Can China Destroy Bitcoin? Explaining China's Ban on Crypto Mining
[Transcript of Video]
Today we are going to talk about the exodus of the miners from China and the biggest drop in the hashrate in the history of the Bitcoin network. Now first let’s explain that the miners are actually participants of a network that supports the cryptocurrencies. And those miners make sure that all transactions that happen within this particular network are done in a safe and secure way and that they are done properly. Meaning that there is no double spending or errors.
Now, when miners contribute to the network and make sure that all the transactions are done in order, they get rewarded with the native cryptocurrencies and that’s how they actually generate revenues for their business. That’s their motivation to be a miner.
Now, historically, some of the biggest mining corporations globally are in fact and were in fact located in China and the reason for that was the ease of getting technology for mining but also having access to cheap electricity in China to support these large-scale mining operations. What happened just recently in the last couple of weeks, was actually a crackdown or pressure from the government towards these mining operations and due to this pressure, the mining operations and miners had to move out of China and relocate to somewhere else.
Now what happened was that as these miners were shutting down their operations the so-called hashrate experienced the largest drop in the history. If we have to explain the hashrate in very simple terms you can just think about it as how hard or difficult it is to mine cryptocurrencies. Meaning, the higher the hashrate, the more effort and resources miners need to put in to mine cryptocurrencies.
Now there were actually a lot of statements around this historic drop in hashrate and what impact it might have on the price of bitcoin. A lot of people stated that the drop in the hashrate would in fact mean a drop in the price of bitcoin. But that is actually a bit misleading.
We have to remember that as miner’s shut down their operation, their hashrate dropped, but that meant for all the other remaining bitcoin miners it became easier for them to mine cryptocurrencies such as bitcoin. Meaning that the remaining miners who still kept on running their operations around the globe in fact benefitted from the drop in hashrate that came from the exodus of miners from China.
Now what will happen in the near future with the hashrate and the mining around the world is that the mining corporations that were previously located in China, would actually relocate around the globe to locations where they can have ease of access to technology and infrastructure and access to cheap electricity such that they can continue mining profitably going forward.
So, in short, this was a historic event for our industry and for the miners where we experienced certain short-term effects that were actually very beneficial for the remaining miners that continued operating but in the long run the mining industry will continue growing.
So that’s it for today. Thank you everyone and stay liquid.
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