Bitcoin ban in China is the unnoticed geopolitical event of the decade

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It is perhaps underestimated how much China’s autocratic government has messed up with bitcoin.

The political and economic sun has risen in the East over the past century, with China playing an increasingly important role in global geopolitics. Despite this trend, I have long been skeptical of China’s centralized and autocratic governance structure, and 2021 could be a monumental year, exposing the weaknesses of excessive control. If Bitcoin turns out to be as important a technology as I think it is, then the CCP’s decision to ban bitcoin mining could turn out to be the biggest geopolitical misstep of the next decade. In summary, while decentralized Bitcoin has shown its resilience to regulation, bans, and decreased the likelihood of an attack by 51%, centralized China may have handed critical technology of the future to its peers.

The US-China conflict is not just a Donald Trump phenomenon

The United States and China have been at loggerheads in recent years with flashpoints over corporate control, tariffs and trade, Xinjiang, the Olympics, the origins of coronaviruses, Hong Kong, the espionage, Huawei, Taiwan, the South China Sea, TikTok and WeChat, Tibet and soon. Hopefully the world’s two greatest nations don’t end in a hot war, but they will likely remain in a cold war for many years to come as the United States retreats from its position of global hegemony, China. is rising in the East and we are scrambling for a new world order. Despite all of this conflict, the geopolitics of bitcoin mining has fallen under the US-Chinese radar.

Bitcoin Geopolitics – Who Cares?

Most people don’t understand Bitcoin correctly – let alone politicians and the mainstream media – so the ignorance of Bitcoin’s geopolitics is not surprising. But just as Bitcoin gains in financial and economic importance, its geopolitical importance will also increase.

There is a fascinating geopolitical shift underway in Bitcoin where power is moving from East to West.

China and the United States are both trying to exert control over their populations. The centralized Chinese apparatus is much faster and more efficient than that of the United States. Some would say the Chinese approach has benefits – like tackling the COVID-19 pandemic – but there are certainly consequences too. While China refuses bitcoin miners, Western entrepreneurs are capitalizing and establishing this industry in the West.

“Strategic China” ignored innovation because of centralized governance

We have established over the past few quarters that Bitcoin is a powerful technology with immense potential for the world. The future is uncertain, but a digital, decentralized, secure and scarce asset has the potential to be the cornerstone of a new digital financial infrastructure. With each passing cycle, the likelihood of Bitcoin having a role to play in the global financial infrastructure increases and individuals, institutions and smart funds secure their exposure to the network.

Miners are an essential part of the Bitcoin network; they secure the network and process transactions. At the start of the year, China occupied the king’s seat in this industry with around 75% of the world’s bitcoin mining resources. This domination was potentially a powerful tool for the Chinese economy. However, in the third quarter of 2021, China decided to ban bitcoin mining. Rather than taxing, coercing or confiscating equipment, minors were allowed to leave China en masse in the third quarter of 2021.

The reasoning for China’s decision is uncertain, but what we do know is that it would be very difficult to enforce this type of blanket ban in a moderately free country. Imagine your country wiping out an industry on a whim. The United States is struggling to pass an infrastructure bill; how are they going to ban an asset that they don’t even understand? I wrote more about this in “Worried About A Ban? So you need Bitcoin more than you think.

The Western world is far too influenced by tax revenues, fear of making mistakes, and immediate political pressure to implement a blanket ban on bitcoin mining. In contrast, China can only enforce a ban because it is centralized and autocratic. I think this thoughtless centralized move could be the biggest geopolitical misstep of the next decade, ceding technological power and resources to global peers.

Bitcoin miners could have a profound impact on the energy industry

Miners not only secure the grid, but they convert energy into a digital currency network, which has potentially profound implications for the energy industry at large. I recommend reading Nic Carter’s recent article “Bitcoin Mining Is Reshaping The Energy Industry And No One Is Talking About It” for more information. I also covered much of this topic in “The ESG Solution”.

1) Miners can use energy at times when normal consumers have low demand. Often this energy is wasted because we do not have a cost-effective means of large-scale energy storage and long-distance transport.

2) Miners can provide base load to intermittent power generators. Renewable energy producers are often the most intermittent, so miners can support renewable energy investments and ESG goals.

3) Miners can make an energy grid more robust because they can also be turned off if power is needed elsewhere.

Source: CBECI

China has just handed over one of the most exciting new industries to the rest of the world. Miners have moved across the world and the United States has been the biggest beneficiary. Most American politicians probably have no idea what’s going on, but some do. I know Ted Cruz isn’t everyone’s cup of tea, but listen to this interview he gave on bitcoin mining. I think he understands a thing or two about the potential positive impact mining could have in America.

Key Implications Before this change, a 51% attack on the Bitcoin network was already an unlikely event. But with China holding 75% of the world’s hash power, a 51% nation-state coordinated attack was a possibility. Bitcoin mining is much more decentralized and the likelihood of an attack has decreased to 51%, improving Bitcoin’s security. reducing hash rate (a measure of bitcoin mining power), processing transactions normally until Q3 2021. After dropping by more than 50%, hash rate recovered to less than 10 % of its previous peak, further boosting Bitcoin’s resilience.

Image source

China’s actions highlight the risks of centralized autocratic governance. Western political governance itself is in a terrible state, but the more decentralized nature of political and economic processes, with greater respect for property rights, is stronger than in a centralized system. Entrepreneurs can capitalize on these opportunities and these entrepreneurial risks benefit society in the long run through a more robust energy grid, economic growth, employment opportunities, etc. in western countries. Additionally, for every politician who is Bitcoin negative, there is one who is significantly more positive and knowledgeable. China may have handed over a strategic global resource of the future to the rest of the world. Verifying the transactions of the world’s first decentralized storage and value transfer network, as well as the ability to convert excess energy into a currency network could revolutionize the energy industry in the years to come, but China is not. will play no role. Maybe the sun isn’t rising in the east after all? Conclusions Bitcoin mining is much more decentralized after China’s mining ban. The probability of an attack has decreased by 51%, improving the security of Bitcoin. process transactions as usual until Q3 2021. China’s actions highlight the risks of centralized autocratic governance. Western entrepreneurs have capitalized, benefiting society in the long run, regardless of the perspective of their politicians. Bitcoin continues to anchor itself economically, financially and politically in Western countries. China may have handed over a strategic global resource of the future to the rest of the world.

This is a guest article by Rob Price. The opinions expressed are entirely theirs and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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