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 halt existing activities to reduce energy consumption.
Bitcoin is based on a decentralized network, meaning 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 miners.
These miners operate specially designed computers to solve complex mathematical puzzles that effectively make a Bitcoin transaction possible. The miners get Bitcoin as a reward and that is the incentive.
However, because the computers are powerful, they consume a lot of energy.
Bitcoin mining consumes an estimated 128.84 terawatt hours per year – more than entire countries like Ukraine and Argentina, according to the Cambridge Bitcoin Electricity Consumption Index, a project by the University of Cambridge.
China accounts for around 65% of all Bitcoin mining worldwide – Inner Mongolia alone accounts for around 8% due to its cheap energy. By comparison, the United States accounts for 7.2% of the world’s bitcoin mining.
Not all cryptocurrencies work like Bitcoin, however.
Inner Mongolia, located in northern China, did not meet the central government’s assessment targets for energy consumption in 2019 and was abused by Beijing. In response, the Region’s Development and Reform Commission put forward plans to reduce energy consumption.
Part of these plans is to close existing cryptocurrency mining projects until April 2021 and not approve any new ones. This includes re-evaluating other energy-intensive industries such as steel and coal.
While the Chinese government has been helping develop Bitcoin’s underlying blockchain technology, it has tried to fight digital currencies itself. In 2017, Beijing first banned coin offerings to issue digital tokens and raise money. The government has also taken action against companies involved in cryptocurrency operations such as exchanges.
China is also pushing to become more environmentally friendly. President Xi Jinping said last year that the country is aiming for the highest carbon emissions by 2030 and carbon neutrality by 2060.