Could China snatch the Bitcoin (BTC) ecosystem? It is a very real possibility and it could happen very quickly because China controls more than half of Bitcoin mining worldwide – more than 65% of the processing power for Bitcoin extraction. No other country comes close to this number. According to the latest Genesis mining report, “The State of Crypto Mining 2020” 60% of Bitcoin owners are really concerned about this Chinese majority and what it could mean for cryptocurrency stabilization.
And you should be concerned. China, which owns more than half of the mining operations, could lead to an iSystem failure, instability in the Bitcoin blockchain or even a takeover of the entire system. Bitcoin was not built as a controlled currency.
Why is China’s Huge Mining Network a Problem? To understand the potential threat to China’s majority control, we need to look at a fundamental feature of how the Bitcoin ecosystem works: Decentralization.
Bitcoin works in a decentralized system
Bitcoin founder Satoshi Nakamoto had a vision for a currency that was not subject to a third party like a bank, but could be exchanged democratically from individual to individual. The Bitcoin ecosystem works thanks to the community it supports: the miners who add blocks to the chain and the nodes that scan the transactions to make sure they adhere to the Bitcoin protocol. There is not a single entity that regulates Bitcoin – And that is the point.
Although Bitcoin has a highly decentralized network, it could still be threatened. If someone controls more than 50% of the energy used in mining, they can potentially disrupt the entire system through a so-called 51% attack or a majority attack. The majority control would allow the attacker to change transactions, double Bitcoin spending for their own benefit, or even prevent other miners from mining.
So it’s worrying that Chinese mines are using 65% of the world’s mining power to mine Bitcoin.. It is surely more than 51%.
Why China has a large part of the computing power
Obtaining Bitcoin requires a lot of energy, so it would make sense for miners to install their facilities in places where energy and labor are cheap. Because China is an international trade center, delivery times and production costs for almost all goods are lower than in other countries, and this also applies to mining companies and miners. While a number of mining operations operate with sustainable resources such as hydropower, many rely on coal to fuel their mining operations. Coal is cheaper than other fuels such as gas and oil, but it is still more expensive than other alternative options such as wind and hydropower, and it is unsustainable and environmentally harmful.
The fact that 65% of global mining is located in China is worrying. Although Chinese mines are operated independently, most of the energy is in one country. The fact that the Chinese government has control over all of its industries is also of concern. If the government decides to take over the Bitcoin ecosystem, it could use its power over the country’s mining companies and simply take over most of the computing power and launch a 51% attack. Suddenly the decentralized system would be centralized in one country.
Uncertainty about the future of mining in China
Although this could be a very real scenario if all the right parts fit together, it’s probably a long way. New players in the mining market are increasingly establishing themselves in the Nordic countries of Europe, Canada and the United States. The operating costs there, which include cheaper energy options such as water and wind power, and a lack of government control that would allow companies to freely plan their strategies make these places attractive to investors looking for more options. sustainable.
It is also unclear what China’s future will look like with Bitcoin. This, along with all cryptocurrencies, has been banned in the country for years. Although mining was allowed to continue, The entire industry was on the guillotine last year. Although the Chinese government suddenly announced a commitment to develop blockchain technology in late 2019 and allowed the mines to operate, The government has not yet lifted its ban on cryptocurrencies. Although China could take control of Bitcoin, You may not want to.
However, the Bitcoin community should be aware of the overwhelming number of miners, pools and mining companies in China. At the same time The community can ensure that decentralization continues within the ecosystem by ensuring that its mining operations remain diversified. As I mentioned, new mining operations are emerging in new regions that will continue to distribute mining resources and energy around the world.
The future of Chinese mining remains to be seen. The Bitcoin community, which values transparency and democracy, will work to ensure that it remains open and accessible to everyone.
The views, thoughts and opinions expressed here are only those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.