How big is the cryptocurrency mining industry?

One of the first things many people learn about when introduced to the world of cryptocurrency is mining. It is the foundation that has allowed Bitcoin and other major cryptocurrencies to thrive. In this article, we will discover the global reach of the crypto mining industry and how it may evolve going into the future.

When Bitcoin was first introduced to the world in 2009, anyone could successfully mine it using their personal computer. Over the past decade, this has changed significantly.

As more people entered the space, competition to win those lucrative mining rewards increased. The computational power required to successfully receive a mining reward on the Bitcoin Network is currently astronomical. Bitcoin’s total network hash rate reached its all-time high at the beginning of April with a value of 179.4 EH/s.

This has led to the mining industry now being dominated by big players with specialized mining facilities. It is common to find large warehouses full of ASIC crypto mining machines dedicated to mining Bitcoin.

The cost of running such facilities is not low, with the most considerable expense being electricity. To remain as profitable as possible, the big players in the industry constantly strive to cut down on electricity costs wherever they can. It generally means choosing to set up their facilities in regions with the cheapest electricity.

Mining around the world

The map below created by the Cambridge Center for Alternative Finance in the 2nd Global Cryptoasset Benchmarking Study shows how global Bitcoin mining distribution has trended towards countries with the lowest electricity costs.

The undisputed leader in crypto mining is currently China. Cheap resources and access to inexpensive hydro, thermal, and coal energy have made the country extremely attractive to big players in the industry.

According to the Cambridge Bitcoin study, 35% of all Bitcoin’s hash rate is in China’s Xinjiang region, a region famous for its extremely cheap coal energy. The next biggest region for Bitcoin mining, responsible for nearly 10% of the total hash rate, is Sichuan (also in China), known for its affordable hydropower.

Overall, China controls approximately 65% of the global Bitcoin hash rate.

Although the country is by far the most profitable to mine in, China’s dominance in Bitcoin mining has not always fallen in line with the government’s regulations regarding cryptocurrency.

This uncertainty has meant that other countries have started to attract the attention of mining giants.

Future of mining

Suppose China were to introduce regulations that drive crypto mining out of the country. In that case, some other regions that would become integral to the industry’s future success include North America, Russia, and Kazakhstan.

The popularity of mining in North America is currently on the rise, with the U.S especially aiming to grab a piece of China’s dominance.

Clean and renewable energy use is the critical factor that North American miners aim to use as an advantage. Large companies, such as Tesla, have made it known that they will be more willing to accept Bitcoin and other cryptocurrencies in the future if mining becomes more eco-friendly.

In Russia, as in China, current mining activity takes place in regions with access to cheap energy. Cheap natural gas and hydropower in northern parts of Siberia, combined with the cold climate, make for perfect crypto mining conditions.

ASIC miners produce enormous amounts of heat and require complex cooling systems. Although Russia cannot compete with the cheap electricity currently offered in China, the costs saved on cooling could give them an edge in the future.

The next important player in the future of Bitcoin mining is Kazakhstan.

Kazakhstan is quickly becoming one of the most favorable regions for crypto mining. Its cheap coal energy and regulatory clarity have helped accelerate the growth of mining in the country.

It saw the largest increase in the total share of Bitcoin hash rate in 2020. Estimates show that Kazakhstan’s hash rate share grew from 1.42% to 6.17% in the first half of 2020 alone.

The uncertainty surrounding China’s crypto regulatory policies may encourage companies to move their mining operations to Kazakhstan in the near future, potentially turning the country into the next mining powerhouse.

As the crypto mining industry evolves and adapts, China’s hash rate dominance could start to be rivaled. The mainstream acceptance of digital currencies, strong calls for eco-friendly mining, and more transparent government regulations could restructure the entire cryptocurrency mining industry.