A new study released by Princeton (in conjunction with Florida International University) suggests that most of the world’s Bitcoin mining currently takes place within the borders of China, one of Asia’s economic powerhouses.
Aptly titled “The Looming Threat of China: An Analysis of Chinese Influence on Bitcoin,” the study aims to demonstrate the growing influence of China’s mining sector over Bitcoin — thereby raising fears of the Chinese government manipulating the BTC network for its own agenda in the near future.
China’s Relationship With BTC
It is a well known fact that China currently possesses the largest number of dedicated miners amongst any country across the world. Not only that, the nation is also home to Bitmain, the firm that is responsible for mining nearly half of the world’s total Bitcoin supply.
In its very essence, the Bitcoin network is wholly dependent on miners who make use of large amounts of computing power to verify transactions, find blocks to continue the network’s ledger and mint new bitcoin. However, according to Princeton’s latest findings, nearly 74% of that computing power currently comes from China. This has raised a lot of eyebrows all over the world since it now leaves the Bitcoin network exposed to the threat of a 51% attack.
For those not aware of what a ‘51% attack’ is, it is essentially a situation wherein miscreants are able to gain control of 51% of a network’s hashrate— thus procuring the power to modify transactions on BTC’s distributed ledger system for personal gains.
In addition to all this, the report also says that the Chinese Government is currently keeping a close watch on all crypto related activities taking place within its borders. Lastly, given the concentration of BTC miners that has cropped up within China over the past 3-4 years, the local government may soon step in to disrupt the BTC ecosystem (if it feels like things are going out of hand).
Chinese Govt. Has Made Concerted Efforts to “Reduce the Speed of the BTC Network”
Another startling claim which the study makes is that the Chinese government has been making systemic efforts to reduce the overall speed of the BTC network. This reduction has primarily been achieved via the use of tools such as China’s Great Firewall and the Great Cannon— both of whom are known to be able to “modify and keep track of internet traffic coming in and out from China”. Not only that, the paper also discusses how the Great Firewall has been used to incentivize miners to mine “empty blocks”.
Closing out the study, the authors also looked at some of the other ways in which China has been looking to weaken the global cryptocurrency ecosystem, primarily through means of regulatory and technical restrictions.
In this regard, the authors added:
“To exert influence in a foreign country where Bitcoin is in use, China may aim to weaken or even totally destroy Bitcoin. This could be done by targeting specific users or miners for attack or by generally weakening consensus to increase volatility to a breaking point”
With that being said, how much weight these claims really carry remains to be determined. However, one thing is for sure that China’s growing influence over the Bitcoin network cannot be ignored for much longer.