China Plans To Kill Most of the World's Bitcoin Mining Operations (bloomberg.com)

The Chinese government will end bitcoin mining operations in the country in the coming months in a move that could have a massive impact on the price of the world's biggest digital currency. From a report: China has been a central player in the development of bitcoin in recent years, but Beijing has spent the last six months cracking down on the cryptocurrency industry -- shutting down local exchanges and banning initial coin offerings. Leaked documents suggest the Chinese government plans an "orderly exit" for bitcoin mining operations in the coming weeks and months. In the documents, issued to the local offices of the internet-finance regulator, authorities were instructed to force mining operations out of business using measures linked to electricity pricing, land use, tax and environmental protection.

Comments

Major impact on the price

[jrumney]

Given that bitcoin relies on mining to certify transactions, I suspect that the direction of impact could be rather surprising to some of those who believe in scarcity driven theories of economics.

Re:Major impact on the price

[TheRealMindChild]

The biggest, and maybe only problem that will arise will be the difficulty being too high when they shut down the farms, leading to a period of slow block solves until the difficulty adjusts. The network will work just fine without the chinese mining farms

Bitcoin hyped up disaster

[Eravnrekaree]

Wasn't bitcoin always one big cluster due to the fact it eventually takes the power output of nuclear plants just to mine new coins. An activity which consumes vast physical resources for no tangible benefit, which makes the interest rates of the banking system look very reasonable in comparison. I am sure that the fact that it consumes vast resources and stressing infrastructure on something with no tangible value to society is a part of the reason China is taking it off line. A lot of hype over a fundamentally broken model, that is really not a currency anyway, but a wildly fluctuating and unstable mess, any real currency that acted this way would be a laughing stock.

Re:Bitcoin hyped up disaster

[Anonymous Coward]

No, and this is one of the seemingly least understood aspects of Bitcoin mining. The difficulty of mining a block adjusts dynamically based upon the total amount of compute power currently mining. The more mining power, the higher the difficulty. The purpose is so that a new block is found approximately every 10 minutes. When power is added, blocks are found faster and the difficulty increases. When power is removed, difficulty decreases.

One important aspect if how often the difficulty adjusts -- it's around every 2 weeks for Bitcoin. So if a lot of power is suddenly removed, then the rate at which blocks are found will likely dramatically increase -- and stay that way for potentially several weeks. But eventually the difficulty will adjust to match the available compute power, and orderly blocks every 10 minutes will resume.

Some alternative cryptos have differentiated themselves versus Bitcoin by having much faster difficulty adjustment periods (e.g. as quickly as every single block).

Bitcoin would only consume a nuclear power plant of energy if humans put a nuclear power plant's worth of energy into mining. If instead humanity puts it 5V @ 0.001W of power, the difficulty will adjust and that will be the consumption. ROI will ultimately drive the amount of compute power dedicated to Bitcoin.

Mining pools and difficulty

[FeelGood314]

The mining pools are run out of China. The physical location of the devices doing the hashing is wherever the electricity is cheapest. For example, people heat their homes in Quebec with electricity so some are mining there now and heating with the waste heat.
The mining equipment won't vanish. If you have sunk the cost of buying the equipment, you won't turn it off because electricity got more expensive. Right now $1 worth of electricity gets you about $10 worth of crypto currency. If the price of electricity goes up 9x it still will make sense to mine. It just won't make sense to buy new equipment.

Transaction times won't be affected. The total hashing power won't decrease. It's rate of increase might slow. BUT, even if the total hashing power fell, the currencies have what is called a difficulty level. That will decrease and a currency like bitcoin will continue to create a new block every 10 minutes.

Re:Smart

[Tailhook]

We know you do. We also know you're not smart enough to make the connection between authoritarian government and lack of free speech, which is why we don't allow you to prevail.

And the blockchain network will be more secure

[perpenso]

The biggest, and maybe only problem that will arise will be the difficulty being too high when they shut down the farms, leading to a period of slow block solves until the difficulty adjusts. The network will work just fine without the chinese mining farms

And the blockchain network will be more secure. Bitcoin has deviated from its original design in two ways and both compromise blockchain security. First, miners are no longer a diverse group of ordinary users and their personal computers, mining is dominated by a relatively small number of ASIC farms. This makes 51% attacks more plausible, we had one pool get to 50% a few years ago. Secondly, ASIC mining is concentrated in a single country, 70% of the hashate give or take. This obviously destroys the notion that bitcoin is beyond government meddling. These ASIC miners are dependent upon cheap government controlled power.

It sucks to have invested money in ASIC hardware and colocated you gear there but this move would help to get bitcoin back on track. Hopefully closer to the globally and widely distributed mining that is necessary for blockchain security, something we do not have today.