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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 the world’s Bitcoin mining operations – more than 65% of the computing power to mine Bitcoin. No other country comes close to that number. Furthermore, according to the recent Genesis Mining report “The State of Crypto Mining 2020”, 60% of Bitcoin owners are genuinely concerned about that Chinese majority and what it could mean for stabilizing the cryptocurrency.
And they should be concerned. China, which owns more than half of the mining operations, could result in an iSystem disruption, instability in the Bitcoin Blockchain or even a takeover of the entire system. Bitcoin was not built to be a controlled currency.
So why is China’s vast mining network a concern? To understand the potential threat to China’s majority control, we need to look at a fundamental attribute 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, such as a bank, but could be democratically exchanged from individual to individual. The Bitcoin ecosystem works thanks to the community that supports it: 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 no single entity that governs Bitcoin – And that is the point.
Although Bitcoin has a strongly decentralized network, it could still be under threat. If someone controlled more than 50% of the energy used in mining operations, they could possibly disrupt the entire system through what is called a 51% attack, or a majority attack. Majority control would allow the attacker to alter transactions, double Bitcoin’s spending for their own benefit, or even block other miners from mining.
So it is concerning that Chinese mines are using 65% of the global mining power used to mine Bitcoin.. It is certainly more than 51%.
Why China owns a large part of computing power
It takes a lot of energy to mine Bitcoin, so it would make sense for miners to install their rigs 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 is also true for mining farms and miners. But while a number of mining farms operate on sustainable resources like hydroelectric power, many rely on coal to fuel their mining. While coal may be cheaper than other fuels like gas and oil, it is still more expensive than alternative options like wind and hydropower, and is unsustainable and environmentally damaging.
Control concerns
The fact that 65% of the world’s mining is located in China is worrying. Although Chinese mines operate independently, most of the energy is now located in one country. And the fact that the Chinese government is in control of all its industries is also a concern. If the government decides it wants to take over the Bitcoin ecosystem, it could harness its power over the country’s mining companies and simply take over most of the computing power, executing 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 pieces fell into place, it is probably a long shot. New players in the mining market are increasingly establishing themselves in the Nordic states of Europe, Canada and the United States. Operating costs there, which include cheaper energy options like hydro and wind power, along with a lack of government oversight that would allow companies to freely plan their strategies, make those places attractive to investors looking for a more opportunity. sustainable.
Also, it’s unclear what China’s future will be with Bitcoin. This, along with all cryptocurrencies, has been banned in the country for years. Although mining was allowed to continue, the industry as a whole was on the guillotine last year. Even though the Chinese government suddenly announced in late 2019 a commitment to develop Blockchain technology and allowed the mines to continue to operate, the government has yet to repeal its ban on cryptocurrencies. Even though China could take control of Bitcoin, you may not want to.
Still, China’s overwhelming number of miners, pools, and mining companies is something the Bitcoin community should be aware of. At the same time, The community can ensure that decentralization continues within the ecosystem by making sure to keep its own mining operations diversified. As I mentioned earlier, we are seeing new mining farms emerge in new geographies, which will continue to distribute mining resources and energy around the world.
The future of Chinese mining remains to be seen. But the Bitcoin community, which values transparency and democracy, will work to ensure that it remains open and available to everyone.
The views, thoughts and opinions expressed here are those of the author only and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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Philip Salter He is the head of mining operations at Genesis Mining, the world’s largest cloud cryptocurrency mining company, where he leads the software development, data engineering and research teams. Salter began his career as a software developer for BSI Business Systems Integration AG. Salter is an avid miner and cryptocurrency enthusiast based in Germany.
