Now that China’s politburo policymakers have softened their stances on blockchain technology, local block reward miners have another competitive advantage over their industry peers. This development comes as the BTC block reward mining sector grapples with reduced earnings in the aftermath of the halving.
Block reward miners operating in China already enjoyed some of the lowest electricity rates around the world. With this embrace by the Chinese central government, they may also have access to the generous subsidiary programs officials grant technology enterprises. The subsidies can often include discounts on power, facilities, and reimbursements for labor costs.
One such example is from the city of Ya’an, in the Sichuan province. Officials publicly encourage blockchain companies to establish themselves in the area and consume the excess hydropower from the coming wet season.
How will North American block reward miners compete with their production costs 3 to 4 times higher to discover a BTC block than their Chinese opponents?
Their situation is similar enough to merit comparison to the traditional manufacturing industry. From electronics to apparel, China became the “world’s factory” as blue-collar jobs dried up in North America. Most consumers tolerated this shift because it meant lower prices for them.
Block discovery services adhere to many of the same basic economic principles. A node is still a worker that produced an output but has an associated cost for performing this task.
There is a very narrow tightrope for block reward miners to walk with profitability on the BTC network. A core principle underpinning block discovery is the competition amongst participants. If Company A’s cost structure is significantly lower than Company B, they’re capable of putting more resources to work on their side to outperform their rivals.
Not to mention the fact that most of the hardware and parts also come from within China, which speeds up the supply delivery process. There could be additional government incentives put in the decree that encourage local companies to collaborate or prioritize domestic firms over an international partner.
This sort of collusion and centralized control is typical within Chinese industries.
As long as the BTC community doesn’t object to the further centralization of mining in China, its supporters will not notice any immediate difference. Already, no other country holds a hash rate stake close to China.
According to CoinShares, Chinese mining pools are responsible for 65% of the BTC hash rate, while North American miners compose about 15% of the hash rate.
Adding to this is the fact that the Chinese state either directly or indirectly holds full control over all its industries nationwide. So far, the regime has yet to assert its dominant influence over the BTC network in a manner that noticeably affects senders of the digital token.
North American block reward miners in engaged in a two versus one fight to the death.
North American block reward miners are not just competing against Chinese-based rivals. They are battling against a government apparatus that prides itself on unabashed protectionism. Many will not survive.
If they are a publicly listed company, their shareholders will not tolerate losses for the supposed greater good of the ecosystem.
While the BTC community forges ahead, evangelizing increasing market value based on emotion instead of utility, North American firms are facing the starker realities that even if successful, these tactics still leave them at a disadvantage versus block reward miners in China.
China is coming for North American block reward miners just as it happened for industrial cities in the midwest of the United States. Unlike the U.S. and Canadian factory workers, no labor unions are advocating for block reward miners’ protection. They are all alone.
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