China's Crackdown on Bitcoin Sets off the 'Great Mining Migration'
Cryptocurrencies have been on a wild ride among turbulent waters for these past months. There has been Elon Musk, who loved them at first, then doubted them, and then was accused of manipulating them. Then there is China, which banned financial institutions from facilitating cryptocurrency transactions including conducting business or providing services with digital currencies, on May 18.
The country may have housed more than half of the world's bitcoin miners once, but that is about to change.
Bitcoin miners are seeking alternatives to base their operations as Beijing continues to issue orders to shut down Bitcoin mining activities.
China's neighbor Kazakhstan appears to be one of the likely destinations, given the country's relaxed attitude toward construction, and its coal mines, which provide an inexpensive energy supply. This "great mining migration", as crypto industry observers have been calling it, has miners looking at overseas as well. According to a report by CNBC, one of the often considered options is North America, and especially Texas.
There are a couple of good reasons for this. Texas has an abundance of solar and wind power: According to the state comptroller, Texas is now the nation’s leader in wind-powered energy generation, producing over 30 percent of the total, and its share of renewables is growing over time. Texas also often has some of the world’s lowest energy prices.
Moreover, its market is largely unregulated, and political leaders and bankers in Texas are pro-crypto. All of this adds to the state's appeal to miners.
However, there are also some drawbacks since building the infrastructure required to host miners will most likely take six to nine months to construct. Also, due to the shipping container scarcity that has come with the COVID-19 pandemic, logistics could also prove to be tough.
There is also the matter of how dependable the Texas power infrastructure is, given that it isn't winter-proof, and most recently, freezing temperatures brought on by winter storm Uri left almost 3 million people in Texas without power in February 2021.
All of these processes are likely to take a considerable time as miners search for a new home. The miners will either have to relocate their equipment out of China or liquidate their holdings and start over somewhere else.
According to CNBC, as miners race to move, hash rate, which is the measuring unit of the Bitcoin network's processing power, may "go offline and stay offline," since there isn’t enough mining capacity in the world that is ready to absorb this relocation.
We caught up with metaverse expert James Coop to talk about why – and when – it’s going to change everything.