Chinese government may wield power to destroy Bitcoin
October 10, 2018 @ 11:35 +03:00
China has played a critical role in the crypto markets for several years now. A new paper written by academics from Princeton University and Florida International University suggests that China’s growing influence over Bitcoin’s key infrastructure has given the Chinese government the ability to heavily shape, or even destroy, Bitcoin.
Bitcoin (BTC) $6561.73 +0.03% was designed to be impervious to any form of centralized control. Bitcoin’s core infrastructure was built to give all participants in the system a strong set of incentives to maintain the health and stability of the ecosystem. Bitcoin is now over a decade old and has yet to suffer any type of successful hack or attack, which has fed market perceptions that Bitcoin is completely secure. Researchers suggest that this perception is less and less accurate.
The key to understanding this change is the shifting nature of Bitcoin mining. Bitcoin mining originally could be managed using off-the-shelf computers, but the increasing computational power required to mine Bitcoin has led to the creation of increasingly specialized, and expensive, mining equipment. The paper describes how this has led to increasing miner consolidation.
“Bitcoin mining has become heavily centralized due to advances in specialized hardware that render commodity hardware obsolete. As a result, miners have congregated into mining pools: consortia of miners who work together and share profits. As of June 2018, over 80% of Bitcoin mining is performed by six mining pools and five of those six pools are managed by individuals or organizations located in China. “
The researches breakdown the potential methods through which the Chinese government could influence Bitcoin into four categories: disrupt competing miners, undermine consensus and destabilize Bitcoin, de-anonymization, and censorship. Potential attacks could spring from ideological or commercial motives. China’s technical ability to carry out these attacks is increased by the governments free hand domestically.
Chinese government may wield power to destroy Bitcoin, Bitcoinist, Oct 10