The US share of Bitcoin mining recently fell back down to 35.425%, just under 36.025%. Though this change may seem minor, it could serve as a harbinger of greater changes to come within the industry. Change is coming and we’re thrilled to be leading the charge into a decentralized technological future. The current concentration of mining power in just two adversarial countries — Russia and China — should give anyone pause. Are we in effect sleepwalking into a future where Bitcoin, built to be censorship-resistant, finds its foundations eroded by geopolitical gamesmanship.

Are We Losing The Innovation Race?

Let's be blunt: the US pioneered so much of the internet and the technology that underpins Bitcoin. The fact that we could be losing ground here, even slightly, is a strategic misstep that stings. It would be as if we invented the internet and then allowed China to take the lead in e-commerce.

The US reasons for decline aren’t as clear cut as the above examples might suggest, of course. We understand that increased competition, rising energy costs, and regulatory uncertainties are factors as well. Just how far are we going to allow rising energy costs to shape the future? This is a really exciting, potentially revolutionary technology we’re talking about here! We need to get creative. Consider rewarding environmentally sustainable energy strategies for miners, rather than just penalizing them with increased costs.

What's especially concerning is the regulatory landscape. In contrast to the handful of states that are friendly and welcoming to crypto, a growing number are establishing a minefield of red tape. This patchwork approach leads to uncertainty and chases innovation and capital to more favorable pastures. We should do that through a more holistic, proactive regulatory framework at the federal level – one that encourages and enables innovation rather than impeding it.

Centralization Risk Is A Real Threat

The relocation of mining power to Russia and China isn’t merely a matter of market share. It’s a question of control. Both countries defend quite a unique conception of freedom compared to our own. The opposite is true, since the one area where Russia and China excel is in having lots of cheap energy resources. They have regulatory environments that fiercely defend environments that are favorable to in-state activities that advance their state interests. That has created a wonderful environment for those initiatives.

This raises a critical question: what happens if these governments decide to exert influence over the Bitcoin network? A 51% attack — one where an entity has gained control of over half the network’s mining power — is not possible in the short term. The current concentration of power does make it a key pressure point. Subtle censorship and manipulation of transactions might develop as strategies. Coordinated disinformation campaigns are likely, with the goal of undermining confidence in Bitcoin.

Remember, Bitcoin's strength lies in its decentralization. And the more geographically diverse and politically independent the mining network, the more resilient it is. Ceding so much dominion to countries with authoritarian inclinations is precisely the opposite of what Satoshi Nakamoto intended.

Unintended Consequences of Our Actions?

Here's where the "unexpected connections" come in. Are our well-intentioned policies, ostensibly created to protect consumers and the environment, inadvertently pushing Bitcoin mining overseas? This is an important question to explore.

If we make it too expensive or too difficult to mine Bitcoin in the US, miners will simply go elsewhere. This isn’t a theoretical concern—this is occurring right now. Above all, we need to consider the second-order effects of our regulations. Are we addressing the immediate concern but tripling down on a larger one?

  • Higher energy costs are driving miners to seek cheaper alternatives, even if those alternatives are located in countries with questionable human rights records.
  • Unclear regulatory frameworks are creating uncertainty and deterring investment in US-based mining operations.
  • Overly burdensome compliance requirements are making it difficult for smaller miners to compete, further concentrating power in the hands of larger players, some of whom may have ties to foreign governments.

We need to ask ourselves: are we willing to sacrifice our leadership in the Bitcoin space in the name of short-sighted policies?

Is It Time To Sound The Alarm?

Maybe "alarm" is too strong. But we definitely need to pay attention. The US share of the US Bitcoin hash rate dropped below a third at 35.425%. This represents a decrease of 0.60% from last quarter’s rate of 36.025%. While that might sound small, trends matter.

We must have an honest national conversation about the future of Bitcoin mining in the US. The problem is far more than dollars and cents. It’s about national security, keeping the lead in key technologies, and the future of an innovative and important 技术.

Let's not let short-sighted policies and a lack of vision cede our leadership in Bitcoin to countries that don't share our values. The urgency to act is great, before a worrying year turns into a lasting trend. If not, we may end up wishing we’d been more proactive when we’re faced with mission-creeping pernicious effects of standing still.