Three American scientists have conducted a major study on how China can have a serious impact on Bitcoin . The results were published in October 2018. The material confirms that the country has not only powerful motives , but also all the resources that are needed for a targeted attack on the first cryptocurrency . Below we analyze everything in order.
From the very beginning of the emergence of various devices for theextraction of cryptocurrency , most of them were made in China. For example, according to data for 2017, 70% of all ASICs that were used to extract Bitcoin were from the Chinese manufacturer Bitmain . Here most of them remained in pools. In 2015, half of the network’s capacity was concentrated here. Now this figure has exceeded 80% , and the top 10 pools in the world include 7 from the Middle Kingdom ( BTC.com, Antpool, ViaBTC, F2Pool, BTC.top, Poolin, DPOOL ).
The country has a very cheap cost of electricity , which was the main reason for such a huge concentration of mining devices in this area . The lower the cost of electricity, the greater the profit that is reinvested in the scaling structure. According to a study on the cost of electricity in different countries, China confidently occupies one of the leading positions with the lowest price per kilowatt after Argentina . The data reflects the situation for 2018. On the chart, the price is in US dollars .
These prices have become real due to the huge reserves of coal , which are one of the cheapest sources of energy. Even despite the fact that this method is not at all environmentally friendly, China is quite loyal to this effect. Reducing the cost of transporting raw materials further increases the profits from mining , which has made it popular to build farms for the extraction of cryptocurrencies near coal basins .
These studies indicate that the size of the pools does not mean that all these devices are in China. From almost anywhere in the world you can connect to the pool . At the same time, the governors are located precisely in heaven, and accordingly are under the control of the country. In this regard, indirect control of the hashrate of devices that are running in China is allowed. This is possible because the managers are responsible for the distribution of tasks , as well as the transfer of blocks to the common network . Despite the fact that it is impossible to determine exactly what percentage of the hashrate is under the control of each country where the cryptocurrency is mined , we can confidently say that the largest share falls on China .
The rapid growth of miners was also due to favorable policies in the form of discounts on electricity and land . But already in 2018, the government’s rhetoric completely changed because of which such giants as ViaBTC, BTC.TOP and Bitmain announced plans to move to jurisdictions with more favorable conditions .
Why is bitcoin so popular in China?
In 2013, an increase in the individual wealth of the population was recorded , as well as a very good exchange rate of the national currency on international exchanges. According to the researchers, these factors provoked the growth of purchasing power , and with it increased interest in investing. Investment assets are strictly controlled, bitcoin has become extremely popular due to the huge potential for profit and the absence of any regulation .
Another factor is that mobile payment systems are more in demand than anywhere else in the world. Given that Bitcoin is similar to already existing online payment platforms, Chinese users accepted the first cryptocurrency as loyally as possible .
Another reason comes down to a total social control policy . Under the control of the state are all banks , anonymous online interaction is prohibited. On the shoulders of providers and at all compliance with state censorship. Bitcoin is the exact opposite of all this, with the idea of decentralization and complete autonomy.
In connection with this, cryptocurrency exchange overtook a smashing success. The instrument of capital outflow, which is very difficult to track, took its confident position. Although according to some indicators of 2016, it is noted that 98% of bitcoins were exchanged specifically for yuan , the researchers explain that the real picture is different. This is due to the fact that the Chinese stock exchanges created a false trading activity . Trading on these sites is free , and commissions at withdrawal decrease with an increase in trading volume . It was this that prevented a more correct assessment of the share of Chinese traders. According to various estimates, the range of 50-85% is closer to reality .
China as a threat to bitcoin
The research says that now China is a real threat to the first cryptocurrency . This is primarily due to the fact that the government controls both the Internet infrastructure and the internal cryptocurrency activities . Given the fact that the economic value of Bitcoin has grown, attacking it in personal interests has become more relevant. Scientists considered China as the country with the greatest opportunities to do it at the technical and regulatory levels, which also has real motives.
The document notes that the production of cryptocurrency is already “highly centralized” given that 80% of mining capacity for cryptocurrency is controlled by only 6 pools and 5 of them are Chinese . If pools unite , it will not be difficult for them to make a “51% attack” . Already, a large fraction of the hashrate is based on blocks that are found in China. After gaining control over the local hashrate , the government will have a clear advantage in selecting blocks to be added to the general registry . This is an important factor for the implementation of several types of attacks .
Variety of bitcoin attacks
Researchers identified as many as 19 types of attacks that can be carried out against the first cryptocurrency . They are divided into 4 classes : censoring of miners and users, de-anonymization of market participants, destabilization of Bitcoin, violation of the mining environment. In addition to the classification of attacks, the table shows the alleged victims , as well as the necessary resources for this, which China already has . Most of the attacks are directly connected with mining powers.
Benefits for China from a bitcoin attack
Scientists have voiced the opinion that Bitcoin does not conform to the philosophy of centralized management , but is in direct opposition. The weakening of the first cryptocurrency can clearly demonstrate how useless a decentralized approach to control . According to the researchers, to achieve this goal, any relatively significant breach in Bitcoin security will suffice.
Pressure and destabilization of the foreign economy
The more the cryptocurrency integrates with the financial systems around the world, the more realistic the vector to attack this can be . The weakening or complete destruction of bitcoin can be a serious lever of influence on the countries where it is used. The goal of attacks can be not only individual members of the network, but also the mechanism of consensus so that volatility reaches a critical point.
Control of funds
Another real argument in favor of an attack is the desire to stop illegal activities and to take capital under control . To do this, it is enough to censor transactions and de-anonymize users.
Global mining control
With the use of selfish mining and branching of the chain, thanks to the delay of the blocks, it will not be difficult for China to make its own “branch” genuine , in order to keep it under control.