It was only a matter of time before China imposed a ban on bitcoin (BTC) mining, trading and crypto services. To do something with bitcoins anywhere in China, you need special permission. The reason the Chinese government is taking action against Bitcoin is to reduce its well-documented climate impact. Regardless of an iota of truth in this interpretation, one thing is clear: just China’s anger over energy-intensive, carbon-emitting cryptocurrencies mined to serve Earth’s climate is just the first shot in the looming global standoff over Bitcoin and other cryptocurrencies. . Which relies on Proof of Work (PoW), a complex cryptographic security mechanism we refer to as “mining.” It doesn’t look like the fighting cryptocurrency can or will win.
For many cryptocurrency enthusiasts who own bitcoin, this is hard to fathom. Fortunately, there is a useful similarity, and it has the same name: coal mining. Charcoal is in the back of the stove because there are cleaner, cheaper, more efficient and more technologically advanced alternatives.
Related: Bitcoin Neutral Carbon? New approach aims to help investors offset BTC’s carbon footprint
Admittedly, coal does not fall without a fight, backed by financial lobbyists from corporations and powerful politicians, who often approve of generous campaign donations. But if your financial advisor tells you that they are very good at investing in coal, you should probably hire a new financial advisor. For the same reasons, it may be time to accept that mining, from coal to cryptocurrencies, may soon become a thing of the past.
Short-Term Consequences of China’s Bitcoin Ban
A combination of inertia and reluctance to abandon mining temporarily mitigated the full impact of the China War on Bitcoin. After the initial shock, the United States seized the opportunity presented by China’s ban to become the world’s new mining hub. In Asia, Kazakhstan and Malaysia are increasing mining operations, as well as Germany and Ireland in Europe and Iran in the Middle East, according to the latest statistics. The act of keeping crypto-mining creates very strange geopolitical partners.
Such a “colorful and diverse coalition of bitcoin miners” may be comforting to some investors, but it really will not stand the test of time. The United States cannot match China’s low energy prices and cannot hold the title of miner for long. Germany and Ireland are in a similar boat. Iran is currently undergoing massive protests over an acute water shortage, so flaunting a stake in the world’s least stable cryptocurrency is politically undesirable and socially unacceptable even for theocracy. Malaysia is also exposed to extreme weather conditions and rising sea levels, which prevent the country from maintaining its mining operations with cryptocurrencies in the medium to long term. In general, this development severely limits the future prospects of the redeemed cryptocurrency.
Climate change commitments push mining aside
Of course, Bitcoin miners are not helped by the fact that most countries in the world and almost all the powerful industrial powers have joined the Paris climate agreement. This comes with a firm commitment to reducing carbon emissions and preventing the planet from overheating. Bitcoin mining goes against that promise. In addition to the Paris Agreement, the European Union is implementing its own action plan on climate change, the European Green Agreement. These large-scale multinational agreements increase energy-intensive projects such as bitcoin mining.
RELATED: Back to Mining Assets: Bitcoin Is Going Green Faster Than Ever
With the tide turning in favor of carbon neutrality, the task of mining cryptocurrency is left to a few countries that either don’t take their climate goals seriously or simply don’t make long-term plans. It is no coincidence that many of the countries that are currently making a last-ditch effort to mine Bitcoin are authoritarian states that are facing increasing international pressure along with growing internal conflict and resentment. Few, if any, serious investors could invest their crypto portfolio in the political stability of a dictatorship or autocracy running out of water and brutally suppressing public dissent. It’s bad optics, bad for the climate, and bad for business.