Chinese bitcoin miners have found ways to resume Bitcoin mining, using foreign proxy services to maintain low-key mining activity.
From last September 2021 to this January 2022, China accounted for nearly 20% of bitcoin’s total hash rate – a measure of the network’s processing power for verifying transactions and mining new crypto tokens on a blockchain – making it second only to the US.
China’s resurgence as a major bitcoin mining hub has come despite Beijing’s complete ban on cryptocurrency mining a year ago, according to data from the Cambridge Centre for Alternative Finance (CCAF) on Tuesday.
Following the crackdown on bitcoin mining in the country last May, China’s share had fallen to 0 percent in July and August. However, the CCAF’s latest data shows that the figure was up to 22.3 percent in September – coming in only behind the US, which was at 27.7 percent the same month.
China’s rate then fluctuated around 20 percent from October 2021 to January 2022. At 13.2 percent of the global hash rate, Kazakhstan comes in third. Canada and Russia, at 6.5 and 4.6 percent respectively, round out the top five.
The data “strongly suggests that significant underground mining activity has formed in the country,” the CCAF said in a statement. “Access to off-grid electricity and geographically scattered small-scale operations are among the major means used by underground miners to hide their operations from authorities and circumvent the ban”.
The sudden drop to 0 percent in July and August last year followed by a swift increase in the subsequent months suggests mining firms may have been operating covertly and concealing their locations while using foreign proxies to circumvent scrutiny.
“It takes time to find existing or build new non-traceable hosting facilities at that scale,” CCAF said. “It is probable that a non-trivial share of Chinese miners quickly adapted to the new circumstances and continued operating covertly while hiding their tracks using foreign proxy services to deflect attention”.
“As the ban has set in and time has passed, it appears that underground miners have grown more confident and seem content with the protection offered by local proxy services,” CCAF added.