to take a decision with the cryptocurrency miners that are operating in the country. Bitcoin and the community should also start to think about how to better have a decentralized network of miners that would not heavily rely on miners from a single country or jurisdiction.