Bitcoin mining is a controversial practice given the excessive energy it uses, meaning the key locations for the activity are highly changeable.
Bitcoin has been steadily growing in popularity and prevalence in the investor community since the cryptocurrency launched in 2009. Although many are still scratching their heads over what exactly Bitcoin is, with some arguing that it will be the future of finance and others dismissing it as fool’s gold, the digital currency is unlikely to disappear from the crypto conversation any time soon.
A key draw of Bitcoin is the idea that it is a decentralised currency, free from control of governments or central banks. However, the recent riots in Kazakhstan related to internet shutdowns caused by Bitcoin mining, and the resulting drop in the currency value show that it is not free from the impacts of volatile external forces, particularly in those countries where Bitcoin is being mined on a mass scale.
So where exactly does this decentralised currency market ‘live’, and why have certain countries emerged as Bitcoin mining hubs?
What environment do Bitcoin miners need?
Bitcoin mining is essentially programming computers to solve complex mathematics problems as a way of verifying transactions on a network. When the solution is solved, it secures the network and generates a new ‘bit’. There is a time pressure when it comes to Bitcoin mining too, as the resource is finite. The evasive and alleged creator, Satoshi Nakamoto, instilled a hard cap of 21 million Bitcoin when creating the source code. This means that as Bitcoin mining industries continue to grow in size and efficiency, the job of mining will also increase in difficulty. This also explains why the crypto mining industry is based around Bitcoin and not, for example, Ethereum or Tender.
Although Bitcoin mining started out with solo miners quietly building up reserves of the currency on their home computers, those days are long gone. In order to become a key player in Bitcoin mining, a substantial amount of space and computer equipment is needed, along with maintenance such as air conditioning for the equipment, a large energy source and a stable internet connection.
The scaling up of Bitcoin mining has been rapid and as a result has created concerns regarding the power required to maintain operations. In fact, energy consumption during the mining of the currency has been steadily building to a record-breaking peak in January 2022, following a decrease in July 2021. The increasing environmental cost of Bitcoin mining presents a new layer of considerations for those looking to source mine locations, such as how sustainable is this location and how ethical will this operation be?
Growing concerns around vast energy consumption have led to Bitcoin mining being banned from many countries that were considered to be welcoming environments for the activity, meaning that the hotspots are in a constant state of flux.
US fills China’s shoes
Many countries have decided to not just ban Bitcoin mining but outlaw cryptocurrency altogether, including Algeria, Bangladesh, Egypt, Iraq, Morocco, Oman, Qatar, Tunisia and, most notably, China. When China banned cryptocurrency in September 2021, the global hashrate – the level of computing power contributed to a network through Bitcoin mining – and the Bitcoin mining map shifted significantly.