What Is Bitcoin Pizza Day and Are Chinese Miners Mining Bitcoin Again? How the U.S. State of Georgia Overtook Texas as America’s Bitcoin Mining Hub. (#102 - 30 May 2022)



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The Future of Money with Henri Arslanian
What Is Bitcoin Pizza Day and Are Chinese Miners Mining Bitcoin Again? How the U.S. State of Georgia Overtook Texas as America’s Bitcoin Mining Hub. (#102 - 30 May 2022)
By Henri Arslanian • Issue #95 • View online
This past weekend was the 12-year anniversary of Bitcoin Pizza Day, which marked the first time that some unit of value was placed on Bitcoin.
This happened on May 22nd, 2010, when 10,000 Bitcoins were paid in exchange for two pizzas. 
But what exactly happened on that date twelve years ago? And how did the transaction take place? I cover this interesting story in our newsletter this week.
We will also discuss if Bitcoin mining is making a comeback in China despite the ban. How did the U.S. state of Georgia overtake Texas as America’s Bitcoin mining hub? And what is happening with Bitcoin mining in Russia and Kazakhstan?
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Here we go!

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What Is Bitcoin Pizza Day?
May 22nd is a very special day in the history of Bitcoin and money. 
Because on May 22, 2010, Bitcoin enthusiast Laszlo Hanyecz posted online a receipt of the first documented purchase of goods in Bitcoin: two pizzas for 10,000 Bitcoin, the equivalent of US$41 at the time. 
But twelve years later, those 10,000 Bitcoins are worth over $300 million at the time of writing!
His original message said:
I’ll pay 10,000 bitcoins for a couple of pizzas…like maybe 2 large ones so I have some left over for the next day. I like having left over pizza to nibble on later. You can make the pizza yourself and bring it to my house or order it for me from a delivery place, but what I’m aiming for is getting food delivered in exchange for bitcoins where I don’t have to order or prepare it myself, kind of like ordering a “breakfast platter” at a hotel or something, they just bring you something to eat and you’re happy!
I like things like onions, peppers, sausage, mushrooms, tomatoes, pepperoni, etc…just standard stuff no weird stuff no weird fish topping or anything like that. I also like regular cheese pizzas which may be cheaper to prepare or otherwise acquire. 
If you’re interested please let me know and we can work out a deal. 
And after no offer for three days, he even proposed to raise the price by saying:
But a transaction was finally made: 
I highly recommend reading the entire message trail here
This is the picture of those two famous pizzas (from Papa John’s), along with one posted by Laszlo himself enjoying his purchase.
Source: Laszlo Hanyecz
Source: Laszlo Hanyecz
May 22 is now celebrated by many in the global crypto community as “Bitcoin Pizza Day.”
You can watch an interview with Laszlo (who paid those 10,000 Bitcoins for the pizza) here.
So if you’re feeling bad about some financial decisions in your life, this is a reminder that things could be a lot worse!
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Are Chinese Miners Mining Bitcoin Again? And How the U.S. State of Georgia Overtook Texas as America’s Bitcoin Mining Hub.
China used to be the uncontested global leader in Bitcoin mining, with over 65% of the global Bitcoin hashrate. 
Source: Cambridge Centre for Alternative Finance
Source: Cambridge Centre for Alternative Finance
But that drastically changed in June 2021 when China banned Bitcoin mining.
In a matter of weeks, China’s share of global Bitcoin mining plummeted from 65% to 0%.
Other countries, notably the U.S., took advantage of this and rapidly increased their share of global mining. 
Source: Cambridge Centre for Alternative Finance
Source: Cambridge Centre for Alternative Finance
It was thought that Bitcoin mining would never return to China.
However, a surprising recent report from the Cambridge Digital Assets Programme dropped a bombshell: China’s share of mining has surged back up to 22.3%.
Whilst this may come as a surprise at first glance, there are a number of reasons to explain this unexpected surge. 
First, whilst most Chinese miners shut down operations in China and moved to friendlier jurisdictions like the U.S. and Kazakhstan, it is very likely that some simply shut down their machines for some time and layed low. Once the dust settled, they started operating again. 
As we will discuss later in this newsletter, many Chinese miners moved to Kazakhstan and Russia following the China ban. But following problems in these countries, power outages and internet shutdown in Kazakhstan and government ban and international sanctions in Russia, many miners may have decided to take the risk and simply move back to China.
Second, many of these miners are able to mask their identities using VPNs so whilst the actual Bitcoin mining takes place in China, it is appearing like coming from Western countries like Ireland and Germany. Whilst there are no significant mining activities in these countries, they have in contrast strong privacy laws which make it ideal for anyone trying to hide under a VPN.  
Finally, the reality is that whilst the central government wants to ban Bitcoin mining, many provincial governments, particularly those with excess electricity, are more than happy to have them continue to operate.
At a time when the economy is suffering due to the central government’s zero-Covid policy and the fact that the central government is busy with more urgent priorities, it is easy to see how such an activity can take place underground with or without the unofficial approval of provincial (or city specific) authorities (something that many had long suspected).
This matters due to the ESG debate around Bitcoin.
The migration of the hashrate to the United States has one major advantage: greener Bitcoin mining.
As we have covered in the past in this newsletter, Bitcoin mining in the US is very energy-efficient, using an increasing percentage of sustainable sources (wind, solar, hydro, geothermal, nuclear) in their energy mix.
Source: Bitcoin Mining Council
Source: Bitcoin Mining Council
Whilst most of the mining in China that took place during the wet season and in regions like Sichuan was also mainly using renewables (thanks to the abundance of hydroelectricity), it is not the case during the dry seasons where coal is still used.
It will be very interesting to watch if this data changes over the coming months. Ironically, the biggest deterrent to Bitcoin mining in China may not be government officials, but rather the drop in the price of Bitcoin which may make Bitcoin mining not as attractive to some miners (depending on their electricity and equipment cost).
U.S. Data
The second big surprise involves the latest U.S. data.
We all knew that many Chinese miners had relocated to the U.S. following the ban.
And according to recent data, the U.S. continues to maintain its leading position in global Bitcoin mining.
Data also indicates that the U.S. has surged past the rest of the world when focusing on hashrate growth, with installed Bitcoin mining capacity climbing from 42.74 EH/s (35.40%) in August 2021 to 70.97 EH/s (37.84%) by January of this year.
But what’s interesting is the mix of states dominating mining in America, with one particular state standing out: Georgia. 
Source: Cambridge Centre for Alternative Finance
Source: Cambridge Centre for Alternative Finance
For example, data shows that U.S.-based Bitcoin mining tends to concentrate in specific states, with Georgia (30.76%), Texas (11.22%), and Kentucky (10.93%) responsible for more than half of America’s overall hashrate.
Whilst heavy mining activity in Texas has been reported on for several months now, very few expected Georgia to take such a large share of mining.
Some of the biggest factors driving the concentration of miners in these states can be attributed to easy access to cheap electricity, hosting capacity for mining facilities, and the passage of favorable, pro-crypto state legislation
Mining isn’t just limited to these states, however, with New York (9.77%), California (7.9%), North Carolina (4.7%), and Washington (4.1%) all featuring a visible mining presence.
Kazakhstan and Russia
The third interesting takeaway revolves around Kazakhstan and Russia.
Kazakhstan, for instance, had emerged as a very attractive location for miners fleeing China following the crackdown last year.
By last August, Kazakhstan’s share of the Bitcoin network’s total hashrate had climbed to 18.10%. And those volumes continued to surge through the fall. 
But following numerous power outages in late 2021 and nationwide unrest stemming from mass protests throughout the country in January (in which the government shut down the internet for over a week), Kazakhstan-based miners were forced to suspend operations. 
Given that increases in the prices of gas and electricity were a central component of protestor complaints, the government quickly focused on the role of Bitcoin miners in contributing to increased power usage, increasing taxes on mining whilst cracking down on non-registered mining outfits. 
As a result, Kazakhstan’s market share plummeted to 13.22%, and its future as a global Bitcoin mining hub is now in question. 
Meanwhile, Russia’s share of the global hashrate plunged from 11.23% in August 2021 to 4.66% by January.
Similar to what we saw in Kazakhstan, Russia briefly benefited from the flood of miners leaving China thanks to its geographic proximity and its ample energy reserves. 
But by January Russia’s central bank had come out strongly against Bitcoin mining, going so far as to try to outlaw the activity entirely.
The invasion of Ukraine one month later and the ensuing sanctions from around the world hammered mining in the country even more, with instability and geopolitical risks likely deterring major mining operations from investing any resources in the country. 
The one country that benefited from such problems when it comes to Bitcoin mining is the U.S but there is an argument that some of those miners in Russia and Kazakhstan simply decided to take the risk and move back to China to continue mining “under the radar”.
But despite all of these developments, it is important to remember that the Bitcoin hashrate is growing stronger and recently hit a new high. Following China’s ban on mining, the global hashrate plummeted to a new low, bottoming out at 57.47 Exahashes per second (EH/s) on June 27, 2021.
But by the end of last year, the total network hashrate had almost recovered to where it was before the ban, reaching a level of 193.64 ET/s on December 21, 2021. 
Source: CoinMetrics
Source: CoinMetrics
And by February, the network hashrate hit a new all-time high of 248.11 ET/s.
As we’ve mentioned in this newsletter before, a high hashrate is important, as it shows the strength of the Bitcoin blockchain.
Ultimately, this data provides us with some fascinating new insights into the shifting Bitcoin mining landscape nearly a year after the implementation of China’s ban. 
Will be very interesting to follow these fast-moving trends moving forward.
My New Book is Out!
Thank you for making “The Book of Crypto” the #1 new release globally in financial services on Amazon and a global top 10 best-seller in the same category! 
In 400+ pages, the book provides a thorough overview of Bitcoin, cryptocurrencies, and digital assets and their impact on the future of money and finance.
The book provides a 360-degree practical, concise, and engaging overview of all the topics anyone interested in digital assets needs to know about, including how Bitcoin and Ethereum work, an overview of the most important digital assets in the market, and deep dives into the various types of digital assets, including cryptocurrencies, stablecoins, CBDCs, utility tokens, security tokens, NFTs, and many others. 
The book also covers all of the essentials in today’s crypto landscape, like DeFi, crypto mining, crypto regulations, crypto investors, crypto exchanges, and other ecosystem players, as well as some of the latest global crypto trends, from Web3 and the metaverse to DAOs and quantum computing.
You can order “The Book of Crypto” here.
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See you all next week!! 
Henri Arslanian
*Please note that this newsletter reflects Henri’s personal views and not those of any organisation he is involved with. This newsletter is for educational purposes only and none of its content should be construed as investment or financial advice of any kind. 
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Henri Arslanian

Future of Finance and Money - PwC Global Crypto Leader, Best Selling Author, Keynote Speaker, University Professor, Host of Crypto Capsule™ - Views are my own

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