As the bitcoin community seeks consensus on how to address bitcoin transaction time, a meeting this month in Silicon Valley could indicate how likely the chances are for consensus, according to Bloomberg. The proceedings will likely reflect the impact of China’s miners, who are estimated to control 70 percent of all bitcoin mining.
Consensus on what to do to improve transaction time is considered to be important to bitcoin’s future. Failure to address this challenge could undermine the 4,475% bitcoin growth over the past five years.
Some bitcoin enthusiasts worry that Chinese influence could undermine bitcoin’s decentralized nature, which they see as its main advantage over other currencies.
Peter Todd, a bitcoin developer, cites China’s mining dominance as problematic. He thinks China’s influence in bitcoin could make it easy for the Chinese government to exert control.
Some observers go so far as to worry about the influence of the Chinese Communist Party, which has strict capital and Internet controls.
There is little evidence of such meddling, however. China’s central bank has claimed bitcoin is not a “real” currency and has sought to minimize its influence in the country’s financial system.
The Chinese influence that will most likely bear on the cryptocurrency’s future will come from China’s miners since any proposal to update bitcoin’s architecture will require miners’ validation.
Wang Chun, chief administrator and co-owner of F2Pool, the world’s largest mining collective, said miners control the real voting power.
One faction in the block size debate, known as Bitcoin Classic, wants to increase the size of the bitcoin block to ensure that transaction processing time does not increase. The other faction, Bitcoin Core, wants to resist any major changes until software security can be assured. The Bitcoin Core faction also believes raising the block size will favor the miners that have the processing capacity capable of handling the lengthier calculations that larger blocks require.
In February, Core developers and some large Chinese miners agreed to a new code that will become available this month and could become active next year if there is enough support for it.
Wu Gang, CEO at HaoBTC, which controls around 5% of the computing power for verifying bitcoin transactions, said a consensus will set an example for future collaborations.
Should an agreement not be reached, processing times will rise to hours or days, which will make bitcoin inconvenient. Credit card processors and money transfer services such as PayPal offer nearly instant payment confirmations. The current bitcoin network can manage around seven transactions per second. Visa, by contrast, can do more than 24,000 transactions per second.
Jamie Dimon, CEO of JPMorgan Chase & Co., and others have said digital currency without central authority will not survive in the foreign exchange market, which is estimated to be $5.3 trillion per day. Bitcoin’s value, by contrast, is less than $11 billion and conducts about $120 million in daily transactions.
Wu Jihan, who operates AntPool, the world’s second-largest mining collective and a manufacturer of mining hardware, said Chinese miners will play a major role in achieving consensus, and he is optimistic about consensus.
Chinese miners have capitalized on inexpensive labor, cheap electricity and access to chip-making factories. At the same time, Chinese investors are looking to diversify away from yuan-denominated assets on account of the currency’s devaluation.
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