Study: China threatens Bitcoin network

According to a new report published by researchers from Princeton and Miami universities, China is a potential threat to the Bitcoin network as the majority of mining operations are located in a country whose government is an enemy of the world's first digital asset.

Old-timers in the Bitcoin community remember how its price fell in 2013 right after reaching $1,000. The reason for this was the Chinese government, which prohibited banks from collaborating with Bitcoin enterprises. At that time, this news was perceived as a de facto ban on BTC, since China was the largest cryptocurrency market, as well as the largest mining market. Within four weeks after this news, its price rapidly fell from $1,149 to $544.

Today, China has lost its dominant position in the bitcoin trading market, as the government of the People's Republic forced all local cryptocurrency exchangers to leave the country, and also banned ICO. Despite this, Bitcoin mining is still highly centralized within China, as local cheap electricity has attracted many large mining companies. According to the authors of the report - researchers Ben Kaiser, Mireya Jurado and Alex Ledger - this is a threat to the network. 

The Looming Threat of China

The authors of the study, titled “The Looming Threat of China: An Analysis of China's Impact on Bitcoin,” argue that “Bitcoin's security model must take into account not only fundamental cryptography, but also socio-economic and political forces.” According to the report, more than 80% of all mining operations are now carried out by six mining pools, five of which are located in China. This means that approximately 74% of Bitcoin's hashrate is located behind the Great Wall.

The authors of the article listed several reasons why the centralization of mining centers in China may be a cause for concern. 

In their opinion, these are:

- strong positions of Chinese regulatory authorities

- monitoring of Internet traffic by the government

- dominant hashrate, as well as its influence on the Bitcoin network. 

In addition, the authors listed several more reasons why the Chinese government is unlikely to change its point of view regarding digital currencies. For example, the decentralization of Bitcoin is a direct opponent of China's centrally controlled approach to economic management..

The report also describes a number of attacks on the Bitcoin network that China could carry out if it wanted. 

How real is the “threat of China”?

The authors of the study conclude that the threat of China to the Bitcoin network is very real. They say the popularity and usefulness of cryptocurrencies have grown so much that the Chinese government may have an incentive to obstruct their development.

We chose China for the study because it is the strongest potential opponent to Bitcoin. We also discovered that the government not only has a strong motive, but also every opportunity to launch an attack on the system. In the future, we propose to analyze existing solutions to protect and strengthen the network.

While this all sounds rather grim, it must be realized that the likelihood of the Chinese government launching an organized attack on Bitcoin is quite low. 

This would require the government to gain control of local mining operations in a way that would not be known to other participants in the network. After that, he would need to invest a huge amount of time, money and human resources to carry out an attack on the Bitcoin network. Вряд ли коммунистическая партия одобрит такой шаг, учитывая, что по всему миру биткойн не считается угрозой для финансовой системы, а также нет никаких доказательств того, что его используют для обхода контроля за движением капитала в Китае. 

In addition, if the government gains control of local mining enterprises, the Chinese mining industry will collapse in a couple of days. In turn, this will contribute to the development of mining in neighboring countries, such as Japan, where large mining corporations also exist. It is unlikely that China will want to destroy a highly profitable industry in its country only to give all the profits to its neighbors. 

And while the potential attack scenarios listed in the report are theoretically possible, it is unlikely that Chinese authorities will decide to try to destroy the Bitcoin network.. Fortunately, unlike many altcoins, Bitcoin is quite decentralized, so it is not so easy to destroy or hack the network. 

According to bravenewcoin.com