Different countries may have a different take on cryptocurrencies, but China stands out for the reason that it has been anti-Bitcoin since 2017.
China has been looking to stop crypto-related activities in the country over concerns regarding capital flight. Because of the volatility of cryptocurrencies, its regulators considered Bitcoin and other cryptocurrencies as a threat towards stability in the economy. In September 2017, China started to ban crypto-related activities even before Bitcoin price reached its peak of near $20,000 in mid-December. A new report that was entitled The Looming Threat of China: An Analysis of Chinese Influence on Bitcoin, made by Princeton University and Florida International University researchers, tackled the increasing control of China over Bitcoin’s network. And it has also discussed the possible repercussions of this firm grip.
Adversary to Bitcoin?
The report singled out China. It was even called as the “most powerful potential adversary to Bitcoin”. There are also a “variety of salient motives for attacking the system and a number of mature capabilities”.
What makes China a threat? The report pointed out that the Achilles heel is most likely the “heavily centralized” Bitcoin mining industry. According to the report, “over 80 percent of Bitcoin mining” being performed by a total of six mining pools. Unfortunately, five of those six mining pools are associated with China. This means that Chinese mining pools control around 74% of Bitcoin’s hashpower.
Gone are the days when you have miners that operate in their basement. These days, it is all about commercial mining. Why exactly are most miners in China? Miners typically choose locations that are cold and has cheap electricity in order to maximize their operations.
Another reason why China is a threat to Bitcoin is the fact that it has the Great Firewall and the Great Cannon. These are tools mainly used to filter what people see online. However, this can also modify traffic in the country. And ultimately, it can affect Bitcoin’s network. Because of the Great Firewall, Chinese miners were incentivized to mine so-called “empty blocks”. And because of this, it has slowed down the entire Bitcoin network. However, it has been fixed with the Bitcoin software update called BIP152.
The paper made use of this information to argue regarding the “power of China’s technical capabilities for domestic control to weaken Bitcoin, even unintentionally, on a global scale”.
Renewed Efforts to Ban Cryptos
China has renewed its efforts in banning crypto-related activities. In fact, nowadays, hotels and malls can’t host crypto-related events.
Now, why exactly should China waste all its efforts to stop Bitcoin? There are a number of reasons that have been pointed out in the report. For one, Bitcoin stands as the antithesis to the ideology of China’s centralized governing philosophy. And also, it is possible that for the purpose of law enforcement that China attacks Bitcoin in order to increase control over it.
But of course, these things could simply be blown out of proportion at this point. The report hasn’t even been peer-reviewed yet. However, considering the power that Bitcoin possesses, it isn’t far from happening that China becomes interested in doing all these things.