Bitcoin trading recently bounced after a historic dip in value following Beijing’s crackdown on cryptocurrencies. Read more about cryptocurrencies in China.
Bitcoin trading recently bounced back to US$7,000, recovering after a historic dip in value following Beijing’s crackdown on cryptocurrencies in September. Bitcoin is both a digital currency and payment system that is managed by decentralized computer networks.
The ten-fold increase in bitcoin’s value over last year reflects a level of market optimism that is puzzling for independent observers. This has not gone unnoticed by the country’s regulators, which recently banned all initial coin offerings (ICOs), or fund raising activities, for new cryptocurrency ventures.
Bitcoin mining in China
Bitcoin was created in 2009 by Satoshi Nakamoto, whose identity remains disputed, as a form of electronic peer-to-peer cash system. Since then, the technology behind the cryptocurrency has become even more sophisticated and secure – its origins after the global recession of 2008 driving its innovation.
Cryptocurrencies, such as bitcoin, operate through blockchain technology: encrypted and linked transaction data that include time stamps. New bitcoins get released through a process called mining – where transactions are verified, and added to the public ledger, known as the blockchain.
To be profitable, cryptocurrency mining requires an advanced degree of computer processing power, making China an ideal base for such operations. China is the world’s leading electricity producer and provides important energy subsidies – bitcoin mining is an electricity-intensive operation. Bitcoin mines are established through giant warehouses that host thousands of custom-designed computing machines to check transactions and release new bitcoin. This is why China has consistently accounted for over 75 percent of the world’s bitcoin trade, aside from the drop in September.