The top three Bitcoin mining regions in the world

The top three Bitcoin mining regions in the world 1

Over the past two years, Bitcoin has steadily increased in value and popularity among investors who view the digital currency as an alternative asset. As more users enter the market and long-term investors hold on to their bitcoins, the demand for tokens increases with an increasingly limited supply.

Bitcoin is capped at 21 million bitcoins ever created. Currently there are still tokens that can be mined until this cap is reached – through bitcoin mining – and creating new bitcoins is becoming increasingly difficult.

What is bitcoin mining?

The creation of new bitcoin tokens is known as bitcoin mining. It is the process of using computing power to solve complex algorithmic puzzles to verify transactions on the network. Each time a new solution is solved, the network generates a new bit and creates a new block of data on the blockchain. Bitcoin mining has become extremely energy intensive and miners are encouraged to continue mining by rewarding Bitcoin for each mined block. For about four years, Bitcoin mining rewards will be halved to regulate supply in the industry.

Initially, bitcoin mining was easy to do and miners could use their PCs to generate new blocks. Miners now require special machinery and air conditioning to regulate output. As bitcoin mining has expanded, there have been growing concerns about the massive power required to verify transactions and mine bitcoin to keep operations running. Industry energy consumption hit a record-breaking peak in January 2022, and key players are looking for ways to minimize environmental costs and maximize energy efficiency in bitcoin mining.

The top three Bitcoin mining regions in the world 2

Source: Investment Monitor

Where is bitcoin mining most prevalent in the world?

In the last two years there has been a marked shift in the dominant regions of bitcoin mining. China was a key country in the industry prior to July 2021 and accounted for a large portion of Bitcoin mining. After a blanket ban on Bitcoin and cryptocurrencies in China, miners in the region were forced to relocate their operations.

The top three Bitcoin mining regions in the world 3

Other countries have banned bitcoin mining, including Algeria, Egypt, Iraq, Morocco, Oman and Tunisia. This leaves miners the opportunity to shift their operations to key areas where the industry is allowed – and encouraged. With bitcoin banned in China, the United States quickly stepped in as the global leader in bitcoin mining. This has been driven by the country’s acceptance of industry, as well as access to renewable energy sources and low energy prices. Texas, in particular, is a cryptocurrency-friendly state with a power grid that has been deregulated and offers spot pricing. This means that miners can choose and switch energy providers and look for the most sustainable and cost-effective competitor on the market and reap the benefits of flexibility.

Stephen McKeon, associate professor of finance at the University of Oregon, commented on the Bitcoin energy cost issue:

“There are two main factors in the production of bitcoin mining: hardware and energy. The hardware can be used anywhere with an internet connection, so the best regions are those with the lowest energy costs. In the US, these tend to be regions like the Pacific Northwest, where renewables like hydropower are the dominant components in the generation mix.”

Will Kazakhstan Remain the Second World Leader in Bitcoin Mining?

While Texas promotes sustainable energy, Kazakhstan is considered a region that offers cheap coal-fired power. The surge in mining activity in the country has been criticized for a number of factors, including polluting energy and unrest and political uncertainty in the region. The country has a good environment for bitcoin mining in terms of large acreage for machines, low energy costs, and benign climate, but internet shutdowns and high mining taxation could push miners to look for alternative areas for their work.

Russian bitcoin mining

Even more controversial is that Russia has remained one of the core countries for bitcoin mining operations. Earlier in the year, the central bank hinted that it might take action against cryptocurrency in the country, but stance seems to have eased.

At the time of writing, Russia has invaded Ukraine and the world has imposed sanctions on the country, banning Russia from global economic activity. Bloomberg reports indicate that Russia may rely even more on bitcoin mining to access any form of liquidity in the country. Russian President Vladimir Putin has encouraged mining in the region despite the bank’s earlier proposal to ban mining. Commenting on this, David Carlisle, Director of Policy and Regulatory Affairs at blockchain analytics firm Elliptic:

“It would not be an easy task for the Russian government or certain sanctioned entities to consider mining as a way to gain access to bitcoin. They could be converted into goods and services or just cash.”

The World’s Three Largest Bitcoin Mining Regions post first appeared on Coin Insider.

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