A visual representation of the cryptocurrency bitcoin.
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GUANGZHOU, China – China’s Inner Mongolia region plans to ban new cryptocurrency mining projects and shut down existing operations in a bid to reduce energy consumption.
Bitcoin is based on a decentralized network, which means that it is not issued by a single entity such as a central bank. Transactions, recorded in a public ledger called a blockchain, must be “verified” by minors.
These miners use specially designed computers to solve complex mathematical puzzles that effectively allow a Bitcoin transaction to occur. Miners get bitcoin as a reward and that’s the incentive.
But since computers are very powerful, they consume a lot of energy.
Bitcoin mining consumes around 128.84 terrawatt-hours of energy per year – more than entire countries such as Ukraine and Argentina, according to the Cambridge Bitcoin Electricity Consumption Index, a project of the ‘University of Cambridge.
China accounts for around 65% of all bitcoin mining in the world – Inner Mongolia alone accounts for around 8%, due to its cheap energy. By comparison, the United States accounts for 7.2% of global bitcoin mining.
However, not all cryptocurrencies work like bitcoin.
Inner Mongolia, located in northern China, failed to meet central government assessment targets for energy consumption in 2019 and was berated by Beijing. In response, the region’s development and reform commission drew up plans to reduce energy consumption.
Part of those plans are to shut down existing cryptocurrency mining projects by April 2021 and not approve new ones. They also involve reassessing other energy-intensive industries like steel and coal.
While the Chinese government has supported the development of Bitcoin’s underlying blockchain technology, it has sought to crack down on digital currencies themselves. In 2017, Beijing banned initial coin offerings, a way to issue digital tokens and raise funds. The government has also cracked down on companies involved in cryptocurrency transactions, such as exchanges.
China is also striving to become more environmentally friendly. President Xi Jinping said last year that the country is aiming for peak carbon dioxide emissions by 2030 and carbon neutrality by 2060.