The China Mining Ban, 2021
The closest Bitcoin has come to the edge of its ten-minutes-a-block basin: half its miners switched off within weeks, and the pace came back.
The first basin is ten minutes a block. Its edge is losing most of the miners at once, because the difficulty rule only adjusts every 2016 blocks and never by more than a factor of four. In 2021 the Chinese government pushed Bitcoin toward that edge harder than anything before or since.
What Happened
For years most of the world's bitcoin mining was done in China, drawn by cheap electricity, much of it from hydroelectric dams in Sichuan and Yunnan and coal in Inner Mongolia and Xinjiang. In 2019 researchers at Cambridge University estimated China's share at around two thirds of all computing power.
In May 2021 China's State Council called for a crackdown on bitcoin mining. Over the following weeks, province after province ordered mining operations shut. Machines were switched off, packed up, and put on trucks and planes. By late June and early July, the total computing power on the network had fallen by roughly half from its peak in May.
What the Basin Did
With half the machines gone, blocks took far longer than ten minutes until the next adjustment arrived. On 3 July 2021 the difficulty rule did its job: it cut the difficulty by about 28 percent, the largest downward adjustment in Bitcoin's history. Blocks sped back toward ten minutes, and later adjustments finished the correction.
Meanwhile the miners were not gone, only moving. Many re-established in the United States, Kazakhstan, Russia and elsewhere. Over the following months computing power climbed back, and it passed its May 2021 peak within about a year. Nobody coordinated any of this. The rule lowered the difficulty, which made mining profitable for whoever could plug in, and they did.
What It Shows
The ban was a push of about half, and the basin held. It did not show what would happen at the true edge, nine miners in ten leaving at once, when the next adjustment could be months away. It did show the shape of the recovery: a slow rule, a large one-time correction, and miners elsewhere taking up the slack. The 28 percent cut was smaller than the half that was lost because the hashrate fell gradually across the two-week window the rule measures, so part of the window still ran at full strength.
Sources
The Block (3 July 2021). Bitcoin network undergoes largest difficulty drop ever by nearly 28%.
Cambridge Centre for Alternative Finance, Cambridge Bitcoin Electricity Consumption Index, mining map (country shares of computing power, 2019 to 2022).
Bitcoin Core source, difficulty retarget rule.