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Wednesday, October 10, 2018

Red Alert: China's dominance of Bitcoin mining now a serious threat to the entire network...

Princeton University and Florida International University researchers have teamed up to publish a report titled "The Looming Threat of China: An Analysis of Chinese Influence on Bitcoin".

In the report they say their research shows up to 74% of Bitcoin mining traces back to China - putting the network virtually under Chinese control, as outlined in the papers introduction:

"The decentralized nature of Bitcoin presents unique socioeconomic and political challenges. Operation and maintenance tasks are distributed across a massive number of peers called miners, and because there is no central governing structure, these miners are kept honest by a carefully balanced incentive scheme.

The system is designed so that anyone can contribute by devoting some computing power to mining, but over the last several years, Bitcoin mining has become heavily centralized due to advances in specialized hardware that render commodity hardware obsolete. As a result, miners have congregated into mining pools: consortia of miners who work together and share profits."


As of June 2018, over 80% of Bitcoin mining is performed by six mining pools, and five of those six pools are managed by individuals or organizations located in China.

Attack types are split into 4 categories: Censor specific users or miners, Deanonymize users, Weaken consensus/Destabilize Bitcoin, and Disrupt competing mining operations.

The report then goes into theoretical attacks China could unleash on Bitcoin, adding in their conclusion that China already has the motive to do it:

"As the value and economic utility of Bitcoin have grown, so has the incentive to attack it. We singled out China for analysis because they are the most powerful potential adversary to Bitcoin, and we found that they have a variety of salient motives for attacking the system and a number of mature capabilities, both regulatory and technical, to carry out those attacks."

So how did we get here and what's the solution?  It all comes down to electricity.  The cheaper the power, the more profit incentive there is to mine.  The rest of the developed world, especially western nations conscious of carbon emissions and global warming are just never going to compete with China's cheap, and dirty coal based electricity.

Here in the US we need to welcome mining operations setting up shop like the ones in Washington state - they're profitable because the power comes from a clean and sustainable source - hydroelectric dams. Unfortunately, they've been met with some disapproval from local residents, and the looming threat of local or state government coming in and over-regulating their operations could end with handing over even more mining power to China.

The full report can be read here.

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Author: Ross Davis
E-Mail: Ross@GlobalCryptoPress.com Twitter:@RossFM
San Francisco News Desk