China is the undisputed world leader in Bitcoin mining.
Chinese mining pools control more than 70% of the Bitcoin network’s collective hashrate.
Here is our estimated* mining hash power breakdown by country:
15% of the hash rate is missing from above chart, but it’s likely that China crontrols an even greater amount.
Not only does China manufacture most of the world’s mining equipment, but massive mining farms are located there to take advantage of extremely cheap electricity prices.
China also accounts for hefty Bitcoin trading volumes. Chinese exchanges used to lead the world in terms of volume.
Chinese volume has fallen substantially since the PBOC decreed that exchanges could no longer offer 0% trading fees. This ruling flushed a lot of wash trading from the Chinese exchanges.
So, just why is China the world’s leader in Bitcoin mining?
Electricity cost is the most important factor for a profitable mining operation. As mining difficulty increases, the least efficient miners are forced to shut down first.
Electricity in China is extremely cheap compared to most other countries. Chinese electricity in industrial regions is either supplied by hydro-electric facilities or subsidized by the state.
China’s cheap electricity keeps Chinese miners at peak efficiency and allows them to outlast their foreign competitors.
Coal is the cheapest power source but also the dirtiest. It’s well-known that China has comparatively lax environmental policies. Major cities like Beijing are notorious for their high levels of smog, produced mostly by burning coal.
Energy producers can freely burn coal and use the energy for Bitcoin mining. Instead of physically transporting the coal, it’s easier and more cost-effective to establish a Bitcoin mining operation near a source of coal and convert carbon directly to crypto.
#Bitcoin enables Chinese entrepreneurs to export coal by burning it and using the energy to mine.
— Emin Gün Sirer (@el33th4xor) July 20, 2015
Mining pools, as the name implies, are collaborations between individual miners and, frequently, major mining companies. Their hashrate is combined so that the pool has a better chance of finding a block. The block reward is then shared among all contributing members, according to their proportional hashrate.
The result is that many miners outside of China are attracted to Chinese mining pools due to their size. The bigger a pool, the more steady and predictable a member’s earnings. Many miners are lured by the prospect of small, steady earnings as part of a major pool, as opposed to the high- reward-but-low-odds lottery which is solo or small-pool mining.
China is home to four of the five largest Bitcoin mining pools over the past year. As of the 29th of March, 2017, the distribution of hashrate was as follows:
Antpool is another Chinese based mining pool, maintained by the ASIC manufacturer, BitMain. Antpool has mined nearly 20% of all blocks over the past year. Antpool currently has a hashrate of about 675 Petahash per second (PH/s).
There is some speculation that AntPool disguises its true hashrate by running subsidiary pools. These are said to include ViaBTC, BTC.com, GBMiners, CANOE and possibly others.
F2Pool, also known as DiscusFish, is based in China. F2Pool has mined about 18.5% of all blocks over the past twelve months. At the time of writing, it controlled about 380 PH/s.
BTCC is China’s third largest Bitcoin exchange and also operates a large mining pool. The BTCC pool has mined about 11% of all blocks over the past year. It controls about 240 PH/s.
BW, established in 2014, is another mining company based in China. BW’s pool has mined about 10% of all blocks over the last year. It controls in the region of 225 PH/s.
So, what does this situation mean for Bitcoin? Sadly, nothing good:
There’s a definite downside to China’s mining dominance:
Having so much mining power centralized in any single country exposes the Bitcoin network to a worrying degree of political risk.
Should the Chinese government decide to crack down on Bitcoin, perhaps seeing it as a threat to their economy or a competitor to their own planned digital currency, they could wreak untold havoc in the Bitcoin ecosystem.
The video below offers an inside look at how Bitcoin mining farms in China operate:
*This section will provide insight on how we calculated our mining estimation chart.
We looked at the network hash rate chart at blockchain.info.
At the time of writing, here are the Chinese pools and their respective hash rates:
The total from these pools is 72%.
For India, GBMiners controls ~3.4% of the hash rate while Bitcoin India has ~0.3%. This gives 3.7% for India.
BitFury has most of its hardware running in Georgia, and Bitfury is at 2.3%.
BitClub has most of its farms in Iceland and at time of writing is at about 2% of hash rate.
There are no pools that definitely point towards the USA and Venezueland having lots of hash power, but it is known that there is decent mining activity in these countries.
We’re missing 15% of the hash rate from our estimates, because Slush Pool and BTC.com pool control about 13% of the network, but there hash power comes from many different countries. We suspect that the USA, Canada, Venezuela, China, Iceland and Georgia make up the majority of this other 13-15% but it is hard to say exactly how much.