Behind the recovery of Bitcoin computing power: Chinese mining pools complete overseas migration and continue to monopolize the market

Cailian Press | Blockchain Daily (Hangzhou, reporter Xu Cihao) reported that since May this year, the country has launched a campaign to severely crack down on Bitcoin mining. Inner Mongolia, Sichuan, Xinjiang and other provinces have issued documents requiring the immediate cessation of virtual currency mining.

Due to historical reasons, China has always been the computing power center of Bitcoin. The sudden regulation forced many mining farms and mining pools to shut down domestic mining machines, resulting in a sharp drop in Bitcoin computing power. According to data from OKEx, on May 15 this year, the total computing power of Bitcoin reached a historical high of 176.06EH/S, and then experienced a straight decline, falling to a minimum of 99.38EH/S on July 15, a drop of more than 43.55%.

However, major mining companies and mining pools immediately announced that they would relocate their mining farms and mining machines overseas. More than two months later, the Blockchain Daily reporter learned that domestic mining companies and mining pools have basically completed their overseas migration operations, with the symbolic feature being that the computing power of the entire Bitcoin network has begun to recover rapidly, and domestic mining pools continue to dominate the top of the computing power list.

Data from OKEx shows that after hitting the bottom on July 15, the total Bitcoin network hashrate has risen sharply again, and as of press time on September 2, it has risen back to 125.19EH/S. AntPool, F2Pool, ViaBTC, Poolin, BTC.com, and Binance mining pools with Chinese backgrounds continue to dominate the top six in the hashrate list.

To put it simply, after domestic regulation, Bitcoin computing power is still in the hands of the Chinese, it’s just that the Chinese have changed the place where they mine.

Industry insiders also analyzed to the Blockchain Daily reporter that under the circumstances of China's severe crackdown on Bitcoin mining, companies with a clear and definite global mining pool strategic development direction and years of experience in the blockchain industry have survived, and not only that, their leading position has been further consolidated.

Mining pool computing power is recovering strongly

On May 21, the 51st meeting of the Financial Stability and Development Committee of the State Council called for a crackdown on Bitcoin mining and trading. Subsequently, power-rich provinces such as Inner Mongolia, Sichuan, and Xinjiang took a one-size-fits-all approach to Bitcoin mining.

Starting in June, the relevant departments of Sichuan Province issued a notice requiring power generation companies to conduct self-inspection and self-correction, and immediately stop supplying power to virtual currency mining projects, in order to implement the national cleanup requirements without compromise. Since then, all Bitcoin mining machines in Sichuan Province have been collectively cut off from power, and Bitcoin computing power has plummeted.

Take AntPool, the world's largest mining pool, for example. With the high-pressure policy on Bitcoin mining in China, its computing power once dropped by 65.76%. On May 8, AntPool's computing power reached a historical high of 31752.87PH/S, and on June 29, it once dropped to 10871.61PH/S.

Ant Pool is affiliated with Bitmain. Bitmain previously announced during its IPO that it has four major mining bases in China, including two in Inner Mongolia, one in Sichuan, and one in Ningxia.

However, in less than two months, the computing power of Ant Pool has basically returned to the level before the sharp drop. On August 31, the computing power of Ant Pool was 23329.87PH/S, the same as on May 22.

The recovery of AntPool’s computing power is related to Bitmain’s active “going overseas” strategy.

The Blockchain Daily reported that Bitmain Mining held a closed-door invitation-only meeting on June 19. The main content of the meeting was about mining going overseas, including taxation, legal affairs, customs clearance, etc. in North America and Kazakhstan. At the same time, Bitmain will build a stable, high-quality, high-load mining farm in North America to provide convenient conditions for domestic miners and mine owners to go overseas.

On June 24, Bitmain stopped selling mining machines worldwide and issued an announcement that its mining farms would urgently go overseas. In the announcement, Bitmain stated that all its business colleagues rose to the challenge and urgently went overseas to the United States, Canada, Australia, Russia, Belarus, Sweden, Norway, Kazakhstan, Angola, Congo (Brazzaville), Indonesia and other countries to work with customers to find high-quality electricity resources for the industry.

On July 25, Bitmain announced a partnership with Enegix to build the world’s largest crypto mining farm in Kazakhstan, which will be equipped with more than 50,000 Ant S19 Pro mining machines.

Regarding the current overseas mining farms of Bitmain and the overseas business expansion of Ant Pool, Bitmain declined an interview with the Blockchain Daily reporter on the grounds that Ant Pool is being divested and needs time to sort out.

Similar to AntPool, F2Pool, Poolin, ViaBTC, and BTC.COM, all of which have Chinese backgrounds, also quickly transferred their mining pools and computing power overseas. Currently, their computing power has basically returned to the level of April and May (as shown in the figure below).

Bitcoin mining pool computing power ranking

Chinese-backed mining pools continue to dominate

Two months later, domestic regulatory policies have been implemented and domestic mines have basically been closed.

However, when we open the Bitcoin browser, we will suddenly find that not only has the Bitcoin network computing power quickly returned to its previous level as mentioned above, but even the mining pool rankings have not changed much. AntPool, F2Pool, ViaBTC, Poolin, BTC.com, and Binance, which have domestic backgrounds, still occupy the top six in the mining pool computing power list.

On September 2, the total computing power of these six major mining pools added up to about 95,000 PH/S, accounting for about 70% of the total computing power of the Bitcoin network (as shown below).

Bitcoin mining pool share chart

“In the past, Chinese people were mining in China, but now Chinese people are mining overseas, especially in North America and Kazakhstan.” A person with five years of experience in the blockchain industry told the Blockchain Daily reporter.

A senior miner who declined to be named also told the Blockchain Daily reporter that the computing power of the top mining pools has recovered rapidly. On the one hand, domestic miners themselves quickly found new sites to rebuild their mining operations in a very short period of time, and then continued to connect to the original mining pools.

On the other hand, some large-scale mining companies have signed legally binding investment terms with overseas companies a long time ago. The two parties jointly invest in the construction of mining farms overseas, and quickly put the mining machines into operation after they are shipped abroad and deployed.

This is proven in Bitcoin mining.

On May 19, BitMining announced that it had signed a legally binding investment agreement with Dory Creek LLC, a wholly-owned subsidiary of Bitdeer Inc. The two parties will jointly invest in the construction of a cryptocurrency mine in Texas, the United States. BitMining plans to invest a total of US$25.74 million.

On May 27, BitMining announced that it had signed a binding investment terms list with a Kazakhstan entity. According to the terms, BitMining plans to invest a total of RMB 60 million (approximately US$9.33 million) to jointly build and operate a mining farm with a load of 100 megawatts.

According to data from OKEx, as of press time on September 2, the computing power of BTC.com under BitMining was 12,470PH/s, accounting for 11.16% of the total network computing power, ranking fifth among mining pools.

Relevant personnel from BitMining told the reporter from Blockchain Daily that there are two main reasons for the stable recovery of the platform's computing power: first, BTC.com has long been planning global markets and expanding overseas business, forming a global brand power; second, the ability to develop international markets has been steadily improving. Currently, most of BTC.com's new customers come from markets outside of China.

Of course, overseas mining pools have also developed rapidly recently. Currently, overseas mining pools such as Foundry USA, SlushPool, and SBI Cryto have entered the top ten.

Foundry USA mining pool belongs to Digital Currency Group (DCG), SlushPool belongs to SatoshiLabs located in Prague, the capital of the Czech Republic, and SBI Cryto is a Bitcoin mining pool under the subsidiary of Japan's SoftBank Group.

Currently, the Foundry mining pool ranks 7th in the network, with a total computing power of nearly 10EH/s. The number of blocks produced in the past month accounts for more than 9.18% of the entire network. Compared with the top six mining pools that have been operating for several years, the Foundry mining pool has entered the top 7 in just about half a year since October last year, accounting for 9.38% of the global Bitcoin computing power.

International market expansion capabilities become the key

What must be popularized first is that, unlike a single mining farm, a mining pool is an open, fully automatic mining platform. Miners from all over the country connect their mining machines to the mining pool, contribute their computing power to mine together and then obtain profits, and the mining pool charges commissions from the miners.

According to the second quarter financial report released by BitMining, a US-listed company, the company completed the acquisition of BTC.com on April 15. Currently, BTC.com's computing power accounts for about 11.3% of the entire Bitcoin computing power, ranking fifth among the global Bitcoin mining pools, at about 12,770 PH/S.

From April 15 to June 30, 2021, BTC.com recognized revenue from all mining pool operations of US$422.8 million, accounting for 95.0% of BTC Mining's total revenue in the second quarter.

The impressive revenue data of BTC.com mining pool is enough to show that compared with mining farms, mining pool business is more stable.

However, as major mining farms are now moving overseas, mining pools must also adapt to the new situation, actively expand the international market, attract overseas customers to connect to their own mining pools, and even help customers find cheap overseas electricity resources and settle overseas.

Senior miner Sheng Yincan told the reporter of Blockchain Daily that under China's severe crackdown on Bitcoin mining, Bitcoin mining pools may usher in a round of reshuffle. Companies with clear global strategic development directions and years of experience in the blockchain industry will survive, and their leading position will be further consolidated. In this environment, only globalization can achieve true distribution, minimize costs, and then serve more users.