YEREVAN (CoinChapter.com) — A recent ban on crypto mining in China has forced regional miners out of business. But, at the same time, the huge gap they have left in the space has benefited miners abroad, some of them even raking in 50% additional profits in recent months.
Some of the biggest beneficiaries include Hut 8 Mining, which earned 241 % year-on-year in mining revenues in the second quarter of 2021—around US$24.8 million, and Argo Blockchain, which reported a 180% jump in revenues in the first half of 2021.
Both the companies cited a change in global mining hegemony as the primary reason behind their profitable fiscal quarters. For instance, Hut8’s Downey stated that China’s ban reduced the competition in mining new Bitcoin by 40-50%. As a result, they gained the opportunity to mine 40-50% more Bitcoin than normal, without putting even a single additional machine.
Bitcoin mining becomes easier
China had been a giant player in the Bitcoin mining ecosystem. The country produced almost two-thirds of the world’s hashing power at the end of 2019. But in June, China banned crypto mining due to its energy consumption and large carbon emissions. The China ban gave other miners around the world the opportunity to gain more profit.
“They suddenly own a meaningfully larger piece of the pie, meaning they earn more bitcoin every day,” said bitcoin mining engineer Brandon Arvanaghi.
After the Chinese crackdown in July, the Bitcoin network’s total hashrate fell more than 50%. As a result, the mining difficulty was readjusted to make it less difficult to mine. According to Blockchain.com data, the hashrate is now about 40 percent higher than in July but still about 30 percent lower than in May.
The hashrate is the measuring unit of the Bitcoin network’s computational power. It refers to all the computing power of miners worldwide. When the hashrate goes higher, or in other words, when the number of miners or the computational power of the miners goes higher, the difficulty for mining a block goes higher and vice versa. The reason for changing the difficulty is that the network tries to produce one block every 10 minutes.
Alongside these factors, the bitcoin price rise also affects the mining industry and miner’s profit. With the recent bitcoin price surge to $50,000, and given that the mining block rewards are in bitcoin, miners will have more incentive.
Chinese miners are trying to migrate to other countries, especially the neighboring countries such as Kazakhstan. As a result, some critics believe that 30-40 percent of China’s hashrate will be in the US, especially in Texas. But some experts have concerns about the reliability of the Texas power grid.
Miners leaving China means less fossil fuel-powered mining. In countries like Norway or Canada, miners use renewable energy sources. But as the Chinese mining ban results in rapid demand growth, it would be hard to build sites where miners can use renewable energy sources.
It’s hard to predict when the hashrate will go back to its before-ban rate. But most crypto mining experts believe that it will take around a year or more for all the mining hardware to migrate. So, for now, this situation makes it easier for everyone to mine Bitcoin.
As Kryptovault’s Hove Pettersen says that “Right now, the profitability of bitcoin mining is so high that even the oldest, least efficient machine can be profitable.”