@awemany
bitcoin mining tends towards perfect competition. because of contingent factors, chinese miners have enjoyed cheaper-than-average electricity, which has given them a competitive advantage. on the other hand, they operate subject to a tighter-than-average regulatory regime, which gives them a competitive disadvantage. this was known in advance. how big of a disadvantage, we will eventually find out.
As we all know mining has been far from perfect competition for a while now since mining quickly migrated to locations that benefited from artificial subsidies. China is the largest source but there are many other governments that provide artificially cheep electricity as well.
As crypto currencies grow however, I think we are starting to see they are negatively impacting these subsidies by noticeably draining resources from governments or even exceeding their supply. For example Venezuela which has a shortage of electricity started to crack down on mining because they barely have enough to provide for most people. China has enough capacity so this hasn't been an issue (yet) but it likely will be an issue in time as Bitcoin grows.
Mining today is also simply a transfer of money from subsidy providing governments to individuals. This will not continue long term. In China mining probably has been small enough to survive by bribing local government officials, but this can only scale so far. In Canada there was an article recently on how new hydro power that was meant to attract new data centers instead was consumed by mining. New data centers bring jobs and benefits to the local community, mining however has no local benefits and is just a pass through of wealth. This can't go on.
At some point governments will likely question why they are providing subsidies to mining at all, and why wouldn't they keep this profit generation potential for themselves. First I think we will see more and more crack down on using subsidies for mining, for example as in Venezuela.
But the interesting question is will (or how long it will be till) governments realize they can
mine themselves to raise revenue. If Quebec has a new hydro plan with cheap electricity, instead of attracting data centers for tax revenue, they could simply mine themselves and raise significantly more revenue. Qatar instead of selling natural gas for very low prices into a depressed energy market, could instead use that natural gas to mine themselves and not bother with exporting at lower values. When crypto currencies pass several trillion dollars, these become likely options we will see.
But even this is just governments taking advantage of their resources. Longer term crypto currencies will drive massive competition to
invent new sources of the lowest cost electricity. This is highly beneficial overall and this will also be a more perfect form of competition. Mining in these initial phases has simply leached off of government subsidies (which is highly ironic considering Bitcoin's libertarian purpose), but as crypto currencies grow mining will either exceed the supply of artificial subsidies or the artificial subsidies will be taken away, and as a result should trend towards being more competitive and more focused on developing competitive advantage through better power generation.
