Will the complete ban on Bitcoin mining in many places have a significant impact? How to solve the problems of high energy consumption and pollution?

Recently, a piece of news about "Inner Mongolia has set up a reporting platform for virtual currency mining companies" has become a hot search on Weibo. In fact, cryptocurrency mining has always attracted much attention. Inner Mongolia is not the first province to clear out "mining" companies. Xinjiang and other places have introduced similar policies before.

Due to the impact of the "carbon neutrality" and other important international climate issues in recent years, many places may introduce policies to exclude mining in the future, and many people are worried about this. Because we know that the Bitcoin system relies on miners to generate consensus and maintain the security and stability of the system.

If mining is banned, then isn’t that a “pill”? Will the relevant policies in Inner Mongolia, Xinjiang and other places have a significant impact on Bitcoin?

Why do Inner Mongolia, Xinjiang and other places want to exclude and clear out "mining" companies?

This starts with several major "mining holy places" in my country. Since the proof-of-work mining of cryptocurrency is actually carried out through the consumption of "energy", mining farms are usually concentrated in areas with abundant electricity resources and low electricity prices to reduce costs and ensure a higher input-output ratio.

Currently, the regions rich in thermal power resources are Inner Mongolia and Xinjiang, and the regions rich in hydropower are Yunnan, Sichuan, Guizhou and other places. These places can all be called "mining holy places."

Inner Mongolia and Xinjiang are mainly based on thermal power generation, which runs counter to environmental issues including carbon neutrality. Thermal power generation is a well-known "producer" of "three wastes", namely waste water, waste gas and waste residue pollution. Although it is treated layer by layer for environmental protection, some pollutants that cannot be filtered out are still discharged.

In 2020, at the United Nations General Assembly, my country pledged to strive to peak carbon emissions before 2030 and achieve carbon neutrality before 2060. This goal has put a lot of pressure on these places, and the "mines" of electric tigers are naturally the focus of remediation.

From past announcements in Inner Mongolia or Xinjiang, it is not difficult to find that in order to obtain low electricity prices, many mining farms have been skirting the rules and packaging themselves as "cloud computing" infrastructure encouraged by policies. Many of them have even been enjoying policy benefits in disguise.

Not only did these illegal mines fail to bring economic benefits to the local area, but they also secretly took away resources and enjoyed support policies. This is also the reason why Inner Mongolia and Xinjiang had to rectify and clear out some mines, which began as early as 2018.

Compared with thermal power plants, Yunnan, Sichuan, Guizhou and other places do face conflicts with peak electricity consumption before the "flood season" arrives. Therefore, even environmentally friendly hydropower can sometimes be "unable to cope".

Due to the current environmental pressure of carbon neutrality and the past illegal electricity use and peak electricity consumption, the future of domestic thermal power mines is not optimistic. The pressure on hydropower is slightly smaller, but the follow-up policy is still unclear.

Will the liquidation of a large number of mining farms affect the stability of the Bitcoin system?

One month ago, Wu Jihan, the richest man in the mining industry, said at the second BitDeer 421 Water Festival and Mining Ecology Conference that the impact of carbon neutrality on the mining industry is a problem that the entire industry needs to face. He said that this is a limitation of the mining industry and everyone should not be complacent about this matter.

Moreover, Bitcoin mining also faces doubts in China. If miners continue to use unclean energy, they will be at a disadvantage in the development ecology within my country.

So, if, as Wu Jihan said, a large number of domestic mining farms are shut down due to prominent environmental problems caused by the use of "non-clean energy", will it have a significant impact on Bitcoin?

The closure of a large number of mining farms will first face the problem of computing power. It is impossible to say that there will be no impact at all, because at least in the short term, the computing power of Bitcoin will be reduced. But in fact, the impact is very small, because Bitcoin is already a global public facility with nodes all over the world. As a point-to-point distributed system, its biggest feature is "anti-single point failure".

However, some people are still worried that in extremely extreme cases, if a country's computing power is suddenly shut down, the computing power will drop sharply, and Bitcoin's difficulty adjustment mechanism cannot be adjusted so quickly, in which case the block time will be extended.

However, this worry may be unnecessary. The sharp decline in computing power means that opportunities have come for other miners, because the benefits of mining at this time are greater. Some old mining machines that are close to being eliminated due to their "energy consumption ratio" may be put back on the shelves.

In other words, if the mining farm here stops and the computing power decreases, it will soon be slowly made up by miners in other regions. This can also be regarded as a game between miners under the economic model designed by Bitcoin.

Therefore, even if all the mines in Xinjiang and Inner Mongolia are shut down, it will not have much impact on the stability of the Bitcoin system, not to mention the impact on the market. Besides, although mining uses a lot of "non-clean energy", the use of "clean energy" is much greater. Driven by long-term environmental protection factors in the future, Bitcoin mining will inevitably turn to the use of mainly clean energy.

Many people in the mining industry said that they are not too worried about the domestic hydropower problem for the time being, because hydropower mines in many places are still "invested" by local businesses, which helps to fully utilize the surplus hydropower energy in the "flood season" to create economic benefits.

In fact, many "mining" activities are using excess and "wasted" energy. For example, Reuters recently reported that North American Bitcoin miners are working with oil drillers to use excess natural gas to mine Bitcoin.

Because oil and gas often come from the same wells, when drillers extract oil, the gas is wasted in the combustion process, storing the value of "excess energy" that would otherwise go to waste in many areas.

Wu Jihan also said that miners need to consider the long term and look for clean energy for mining. Blockchain is also seeking solutions. For example, a blockchain backtracking mechanism is established to distinguish clean energy mining products. In the future, with the entry of institutions, or even the emergence of clean energy, the price of Bitcoin will be better.

Can the problem of mining polluting the environment be solved?

As mentioned earlier, clean energy seems to be imperative. Musk has criticized Bitcoin's environmental pollution problems more than once. Recently, he said on Twitter that the energy usage of Bitcoin mining has begun to exceed that of a medium-sized country.

It can be seen that the crazy use of energy by Bitcoin mining is not only a concern in China, it has become an international issue. So when it comes to environmental issues, is it so easy to solve?
In addition to Wu Jihan’s previous suggestion that “miners must be prepared to look for clean energy mining for a long time” and establish a blockchain backtracking mechanism to distinguish clean energy mining products, Musk also proposed his own solution.

He tweeted that auditing the use of renewable energy by large Bitcoin miners could help ease concerns that cryptocurrencies are not good for the environment, and that this problem could be easily addressed if the top ten mining organizations published audited renewable energy consumption.

Of course, there are also many people (such as Vitalik Buterin) who say that Bitcoin's energy consumption is a major flaw and that a better consensus mechanism (such as non-POS mechanism) should be chosen to replace it, just like Ethereum plans to switch from the POW consensus mechanism to the POS mechanism that does not rely on energy consumption. Of course, the POS mechanism is not perfect either, so the debate between POW and POS continues.

In fact, human beings' environmental awareness is constantly increasing, and science and technology are constantly advancing. As people propose various governance plans and continue to innovate in clean energy, the problem of mining pollution will no longer be a problem in the future.