China are continuing their attack on bitcoin.
This comes after banning ICOs and crypto trading within its borders earlier this year.
This time Chinese officials are targeting the mining of bitcoin.
A circulating state document is even suggesting that mining is being considered an ‘illegal activity’ by Chinese officials.
China has banned Facebook, YouTube and Google.
Fred Wilson, early investor in Twitter, even said, ‘The lesson from the internet is that anything China bans, invest in.’
Officials are often silent in applying these bans, so it’s always difficult to interpret how wide they truly are.
Bitcoin mining is the process by which transactions are verified and added to the public ledger, known as the blockchain.
This is also how new bitcoin are released.
Big implications for Bitcoin
Miners are the most important part of the crypto ecosystem. Without them transactions couldn’t be processed, and the system would fall down.
Or in simpler terms, if bitcoin were to suddenly lose all mining support it would be worthless.
Chinese mines make up as much as 80% of the world’s bitcoin processing power.
If Chinese mining suddenly stopped completely, it would place an enormous strain on the rest of the mining community.
At least in the short term — as the duty of processing the transactions would need to be rethought.
This also presents a significant opportunity. The chance to spread out the mining of bitcoin.
Many have argued that China’s mining dominance has led to an unhealthy reliance on one country.
Before recent sanctions, most crypto trading, mining and ICOs were all in China. Making it the centre of the crypto universe.
Cryptocurrencies moving away from China
Recent regulations have sent most of these dealings to Hong Kong and Japan.
The problem with having all the mining in one place, is that it also means all the new bitcoin is mainly going to one place.
This was never part of the design.
If you think of bitcoin as digital gold — as it designed to be — it means that basically all the world’s gold is in or going to China.
This is because bitcoin is finite, limited to 21,000,000 coins.
Nearly 17 million of which are already in circulation.
This is why I argue that spreading the duty of mining could actually lead to growth, through a more even wealth distribution.
Mining was never meant to be done in one place.
So at the very least a more varied mining network will re-align bitcoin with the original vision outlined for the digital asset.
China is committing to a war it cannot win.
Junior Analyst, Money Morning
P.s. If you want to learn more about the secret world of bitcoin, click here.