17 Apr 2019 #Bitcoin
China has made the cryptocurrency news again with the latest in its attempts to control the fledgling cryptocurrency market. This time, however, it is something that the wider Bitcoin ecosystem and community should cheer on.
China's top economic planning committee, the National Development Reform Commission, has recommended eliminating digital mining altogether. The recommendation released last week echoes similar sentiments that it published in 2011. This is going to have a profound impact on the Bitcoin community around the world as China has dominated the industry for a large part of Bitcoin's life-cycle.
The cheap electricity that China had access to from coal and hydropower, as well as the massive industrial base that was capable of supplying the machines needed for such an endeavor, fueled the world's cryptocurrency mining boom.
China has been unfriendly to cryptocurrency from the start, at least to the permissionless and public kind of cryptocurrency that has found favor in the world. This attitude means that there was little surprise when the second recommendation came from the NDRC last week. China has already banned ICOs in 2017, with a ban on crypto exchanges coming soon after. Targeting miners was a logical next step according to many in the industry.
Weiss Ratings' Head of Crypto, Juan Villaverde, says that miners have been expecting something along these lines since the flurry of activity forms the government in 2017. He went on to say that the largest mining operations in China have had ample time to prepare contingency plans. These would include moving into jurisdictions that are more friendly to Bitcoin mining, even if they would not be as profitable.
He finished with some thoughts that have been echoed around the cryptocurrency community. In the event Chinese miners are forced to shut down, there will be plenty of competition available in the rest of the world. Bitcoin mining will become a lot more popular once three-quarters of the mining network is taken down.
Many in the cryptocurrency industry have been warning about China's influence in the crypto ecosystem. Many, in fact, think that China posed an existential threat to the biggest cryptocurrency in the world. In recent years particularly, China has ramped up to providing close to two-thirds of the compute power of mining pools.
The great thing about the Chinese government cracking down now is that Bitcoin will gain ever greater decentralization of the network around the world. More miners will be based in more countries around the world to make up for the immense compute power that will be lost.
China might be looking to create a Great Firewall of Cryptocurrency by trying to exert ever greater control of the industry but there is an irony to those actions. If it outlaws mining, it will just be making Bitcoin strong on a global scale and preparing the landscape for a future where China is no longer the leader in the cryptocurrency sphere.
Countries that are openly welcoming both distributed ledger technology and cryptocurrencies are seeing a boom in innovation and many in the industry feel that if China stops being a leader, they will soon have a lead that China will never truly be able to match. Decentralized systems are harder to influence than centralized systems – and no matter how much control the Chinese might think they have now, no one will be able to control blockchain in the future. Well, that is at least what proponents of the technology in smaller countries think. What the future holds, is up in the air.
Author: Ali Raza for Crypto-Rating.com
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