Bitcoin is created by a process called mining. The process of mining of cryptocurrency involves authorizing every transaction over the Bitcoin network. And also collecting all of them into a block in the network. As the miners confirm and authorize these transactions, they also write them down in a ledger known as a blockchain. Therefore, a new block is added to the blockchain network whenever a new list of a transaction is made.

How Mining Occurs

All miners compete against each other by making use of a specific software aimed at mining blocks. Once a miner successfully adds a block to the blockchain, 12.5 Bitcoin is gotten as reward and the blockchain network updates. The process of mining involves solving a number of complicated cryptographic puzzles to produce a hash from the collection of transaction data.

The transaction list is updated regularly and all miners have individual copies. So, the miners make sure that the blockchain is not tampered with by putting every transaction block into hash. A hash is created through a process which involves applying a mathematical formula to the information in the block. Also, proof of work is the protocol that makes the hashing process deliberately difficult.

Furthermore, the transaction data in a block cannot be tampered with by miners but the transaction data must be changed when creating a new hash. Random data or nonce is used to create a hash with the transaction data. Miners earn bitcoins by finding a nonce that fits the required format. This is what all miners in the network are striving to achieve.

Bitcoin Mining
Bitcoin Mining

Properties of Hash

  • Collection of Bitcoin transaction data produces hash.
  • It is impossible to get all the transaction information from viewing the hash.
  • Hash can be produced from all collections of data.
  • Every hash is unique.
  • Hash can completely change if one Bitcoin block is changed.
  • The hash confirms the legitimacy of each block.

Finally, the hash of a block will change if someone tried to tamper with the already stored block in the blockchain. It is a good way of spotting anything illegitimate as the hash will always be different if it was tampered with. This will subsequently make the next block change too and this change will continue until everything is out of place.

The State of Bitcoin Mining in China

China is the world’s leader in Bitcoin mining. While the government has been cracking down on crypto activities in the country, cryptocurrency mining remains very much open. Now Chinese mining pools control over 70 percent of the Bitcoin network’s total hash rate.

Concentration of Mining Pools

From publicly available data, the second largest economy is home to some of the largest mining pools in the world such as, Antpool, ViaBTC,, Dpool, and many more. As a matter of fact, China houses four of the five largest mining pools in the world. But this was largely expected because not only is Bitmain based in Beijing but other factors as cheap electricity and strategic location as source spur Bitcoin mining activities in the country.

Because of Bitmain’s innovation and entry into the chipset manufacturing at nascent stages, the chipset has a mega valuation as it controls a large chunk of the crypto mining gear market. Although there are claims that their Bitcoin mining rigs, Application Specific Integrated Circuits (ASICs) is the cause of centralization, it is no doubt the main bulwark of the Bitcoin network. It is efficient and designed specifically to bolster the network’s power, which in turn wades off attacks.

Thanks to efficient Bitcoin mining gear and cheap electricity, most Bitcoin mining farms in the region are profitable. In fact, they are so profitable that they successfully weathered 2018’s crypto winter. Therefore, it is no doubt that the availability of large mining tools, cheap electricity, and mining hardware makes cryptocurrency mining a very lucrative venture in China.

Bitcoin Mining Jitters

Even so, the Chinese authorities have been gradually clamping down on cryptocurrency related activities in the country. The ban on crypto exchanges and ICOs affected Bitcoin prices as demand shrunk in response.

With the National Development and Reform Commission (NDRC) proposal of switching off cryptocurrency mining operations, the network’s hash rate could suffer only if there is a follow through. But the investor community is optimistic that authorities will not heed and implement NDRC proposal. The agency maintains that cryptocurrency mining is a waste of resources and doesn’t have a significant impact on the economy.

Should the government follow the recommendation of the NDRC, then China would surely lose its place as the leading crypto mining state. It is similar to how it lost its position as the number one cryptocurrency trading country in the world.