Media outlets reported that even with the Chinese government’s imposition of strict measures on cryptocurrency activities, the country has continued to boom on matters relating to Bitcoin mining activities. China reportedly accounts for 70% of the world’s Bitcoin mining activities and Sichuan has been labelled the capital of Bitcoin mining.
Flood Disrupts Mining Activities in Sichuan
Sources, however, claimed that after a heavy downpour between the 27th and 28th of last month, there were floods in Sichuan which gravely destroyed a mining farm. Eric Meltzer, who is a partner at INBlockchain, one of Asia’s foremost cryptocurrency investment firms, stated that there were rumours that the destruction severely affected mining activities in Sichuan. Melter reportedly put up a picture that showed a badly damaged mining with several ASIC miners that had been destroyed by the flood.
Effect of Flood on Hashrate
Bitcoin mining ordinarily requires cold temperature as a result of the numerous computational operations which rapidly consume electricity and increase the bills. It has been observed that climates that are colder are better preferred by crypto miners for their activities so as to reduce the electricity bills. Sichuan reportedly has lower electricity costs in comparison with other provinces in China and this caused several miners to carry out their activities from this region.
Media outlets claimed that the Sichuan floods led to a reduction of the hashrate of bitcoin from 43 million TH/s to 30 million TH/s, which amounted to approximately 30% fall over the night. It was reported that although the volatility which occurred in the hashrate chart of bitcoin was an expected occurrence, the sudden fall in the hashrate of bitcoin has however kept investors and analysts at alert.
About 24 hours after the occurrence, media outlets reported that the hashrate subsequently rose to 40 million TH/s after its initial fall to 30 million TH/s, and analysts noted that the decline in the hashrate of BTC network was caused by the Sichuan flood.
Divergent view on the Effect of Flood on Hashrate
However, Meltzer, while discussing the Sichuan-based bitcoin mining farm occurrence with analysts stated that the theory by China-based analysts that the drop in bitcoin hashrate was caused by the flood in Sichuan was not accurate. Rather, he stated that the drop was due to a combination of the flood and the increasing heatwave in Eastern Europe which caused mining centers that ordinarily had low profit margins make even lesser profits. Meltzer added that most of bitcoin hashrate originated from mining pools such as Antpool, ViaBTC and BTC.com and they outsourced computational power from ASIC miners globally. Thus, his conclusion was that while the Sichuan mining center probably shut down as a result of the unfavourable weather conditions, the weather was, however, not sufficient to make a concrete impact on bitcoin hashrate.
Media outlets reported that the rumours about the Sichuan situation caused by food had not yet been confirmed by the authorities. However, local analysts reiterated that even if there was a flood which destroyed a major mining center in China, it still should ordinarily not be sufficient to cause a 30% drop in the hashrate of bitcoin.
Analysts also stated that if the flood had been the primary cause of the drop in hashrate, that would point to the fact that a huge proportion of the computing power used to run the Bitcoin network was located in just one region and a particular mining center.
Media outlets reported that China indirectly ordered crypto miners to depart from the country following criticism from different quarters that the country’s action was hinged on protectionism since it maintained the mining exports industry but placed a ban on crypto exchanges. Although several miners remained unmoved, sources claimed that some miners are beginning to move to remote parts in America. Their exit is gradually drawing fresh debates concerning how the potential rise in energy costs could balance against potential advantages offered in form of business opportunities and new investments.
Analysts stated that the departure of miners from China would likely lead to a geographic decentralization of Bitcoin’s Proof of Work (PoW) mining. However, they stated that the scale economies had the tendency of encouraging concentration which would often be more visible in mining centers and enjoy less visibility of a single entitle controlling the hardware. It has been stated that bitcoin has a higher hardware concentration on mining farms, 70% of which is located in China.
