China’s crackdown on bitcoin mining earlier in 2021 forcibly unlocked a massive amount of Bitcoin’s hashing power. As those machines relocate around the world, some cryptocurrency miners expect the US and Canada to eventual represent a majority of Bitcoin’s hashrate. This outcome is highly unlikely though. Here’s why.
51% of hashrate is a big number.
Although Chinese mining companies represented this much hashrate in the past, the US and Canada replicating this would be a very large feat. Is it possible? Yes. But is it likely? No.
And even if it happened, Canada and the US – two separate jurisdictions – would compete for the same hashrate in a situation that would still be an improvement over China – one jurisdiction – controlling a majority of the network’s hashpower.
China’s centralization as artificial.
Close proximity to leading bitcoin ASIC manufacturers like Bitmain played a key role in China’s dominant share of hashrate over Bitcoin’s early history. Not only does North America currently lack players of similar size (or any at all) in the mining hardware market. But even if they were built, they would still compete with existing ASIC giants, and the effect likely wouldn’t be duplicated in North America.
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Rackspace shortage is forcing decentralization, not re-centralization.
China’s massive mining operations are now scrambling to find any and all available rack space. And those that aren’t have put their machines in storage until 2022 when a lot more space is expected to be available. Right now, North America has about as much available rack space as most other regions outside China: very little. So, with miners trying to plug in new ASICs as fast as they can, the severe shortage of rack space is forcing many miners to ship machines wherever they can find hosting space. This dynamic works as a forcing function for increasing hashrate’s decentralization.
Miners are favoring regulatory diversification.
North American countries are generally praised by bitcoin miners as having regulatory environments that are more stable than other countries, especially China, which gives them home to avoid surprise crackdown scenarios like Chinese miners suffered. Despite their transparency and stability, North American markets are still heavily regulated relative to many other countries around the world.
For some miners forced to leave China, relocating to another heavily regulated market is not a desirable outcome. All the hashrate leaving China won’t simply move the US and Canada since some miners forced to shutdown in China are more comfortable spreading their machines across multiple jurisdictions, some (or all) with far fewer regulations.
Mining decentralization is hard to undo.
After the government’s blanket ban, Chinese miners are spreading their machines across the map. And they have almost every incentive to not relocate them all in the same jurisdiction again. Any hypothetical where miners decide to consolidate machines in one country or region would require and unnecessarily large amount of facility buildout, transportation costs, and other resources, which miners are unlikely to spend. And once these machines are distributed, there’s almost no scenario where a majority hashrate would naturally trend toward reconsolidate into one region.