Oct 12, 2018 07:41 UTC
Oct 12, 2018 at 07:41 UTC
China Has the Power to Destabilize the Leading Cryptocurrency
Recently two researchers, Ben Kaiser from Princeton University and Alex Ledger from Florida University, have written a paper on how China is impacting Bitcoin. In the paper, Ben and Alex described different ways that China could be manipulating Bitcoin. The paper is titled “The Looming Threat of China: An Analysis of Chinese Influence on Bitcoin”.
In late 2017, China banned cryptocurrency trading and initial coin offerings (ICOs). According to the People’s Bank of China (PBoC), data shows that after imposing the ban the Chinese currency involved less than 1% of all Bitcoin trade worldwide. Even after the ban, local developers are continually introducing innovative Blockchain projects on the global stage.
Although China has banned the trading of cryptocurrencies but the Bitcoin mining hash rate in China is increasing steadily. In 2015 it was 50%, while currently it is 74%. More than 80% of the Bitcoin hash rate is within six major mining pools and five of these pools are controlled by the agencies which are based in China.
The 22-page report says that “Mining pools managed by individuals in China have constituted over half of the total network hash power since 2015 and currently more hash power is located in China than in any other country.”
According to the paper written by Ben and Alex, the Great Firewall of China observes all the internet traffic across the country with the help of filters. Even if you take out the attack from China, the latency which Firewall has impacts the whole Bitcoin Network. Since over 70% of Bitcoin mining hash power comes from China, it is a big deal. In the report, the researchers mentioned that:
“The Great Firewall of China doesn’t prevent outbound packets from reaching the global internet but it definitely slows them down via inducing packet loss. On the global internet, there is a rate of 0.2% packet loss, while that rate is 6.9% behind the Great Firewall of China. The lost packets must be re-requested and re-sent, increasing latency from 81 milliseconds for the global internet to 218 milliseconds behind the Great Firewall of China.”
According to the research, the Chinese government can threaten the security, stability, and viability of Bitcoin. China has a huge influence over bitcoin and can use this influence to destabilise the leading cryptocurrency.