Although Bitcoin is a decentralized technology, the mining of the cryptocurrency is somewhat centralized in China. Per some reports, around two-thirds of all mining machines are based in the country, concentrated in the river regions where electricity is cheap.
Some argue that this centralization is something that shouldn’t be worried about; after all, China has been a stable to Bitcoin mining since the earliest days. But reports indicate that due to centralization, upwards of 10% of Bitcoin’s hash rate is going offline due to floods in China.
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Bitcoin’s Hash Rate is Dropping: Here’s Why
Bitcoin’s hash rate — the amount of computational power assigned to processing BTC blocks and transactions — has plunged recently. According to Thomas Heller, the Global Business Director at F2Pool, 10-15 exahashes has been lost over the past 24 hours. For context, Bitcoin’s network hash rate, as recorded by sites like Blockchain.com, currently is around 125 exahashes.
Around 10-15 EH/s has dropped off from Chinese pools in the past 24 hours.
Reason: Due to a heavy rain (red) warning, power station(s) need to cut off power to avoid flooding.
Sichuan mining unpredictable as always! 🌊 pic.twitter.com/uBYd2Jo0ek
— Thomas Heller (@thomasheller_) August 17, 2020
Heller claims that this is a byproduct of heavy flooding in China’s Sichuan region, which is famous in the cryptocurrency industry for its mining ecosystem.
According to Taiwan News, the floods the region is seeing are “record-shattering,” with millions of individuals affected and millions of dollars worth of economic damage done:
“Massive rains pounding Chongqing and much of Sichuan Province over the past few days have led to record-setting floods and alerts and are generating the highest inflow into the vaunted Three Gorges Dam yet this year, surpassing the huge quantities of water seen in four previous floods over the past three months.”
A key trend to watch is how this flooding affects the Three Gorges Dam, a dam downstream from Sichuan that critics say could collapse.
Such a collapse would be a humanitarian and economic disaster that would also affect the Bitcoin mining space.
Will It Affect BTC’s Price?
It is arguable if Bitcoin’s mining ecosystem affects price action in the near term. But an analysis by Charles Edwards has found that over the long run, Bitcoin’s price naturally gravitates higher if there is more mining activity and gravitate lowers if there is a decreasing amount of mining activity.
Should China’s mining infrastructure be permanently affected by these floods or other factors, BTC could suffer.
Featured Image from Shutterstock Price tags: xbtusd, btcusd, btcusdt Charts from TradingView.com Here's Why Bitcoin's Hash Rate Has Dropped Around 10% in the past Day