Can China Destroy Bitcoin?
Researchers Ben Kaiser, Mireya Jurado, and Alex Ledger from Princeton University and Florida International University discussed the capabilities of China in destabilizing the Bitcoin mining network through their recent report, “The Looming Threat of China: An Analysis of Chinese Influence on Bitcoin.”
Introduced back in 2008, Bitcoin was meant to be an electronic cash system with no central authority. However, the report states that Bitcoin might not be as decentralized as most people think it is.
China as Bitcoin’s Powerhouse
The East Asian country was quite an influence to the Bitcoin system’s hashing power. Six mining pools hold “over 80% of Bitcoin mining”, five of which are in China.
The researchers mentioned:
“Mining pools managed by individuals in China have constituted over half of the total network hash power since 2015 and currently more hash power is located in China than in any other country.”
Having a combined stronghold of over 74% of Bitcoin’s network, China has the means to attack the system when it pleases.
According to the paper, China possesses a “variety of salient motives for attacking the system and a number of mature capabilities.” The possible attack can affect over 50% of the structure and can lead to destroying the inalterable cryptocurrency ledger altogether.
The Chinese government has proven its control over its citizens throughout the years and has regulated what it thinks is best for its people. In September 2017, China banned the trading of cryptos and ICOs which resulted in the immense decrease of cryptos in the worldwide market.
However, in recent news, it has been reported that some businesses have started to accept cryptos. Companies like the Beijing Sci-Tech Report and Ethereum Hotel are now accepting crypto payments. This shows that Chinese businesses are leaning toward the use of cryptos.
Only time can tell whether the government will strike down these business projects or will accept cryptos despite the ban. One thing is for sure, though – that is, crypto mining was never banned, and it has now led to China being Bitcoin’s powerhouse.
How Can China Destroy Bitcoin?
According to Princeton and Florida researchers, there are 19 different ways Chinese mining pools can attack the Bitcoin network. Here are some of the methods mentioned:
- Censorship attack: The government will censor the addresses of specific users to prevent them from making blockchain transactions. The censorship can force users from these addresses to conform to regulations made by the government.
- De-anonymization attack: The government will expose the user’s identity. Being that Bitcoin transactions are theoretically anonymous, the government may threaten to track the user’s crypto transactions or to enforce regulations. The de-anonymization violates Bitcoin users’ right to privacy.
- Goldfinger attack: The government will make Bitcoin valueless through the application of hash power to control the system. According to the researchers, this attack could potentially destroy Bitcoin for good. The report reads:
“The most likely scenario is a death spiral in which China can credibly threaten a Goldfinger attack and rational miners will be scared off, thus destroying Bitcoin.”
- ‘Trojan’ type attack: The government will launch attacks against international mining pool competitors. This will be done by having Chinese participants pretend as miners from foreign mining pools.
The “miners” will receive submissions of incomplete blocks to such pools. This will lead to frustration by the foreign miners which will direct them to mine at other pools that are most likely owned by the Chinese.
The aforementioned are the major ways China can launch their attack on the system. The paper arrives at a judgment that the reason for China to do such attacks will be that “Bitcoin stands in ideological opposition to China’s centralized governing philosophy.” The potential of China to “weaken or destroy it” raises a statement to the world.
The research paper even ends with the mention of China using Bitcoin as a weapon against its enemy economies. This act will take away the safeguard and intended purpose of cryptocurrencies like Bitcoin.
The report warned:
“To exert influence in a foreign country where Bitcoin is in use, China may aim to weaken or even totally destroy Bitcoin.”
The researchers recommend that those who plan to expand this study look into the solutions for China’s possible attacks.
The researchers stated:
“As future work, we suggest an analysis of existing solutions to the specific threats China poses to Bitcoin and the identification and mitigation of gaps in those protections.”
China’s capability to take over the Bitcoin network raises concern to the leading crypto’s investors. But whether China will intend to use its potential attack for foreign influence, political statement, or law enforcement, scrutiny of China’s blockchain networks will continue to grow.