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5 Reasons Why China’s Crypto Ban is a Boom for Bitcoin
The testy Sino-crypto relationship may have taken a turn for the worst following the country’s latest decree on them. China has openly voiced its uneasiness with privately issued digital assets. For instance, in 2013, it banned Bitcoin(BTC) as a medium of exchange despite recognizing it as virtual property. The country then declared Initial Coin Offerings (ICOs) illegal. Now it has placed a ban on all crypto mining activities in the country. As expected, the crypto world experienced shocks following the announcement.
Crypto users have chimed in with their views on the decision and, notably, its impact on Bitcoin, the premier cryptocurrency. It’s easy to predict difficult times for BTC considering that China hosts most crypto miners worldwide. Regardless, amidst the gloom and doom, there would be a boon for BTC too. China’s crypto ban could be good for Bitcoin in the long run. And in this article, we discuss five reasons that may be so.
How Could China’s Crypto Ban Be Good For Bitcoin?
As stated earlier, China’s ban on crypto mining needn’t spell doom to BTC. If embraced positively, it may open the coin and its entire ecosystem to a lot of good. Here are the five ways that that decision could positively impact Bitcoin
BTC Will Attain Proper Decentralization
One positive that may come out of China’s crypto mining ban is enhancing the crypto’s decentralization. Market stats indicate that the country hosts 65% of all BTC miners worldwide. However, the concentration of BTC miners in China has drawn Concerns from crypto lovers. Some argue that the Chinese Miners could create a monopoly threatening BTC’s entire ecosystem. Theoretically, they could agree to manipulate BTC.
Therefore relocating China’s BTC hashing power to favorable regions will increase its decentralization. As such, the dispersal of mining power enhances the security of the BTC ecosystem.
It Will Reduce State Regulation Of BTC
It’s no secret that China and many other nations would like to control cryptos, more so Bitcoin. They assert that cryptos create market uncertainties owing to their volatile nature. Their grouse with BTC originates from the latter’s decentralized nature that complicates its control.
Migrating China’s BTC hashing power to other countries eliminates the possibility of the state controlling the currency. Many nations are indeed creating structures to regulate digital currencies, including BTC. However, they seek to enhance rather than curtail its adoption.
Consequently, the trooping of China’s BTC mining activities to safe heavens will make the crypto thrive. A thriving BTC ecosystem enhances its sustainability and chances for mass adoption.
It Could Encourage A Greener Bitcoin
As cryptocurrencies move towards mainstream adoption, the conversation is shifting towards their environmental impact. Many have questioned the sustainability of cryptos bearing in mind their carbon footprints.
Bitcoin, mainly, has come in for plenty of stick on the sustainability score. Recently BTC prices plunged following an onslaught led by Elon Musk. Through tweets, he questioned the currency’s clean energy usage. He also announced that Tesla would suspend purchases of its vehicles in BTC till the coin committed to increasing its use of green energy resources. Musk reflects the concerns of many crypto users about their cleanliness. That’s why the BTC industry has started initiatives like the Bitcoin Mining Council to redeem the perception that it’s a dirty coin.
China’s crypto ban, therefore, is a unique opportunity for BTC to make strides in cleaning its operations.
The affected miners are scrambling for new areas to set up afresh. There’s reason to believe that they’ll target regions such as Texas that have an abundant supply of affordable and renewable energy resources. Their migration to such regions with green energy learning areas will help reduce BTC’s carbon footprint. As such, the coin will ease concerns about its emissions to the environment.
Dropping Hash Rate Will Benefit Miners Elsewhere
China’s announcement impacted Bitcoins hashrate, the computational power required to mine the coins successfully. Following Beijing’s decision, the hashrate fell 28% as more and more miners shut down their activities. As a result, the BTC network readjusting its mining difficulty to stabilize the system.
The drop in the hashrate will be welcome news for the miners for several reasons. First, it means that they’ll find it easier mining BTC than they did before.
BTC has a self-correcting mechanism to take care of rises and falls in its hashing rate. When it rises because of increased miner activity, the algorithm increases in complexity, making mining difficult. Conversely, when it drops as it has done now, the algorithm’s difficulty level falls, encouraging faster mining.
Secondly, the exit of Chinese miners means that there’s lesser competition amongst the miners for the block rewards. Thus they expect to earn more per successfully verified blocks. As a result, according to the CEO of BTC mining firm Compass, Whit Gibbs, its clients will see a 35% jump in their profitability.
Kevin Zhang of Foundry Digital estimates that miners will earn $7 more per day. Similarly, Blockcap’s Darin Feinstein asserts that the ban was a gift that’ll shore up revenues and profits in the foreseeable future. He adds that the network will benefit from improved decentralization and sustainability.
Reduced Power Bills
Another area where the mining community will benefit is in their power bills. Mining is an energy-intensive activity. Higher hashrates increase the mining difficulty that in turn increases electricity demands. The opposite is true and will see them spend less on power, improving their margins.
Although, it could be a while before the market finds ways to fill the deficit in hashing power. Analysts suggest that it could take up to 15 months for the market to correct itself. However, what is certain is that miners will enjoy higher returns for the rest of this year.
Migration Of Chinese Miners Will Influence Pro-Bitcoin Legislation
A section of Chinese miners is already looking for safe harbors to continue their activities. Should there be an influx of them in BTC receptive regions, it will need them to regulate them.
The receiving nations will respond to this development by enacting legislation to guide BTC and cryptocurrency mining as a whole. Such laws will likely create an enabling environment for BTC mining rather than curtail it.
Since China’s recent decree on crypto mining, we’ve dwelt so muçh on the cloud. Unfortunately, in so doing are missing out on its silver lining. True, Beijing’s ban on crypto mining impacts the whole cryptocurrency world and BTC in particular, but that shouldn’t distract us from the positives that come with it. Looking at matters deeply and soberly, we will find out that there are ways that China’s crypto ban could be good for Bitcoin. From increasing BTC’s decentralization to improving the miners’ margins and spurring pro-BTC legislation, this ban is an opportunity to transform its ecosystem for the better.