China’s crackdown on crypto has led to a 23% decline in ether mining over the last month

Mining software

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China's crackdown on crypto mining has dented ethereum's hashrate, which has fallen at its fastest pace on record in the last month, since peaking in May according to data from Y charts.

By Wednesday, the rate had fallen by 23% to 492.1 terahashes per second (TH/s) from 643.8 TH/s at the peak on May 20, data shows.

A lower hash rate means miners have less chance of getting a correct hash, which is the total computational power to mine ether on the network. A drop in the hash rate reflects a fall in the number of miners active in the system.

"The global mining landscape is reconfiguring — both geographically away from China, and into capital-led rather than hardware-led approaches. It is increasingly important for the miners and validators of crypto networks to be uncensorable so that the software systems they support continue to run and perform computation," Lex Sokolin, a developer at ConsenSys a leading ethereum development company, said.

Ethereum hashrate tumble.

Y charts

China began clamping down on mining activity in May. One of the country's state media publications, The Global Times, reported 90% of mining bases for rival coin bitcoin were going to be shut down, which likely discouraged ether miners.

"This kind of drop is unusual, though there were similar falls in late 2018 and early 2019. It could be due to the mining crackdown in China. But equally, hashrate tends to follow price, and price is substantially down over recent weeks as well. It is difficult to disentangle these two causes," Ben Edgington, another developer at ConsenSys, said.

Indeed, the ether token has lost almost 40% since May 20 and is trading around $2,105. It's tumbled by more than 50% since hitting a record high of $4,380 on May 12.

The Chinese crackdown is not the only factor responsible for the collapse in the ethereum network hashrate. The ethereum 2.0 upgrade is on the verge of winding up. Soon the system will go from proof of work to proof of stake, which means ether tokens do not need to be mined. Miners will instead become block validators that are awarded more money based on the amount of capital they are willing to work with in the first place.

Upgrades for ethereum 2.0 will take place until 2022 and the idea is that the changes will improve sustainability, security and scalability which is the hash rate the system can handle.

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