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Why We Can’t Trust Bitcoin Mining Hash Rate Data From China

19/05/2022 by Idelto Editor

The changing proportion of Bitcoin network hash rate emanating from China can be explained by the inherent flaws in how this data is collected.

China has “re-emerged” as a major bitcoin mining hub in 2022, representing more than 20% of the Bitcoin network’s hash rate, according to new data from Cambridge’s Centre for Alternative Finance (CCAF). The October 2021 data update from CCAF indicated that “mining operations in mainland China have effectively dropped to zero.”

So, what caused this purported enormous whiplash in mining activity from a CCAF-reported high of 75% in September 2019, to 0%, and now back to 20%? Since July 2021, Bitcoin’s hash rate has grown at a steady pace, paring its losses from China’s original ban and continuing to set record highs in recent months. But what happened in China? And is the new CCAF data an accurate representation of the state of bitcoin mining?

This article aims to provide additional context to the CCAF data and explain why the data, although an important effort to try to quantify trends in the mining industry, is not reliable.

There Was Never 0% Hash Rate In China

Analysis of China’s massive resurgence in mining activity is premised on its prior state of having absolutely no mining activity whatsoever, which is entirely false. When CCAF first released its data last year, showing no mining activity in China, the project’s lead was careful to qualify it as the region’s “reported” share of hash rate, which could theoretically differ from its actual share. Other researchers, mining industry leaders and this author knew the 0% number to be inaccurate and said so publicly.

CCAF researchers dismissed these claims from actual miners as “difficult to verify,” preferring to lean on their own methodology. But CNBC reporter MacKenzie Sigalos took these claims seriously, and she later reported on the active underground mining scene in China. Ironically, the reporting by Sigalos was cited by CCAF researchers in their latest blog post with updated China mining analysis.

With a precipitous drop in total hash rate, a coinciding drop in bitcoin’s price and constant media attention paid to the future of mining after China’s ban, data that claimed 0% of hash rate was coming from China fit the narrative. But the data wasn’t accurate, and miners knew it. So why was the 0% number ever published?

Mining Data Is Hard To Collect And Cambridge Bitcoin Mining Data Is Flawed

Data is only as reliable as the methodology used to collect it, and for CCAF mining data, the assumptions in the methodology clearly demonstrate inherent problems with the data collection. These structural difficulties in fact compromise the reliability of the data as it’s presented.

One key failure is the methodological assumption that a mining facility’s IP addresses are an accurate indication of the hash rate’s geographic location. Consider an unlikely but feasible scenario where a miner based in Mexico uses a proxy with an IP address in Germany in January, switches to Australia as a proxy later in April, and then uses an IP address based in Romania in July. CCAF’s broken methodology would assume that this miner physically moved to all three of these locations throughout the year — a logistical nightmare and economic impossibility for any miner.

Some industry commentators defend CCAF’s research by asserting that slightly inaccurate data is better than no data at all. This idea is so laughably illogical it barely deserves mentioning. And CCAF so heavily caveats and qualifies its own data that its reliability is minimal at best. For example, in multiple places on its data dashboard, the CCAF qualifies its data for Germany and Ireland by indicating, “To our knowledge, there is little evidence of large mining operations in Germany or Ireland that would justify these figures. Their share is likely significantly inflated due to redirected IP addresses via the use of VPN or proxy services.”

Put differently, the data is not reliable.

To be clear, the problems with CCAF’s methodology are not its own doing. Mining data is outstandingly difficult to accurately collect. Similar mining data sets built by the newly-launched Bitcoin Mining Council also received some public criticism for the accuracy of their methodology. If anything, the continued work by CCAF to report mining data serves to expose many of the unavoidable issues with collecting accurate and representative data from bitcoin mining.

Mining Pools Can Lie

CCAF also relies on self-reporting by miners to aid its research on the geographic distribution of hash rate. The obvious problem with this exchange of information is that miners can lie. This point was made publicly on Twitter by Ethan Vera, co-founder of Luxor Mining, when he tweeted, “…the mining pools submitting data to Cambridge lied. They showed 0 hashrate in China when that clearly wasn’t the case.”

The political motivation for miners to lie is obvious. What miner would willingly report full or even partial mining activity in the world’s most aggressively anti-mining region? Any incentive to self-report mining in China is simply non-existent. And, as mentioned previously, the 0% hash rate statistic perfectly fits the ongoing narrative of a full mining exodus from China.

CCAF’s estimated mining hash rate from China versus the U.S.

Data submitted to CCAF is given voluntarily, moreover, and there are very few cross checks available to Cambridge’s research team leaving them to have to simply trust the answers given to it, which is an unreliable research method.

China’s Resurgence Is Logistically Improbable

Considering the real-world logistics of orchestrating China’s resurgence in hash rate corroborates the unreliability of the CCAF’s latest data. It is simply an operational impossibility that nearly half of the hash rate that left China one year ago decided to abandon its newly secured mining facilities elsewhere in the world and relocate back to China.

Even for the non-trivial number of miners that opted to simply move their machines into storage instead of suffering the hassle or relocating internationally, there are few indications that the majority of this group of miners have chosen to or are able to fully redeploy their hardware.

And China certainly has not reversed its mining ban.

The hash rate that is currently online in China has always been in China. Miners have known this and publicly spoken about it. But structural limitations for academics researching this dynamic have resulted in previously inaccurate and persistently unreliable data about this hash rate.

Conclusion

Even though this article has somewhat harshly criticized the data published by the CCAF, it is not responsible for the foundational reasons why its data is unreliable. Collecting mining data is difficult, especially when key metrics are easily manipulated or misrepresented. And the work by CCAF demonstrates these difficulties.

Of course, China is unlikely to ever regain its former share of the global bitcoin hash rate market. Industry leaders and academics alike can agree on this. Chinese officials are still confiscating mining hardware by the hundreds and thousands of rigs, and many large-scale miners have permanently relocated to other parts of the world. But the Chinese underground mining industry will never be extinguished.

This is a guest post by Zack Voell. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Filed Under: Bitcoin Magazine, bitcoin-mining, business, Cambridge Centre for Alternative Finance, China, English, Feature, Hash rate

Study: Amid Mining Bans, China Still Commands World’s Second-Largest Share of Bitcoin Hashrate

17/05/2022 by Idelto Editor

Study: Amid Mining Bans, China Still Commands World's Second-Largest Share of Bitcoin Hashrate

New data stemming from the latest Cambridge Centre for Alternative Finance (CCAF) report on bitcoin mining indicates that China still holds the second position in terms of global hashrate. While China commands close to 22% of Bitcoin’s global hashrate, the United States currently dominates with 37.69%, according to CCAF researchers.

China Is Still the World’s Second-Largest Concentration of Bitcoin Miners


The Cambridge Centre for Alternative Finance updated the organization’s bitcoin mining data and map in order to highlight 2022 hashrate statistics. In July 2021, Bitcoin.com News reported on the CCAF’s data that showed China’s hashrate dropping by 46%.

At the time, China’s government enforced a ban on bitcoin mining and a great deal of the country’s miners re-located. However, the latest CCAF stats show China’s hashrate is still very prominent as the country is the second-largest leader in terms of global hashpower dedicated to the Bitcoin (BTC) network.

The study’s authors believe the miners located in China are likely leveraging virtual private networks (VPNs) to conceal their locations. The report indicates that China’s share of the overall Bitcoin network hashrate was 21.11%.

CCAF’s data derives from the organization’s partner mining pools Foundry, Poolin, Viabtc, and Btc.com. Moreover, some of the hashrate stemming from China did not leverage VPNs and CCAF’s researchers believe those miners are comfortable with their locations unhidden.

Unites States Dominates Bitcoin’s Global Hashrate by More Than 37%


CCAF’s report notes that a “non-trivial” quantity of Chinese miners may have thought the ban wasn’t a big deal. “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 and scrutiny.”

Following CCAF’s updated data in July and October 2021, a CNBC report noted that unnamed sources told the reporter MacKenzie Sigalos that bitcoin miners were still located in China. China’s hashrate is sizable compared to a great number of other countries, however, the U.S. still dominates Bitcoin’s global hashrate by 37.69%.

CCAF’s data from last July showed the U.S. captured 16.8% of the global hashrate last year. If CCAF’s data is correct, that would mean the U.S. hashrate has climbed 124.34% since July 2021. Pool distribution metrics match with CCAF’s data as the mining pool Foundry USA has captured 19.5% of the global hashrate during the last three months. 13,182 blocks were mined during the three-month period and Foundry USA found 2,566 of them.

What do you think about the latest CCAF data that shows close to 22% of the world’s Bitcoin hashrate still resides in China? Let us know what you think about this subject in the comments section below.

Filed Under: Bitcoin Mining Operations, bitcoin-mining, BTC Mining, BTC.com, Cambridge Centre for Alternative Finance, CCAF, China, CNBC report, data, English, Foundry USA, Global Hashrate, metrics, Mining, Mining Pools, News Bitcoin, poolin, Russia, United States, US hashrate, ViaBTC

China Emerges As Second-Largest Bitcoin Mining Hub Despite Ban

17/05/2022 by Idelto Editor

A report from Cambridge exploring bitcoin mining shows the U.S. as the dominant global player and China in second despite the country’s ban last year.

  • New data from Cambridge details a portrait for the global hash rate of bitcoin mining.
  • The U.S. is solidifying its position as the global leader with 37.84% of the global hash rate.
  • China surged to almost 22% following the mining ban from last year showing either a rise of covert operations or miners that have remained well-hidden throughout.

The U.S. has risen as the global dominant country housing Bitcoin hash rate while China has picked up pace to trail in second despite its ban from last year, new data from a Cambridge Center for Alternative Finance (CCAF) report shows.

Following the need for underground mining facilities in China after the ban that took place in June of 2021, covert Chinese operations have risen to 21.11% of the global hash rate, returning China to its position as a major mining hub worldwide. Kazakhstan continues to hold a respectable hash rate of 13.22%, while Canada controls 6.48% and Russia produces 4.66%.

From September 2021 to January 2022, CCAF data shows a continued rise in dominance for the U.S. leading 37.84% of the total global hash rate. The largest American hash rate providers are Georgia (30.76%), Texas (11.22%), and Kentucky (10.93%).

The last time CCAF released detailed bitcoin mining data was in October 2021, immediately following the aftermath of the Chinese ban which resulted in a shockingly steep decline in hash rate – bottoming out at 57.47 exahashes per second (EH/s) on June 27, 2021, per the report.

A quick and decisive migration took place in what seemed like an overnight exodus and by December 2021 the hash rate had risen back to previous levels, reaching 193.64 EH/s on December 21, 2021). By February 2022, a new all-time high (ATH) of 248.11 EH/s of global Bitcoin hash rate was achieved, showcasing the incredible adaptability of the bitcoin ecosystem in the face of adversity.

On the Chinese ban and sudden hash rate resurgence, CCAF noted that it may not be the case that the major hub of Chinese miners actually left at all, stating that “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 and scrutiny.”

Filed Under: ban, Bitcoin Magazine, bitcoin-mining, business, China, English, Hash rate, News

China Backed Publication: Terra LUNA Crash Vindicates Country’s Ban on Crypto-Related Activities

16/05/2022 by Idelto Editor

An op-ed article published in the state-backed Chinese publication Economic Daily, has suggested that the recent crash of the Terra blockchain’s LUNA and the de-pegging of the UST stablecoin vindicate the Asian country’s decision to ban crypto-related activities. In the article, the author names the interest rate hikes by the U.S. Federal Reserve and the buying and selling of crypto assets by several investment giants as the causes of the recent market crash.

Impact of Recent US Interest Rate Hike

An author writing for China’s state-backed publication, Economic Daily, has argued that the recent crash of Terra’s LUNA and the de-pegging of the UST stablecoin vindicates his country’s decision to block or prohibit virtual currency-related activities. The author, Li Hualin, also claimed that China’s “decisive” and “timely” action helped to “extinguish the ‘virtual fire’ of virtual currency speculation and put ‘protection locks’ on investors’ wallets.”

As reported by Bitcoin.com News, Terra blockchain’s native token LUNA’s troubles started after the network’s other project, the algorithmic stablecoin UST, lost its peg against the U.S. dollar. Initial efforts to rescue the stablecoin precipitated the native token’s plunge from a price of over $87 on May 4, 2022, to a current price of just under $0.0003.

While some crypto experts have placed the blame for the token’s crash on the actions of the project’s leader, Do Kwon, in the opinion piece, the Chinese author appears to attribute the token’s fall mainly to the raising of interest rates by the U.S. Federal Reserve. Explaining how the rate rise caused the token to plummet, the author wrote:

Since the beginning of this year, the Federal Reserve has launched an interest rate hike cycle, and global liquidity has tightened. Especially in early May, the Federal Reserve raised interest rates by 50 basis points at a time, which had a negative impact on capital and market sentiment, and virtual currencies were the first to bear the brunt.

Virtual Currency and the Chinese Law

Following the crash of the two Terra tokens, some within the crypto community are still trying to piece together what may have caused the spectacular collapse. However, others have already accused two firms, Blackrock and Citadel, of being behind LUNA’s woes. These allegations have been rejected by the firms.

The Chinese author, in the meantime, claims in the piece that the involvement of investment giants in crypto markets “can lead to violent fluctuations in currency values, triggering a large number of sell-offs.”

Hualin also reiterated that virtual currency transactions are not protected by Chinese law. These comments appear to contradict the recent Shanghai High People’s Court judgment affirming bitcoin to be a virtual asset protected by Chinese law.

The author ends the article by urging investors to “remain rational, promptly eliminate the greed of bottom-hunting and get rich overnight, and stay away from related trading speculations, otherwise it is very likely that ‘currency will go to the fortune.’”

What are your thoughts on this story? Tell us what you think in the comments section below.

Filed Under: ban, Bitcoin, Blackrock, China, crypto ban, Crypto markets, do kwon, English, Featured, LUNA, News Bitcoin, Shanghai High People’s Court, Terra Blockchain, UST, Virtual Currency

Shanghai High Court Declares Bitcoin Virtual Asset With Economic Value Protected by Chinese Law

12/05/2022 by Idelto Editor

Shanghai High Court Declares Bitcoin Is Virtual Asset With Economic Value Protected by Chinese Law

The Shanghai High People’s Court has declared bitcoin to be a virtual asset protected by Chinese law. The court notes that the cryptocurrency has economic value.

Bitcoin Is Property Protected by Law in China

The Shanghai High People’s Court has declared that bitcoin qualifies as a virtual asset protected by Chinese law despite the ban on cryptocurrency trading in China, Sina reported Friday.

The court’s official Wechat channel posted a notice last week stating:

In the actual trial practice, the People’s Court has formed a unified opinion on the legal position of bitcoin, and identified it as a virtual property.

The court further explained that bitcoin “has a certain economic value and conforms to the property’s attributes, the legal rules of property rights are applied for protection.”

The statement marks the first time that a higher court in China has issued a ruling concerning a bitcoin case.

The Bitcoin Case

The court’s statement refers to a case involving Mr. Cheng Mou who filed a lawsuit with the Shanghai Baoshan District People’s Court on Oct. 10, 2020, demanding that Mr. Shi Moumou return his one bitcoin.

After the trial, the court ruled on Feb. 23, 2021, that Shi must repay Cheng his BTC within 10 days of the judgment. However, Shi refused to make the payment, prompting Cheng to seek further redress from the local court system. The Baoshan court subsequently arranged for intermediation between the two parties.

Liu Yang, a lawyer from Beijing’s Deheng Law Firm, told local media that the high court’s statement will have strong significance as a reference ruling for civil disputes involving bitcoin in the Shanghai area.

What do you think about the high court declaring bitcoin a virtual asset protected by law despite a ban on crypto in China? Let us know in the comments section below.

Filed Under: Bitcoin, bitcoin property, bitcoin virtual asset, China, crypto, cryptocurrency, English, News Bitcoin, Regulation, Shanghai

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