Recently, Stuff.co.nz, a popular New Zealand-based news publication, claimed that the Chinese government could gain control over the Bitcoin network and sabotage it by seizing miners and mining equipment based in China.
The author of the report quoted by Stuff, Vladyslav Makarov, wrote:
“It is obvious what this country can do to the network. [It] is over-exposed to China and the government can sabotage it.”
One Major Flaw
The report published by Stuff further claimed that more than 77 percent of bitcoin’s hash power or computing power is based in China, which the Chinese government can shut down at any given time.
Join CCN for $9.99 per month and get an ad-free version of CCN including discounts for future events and services. Support our journalists today. Click here to sign up.
“Some 77.7 percent of the ‘hashpower’ – the computing strength behind Bitcoin – is now based in China, according to the report, leaving the network vulnerable. The majority of the specialised hardware used to mine Bitcoin is also made in China.”
The report of Stuff and Makarov completely dismisses and ignores the concept of bitcoin pool mining, in which individuals or businesses with mining equipment across the globe can contribute to mining bitcoin by allocating computing power to a pool.
The “77 percent” hash power from Chinese bitcoin mining pools are not actually based in China. That number is the cumulative hash power contributed by many individual miners globally. A miner from the US and even Venezuela can contribute computing power to Chinese mining pools. Hence, like the false and misrepresented bitcoin trading volume of China that was supposed to be 90 percent of that of the global market, it is highly inaccurate to claim that 77 percent of hash power is based in China.
According to Blockchain, the second most popular bitcoin wallet and market data provider, the 77 percent of hash rate coming from China are from mining pools. Antpool, BTC.com, BTC.TOP, ViaBTC, and F2Pool all operate international mining pools that support miners from countries like the US, Sweden, Norway, and China. Only a small portion of the hash power actually comes from mainland China.
Central Entity Cannot Gain Control Over Bitcoin
If a central entity or authority like the Chinese government takes over or seizes mining pools, individual miners can simply and easily reallocate their hash power to other mining pools. As such, the Chinese government, contrary to the claims of Makarov, will never be able to gain control of 50 percent of the Bitcoin network and initiate an attack or double spend bitcoin.
Stuff.co.nz and Makarov inaccurately reported:
“However, if one party were to control more than half of its processing power, they would be able to manipulate Bitcoin in a way that renders it useless, the report says. Such a ‘censorship attack’ would cause transactions to grind to a halt, be completed twice, or result in Bitcoins disappearing from wallets. These events could be launched by Beijing if it coerced enough miners in the country.”
In an instant, individual miners can either choose to send their computing power to a certain mining pool or switch over to another mining pool. Miners can switch to non-Chinese mining pools like Slush Pool and Bitfury, and avoid the centralization if an unlikely attack occurs. Conclusively, the probability of any government taking over the Bitcoin network is 0 percent, and that is the purpose of bitcoin, to remain as a decentralized and peer-to-peer cash system, store of value, and medium of exchange.
Featured image from Shutterstock.