Bitcoin enthusiasts appreciate the cryptocurrency as being out of the reach of any government. Yet up to three-quarters of global supply was produced in just one country, China, where an attempt by the government to curb production is now causing global Bitcoin turmoil.
The amount of electricity needed to power large numbers of computers used to make new bitcoins is in conflict with China’s recent climate goals. The government, which manages its local currency with a clenched fist, also generally frowns on cryptocurrencies. Legal bitcoin exchange has not been allowed in China for years, even though the country’s entrepreneurs emerged as the dominant source of its production.
Few governments have adopted Bitcoin, but the aftermath of Beijing’s threats showed how its influence on production left the cryptocurrency vulnerable.
The 24/7 number crunching required to create or “mine” Bitcoin relies on plentiful supplies of cheap electricity and equipment, some of the same elements that China used to become the world’s manufacturing hub.
In their hunger for market share, China’s bitcoin miners took advantage of an underregulated and overbuilt power generation sector. In the mountainous provinces of Sichuan and Yunnan, they set up mining operations alongside hydropower producers, in which turbines turn snowmelt and seasonal downpours into electricity. When the rivers slowed each winter, miners packed their computers and headed north to coal-rich Xinjiang and Inner Mongolia.