Research has emerged from three patrons of Princeton and Florida University that the Chinese government has the “capability to destroy Bitcoin.” The paper is titled – ‘The Looming Threat of China: An Analysis of Chinese Influence on Bitcoin’. The authors of the paper are Ben Kaiser, Mireya Jurado, and Alex Ledger.
Can Bitcoin be destroyed?
The primary reason that the Chinese government could destroy Bitcoin is that it is the region where the majority of Bitcoin mining power is located. Chinese authorities could confiscate the mining operations and execute a 51% attack on the network. The cost of a 51% attack on the Bitcoin network is prohibitive right now (around USD 500,000 per hour) unless these mining pools either start working together or a large entity takes them over.
By 2015, China had more than 50% of the total network hash rate for Bitcoin. Bitcoin mining takes significant amounts of energy, which happens to be cheap in the region. Bitcoins are ‘mined’ using specialized hardware known as Application Specific Integrated Circuits (ASICs).
It is reasonably well known that the Achilles heel of Bitcoin is the centralized mining pools in China and the problem with ASIC mining. But realistically, both of these are not immediate issues, and collaboration between mining pools remains very improbable at present. The Chinese government, on the other hand, presents an altogether different set of concerns.
The looming threat of the Chinese government
China is fast becoming a surveillance state, and the government is extremely eager to extend its influence in all areas. Individual liberties and decentralized technologies take a back seat at all times. According to the research –
“We singled out China for analysis because they are the most powerful potential adversary to Bitcoin, and we found that they have a variety of salient motives for attacking the system and a number of mature capabilities, both regulatory and technical, to carry out those attacks.”
Additionally, China is creating its own state-backed cryptocurrency while criticizing cryptocurrencies in general. If Bitcoin continues to rise and threatens existing fiat structures, then it makes complete sense for China simply to take it over or eradicate it.
China already banned ICOs and cryptocurrency exchanges in the region from operating. It also has a history of strict totalitarian control, extensive regulatory powers, and extreme censorship. In other words, if Bitcoin happens to become adopted globally, then the Chinese government has multiple motives to manipulate the technology as much as possible. The mining pools need to be internationally decentralized for Bitcoin to remain safe from the Chinese government. As noted by the paper –
“Bitcoin stands in ideological opposition to China’s centralized governing philosophy, so they may be motivated to weaken or destroy it to make an ideological statement.”
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.