According to researchers, Bitcoin is at a risk of Chinese sabotage due to its vast exposure in the country.
According to a report by Stuff.co.nz, China could exercise control over the Bitcoin network and sabotage it by seizing miners and mining equipment based in China.
According to researchers, Bitcoin is at a risk of Chinese sabotage due to its vast exposure in the country. A popular New Zealand-based news publication, Stuff.co.nz recently stated that by seizing miners and mining equipment based in China, the government could gain control over the Bitcoin network and sabotage it.
Stuff quoted Vladyslav Makarov, the author of the report, saying,
“It is obvious what this country can do to the network. It is over-exposed to China and the government can sabotage it.”
Since Bitcoin mining requires powerful and expensive computers, thus miners have migrated to areas where electricity is cheap, like in China. More than 77% of bitcoin’s hash power or computing power is based in China. This makes the network vulnerable as the Chinese government can shut it down anytime, states the report published by Stuff.
“Some 77.7 percent of the ‘hashpower’ – the computing strength behind Bitcoin – is now based in China, according to the report, leaving the network vulnerable. The majority of the specialized hardware used to mine Bitcoin is also made in China.”
Bitcoin network is at risk as Beijing could take control of the powerful computers used to maintain the digital currency, which is largely based in China. However, the report of Stuff and Makarov has not taken into account the concept of bitcoin pool mining. Pool mining enables individuals or businesses with mining equipment all over the world to contribute to mining bitcoin by allocating computing power to a pool. This means that a miner from the US or any country can contribute computing power to Chinese mining pools. BTC.com, BTC.TOP, and F2Pool and more operate international mining pools that support miners from countries like the US, Sweden, Norway, and China.
Therefore, it is inaccurate to say that 77 percent of hash power is based in China. Moreover, to claim that China’s bitcoin trading volume accounts for 90 percent of that of the global market is also highly inaccurate. In fact, the 77 percent hash power is actually a cumulative hash power contributed by many individual miners globally and not just from Chinese bitcoin mining pools based in China.
This implies that a small portion of the hash power actually comes from China and according to Blockchain, the second most popular bitcoin wallet and market data provider, the 77 percent of hash rate coming from China are from mining pools.
The report is inaccurate because if Beijing seizes mining pools, it will be very easy for individual miners to reallocate their hash power to other mining pools. If any such attack occurs, then Miners can opt for sending their computing power to a certain mining pool or switch over to another mining pool. They can switch to non-Chinese mining pools like Slush Pool.
“However, if one party were to control more than half of its processing power, they would be able to manipulate Bitcoin in a way that renders it useless, the report says. Such a ‘censorship attack’ would cause transactions to grind to a halt, be completed twice, or result in Bitcoins disappearing from wallets. These events could be launched by Beijing if it coerced enough miners in the country,” reported Stuff.co.nz and Makarov.
Bitcoin is free of government control, and is not maintained by any central organization but by a collection of “miners.” As such, no government can take over Bitcoin network. It is a decentralized and peer-to-peer cash system, store of value, and medium of exchange. Thus, China will never be able to gain control of 50 percent of the Bitcoin network and initiate an attack or double spend bitcoin.
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