Despite banning cryptocurrency trading and initial coin offerings in 2018, and threatening to crack down on cryptocurrency miners In 2019, Chinese Bitcoin miners have controlled the most of the Bitcoin hash rate since 2016.
Since cryptocurrency miners have the direct task of securing the Bitcoin network and generating newly minted Bitcoin, any entity with majority control of the hash rate also has a strong voice over the network, and its rewards are governed.
According to a Map Produced by the Cambridge University Center for Alternative Finance, miners in China currently control around 65% of the average monthly share of Bitcoin’s total hash rate. That’s significantly higher than in China’s three closest competitors: the United States, Russia, and Kazakhstan, each of which currently controls only 6-7% of Bitcoin’s average hash rate.
China dominates the Bitcoin mining industry
This is also not a recent change. China has dominated the Bitcoin mining industry since its earliest days, as Bitmain and Canaan Creative, two of the earliest in the ASIC mining industry, started in China.
Because of this, the barrier to entry for mining in China has always been much lower than in the rest of the world. Chinese consumers can avoid the taxes and fees involved in shipping ASIC units abroad, while benefiting from previous access to new-generation mining hardware.
Combined with comparatively low energy costs in China, it has made the country a hotbed for cryptocurrency mining that has manifested itself in the dominance that is seen today.
Could Chinese miners launch a 51% attack on Bitcoin?
Since Chinese miners control almost two-thirds of Bitcoin’s hash rate, it’s safe to say they have majority control over around two-thirds of newly minted Bitcoin. Because of this, if almost all miners operating in China decide to launch a 51% attack Against the Bitcoin network, the odds are high that it will succeed. However, such a feat would require an extraordinary feat of collusion between miners, and would probably be less profitable than simply mining as usual.
However, this control over Bitcoin’s hash rate gives China a huge amount of power when it comes to setting the current cryptocurrency market rate. A total of around 900 new BTCs are minted each day, and around 65% of this goes to Chinese miners, who can then control how and when around $ 5.5 million in BTC hits the market.
However, since China’s Bitcoin hash rate is actually made up of contributions from potentially tens of thousands of individual miners, large-scale collusion to manipulate Bitcoin’s price is unlikely to occur.
Controlling how 65% of newly minted BTCs hit the market places China in a position of power in the Bitcoin markets, but it is not a position of absolute control. After all, even if 100% of all newly minted BTCs are poured into exchanges every day, it would normally make up less than 1% of Bitcoin’s total trading volume for that day, enough to briefly lower the price, but not cushion it in the long run.
With the Chinese government now seeking to launch its own central bank-backed digital currencyIt could be a long time before China takes a firmer stance against community-controlled cryptocurrencies like Bitcoin. That, more than the activities of China’s miners, could have serious ramifications for the Bitcoin network, its hash rate, and ultimately its value.
