A group of scientists from Princeton University and Florida International University: Ben Kaiser, Mireya Jurado, and Alex Ledger published a study entitled “The Looming Threat of China: An Analysis of Chinese Influence on Bitcoin.”
It says that the Chinese government currently has sufficient tools and resources to substantially change or even destroy the first cryptocurrency. The researchers note that one of the key factors that made it possible for the government to significantly influence the first cryptocurrency is a significant concentration of miners and computing power in China.
“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,” the document says.
The researchers also note that if such a concentration of resources occurred in a country with an open economy, predictable legislation, and transparent policies, this would not cause serious concerns. However, the People’s Republic of China government plays a significant role in managing the economy, compared with Western countries, and is largely motivated by ideology.
“The Chinese government exerts strong, centralized control over economic and financial activity and also operates extensive surveillance and censorship regimes over the domestic Internet,” the authors note.
The document also lists four main categories of methods by which the PRC authorities can potentially influence Bitcoin:
- Sabotage competing miners
- Disruption of consensus (destabilization)
“The motives for potential attacks can be both ideological and financial,” the researchers emphasize.
As an example, the authors of the material cited the ability of the PRC to organize a double spending attack by monitoring the internal infrastructure of the Internet. By manipulating the rates for different pools, they can conduct a hash attack with less computational power. An attacker can send a transaction to two pools, but if artificially significantly slowing down the speed of one of them, the other can easily outperform him and cancel the second transaction.
The fact that Bitcoin is actually controlled by China was earlier declared by Ripple CEO Brad Garlinghouse.
“How do we know that China won’t intervene? How many countries want to use a Chinese-controlled currency? It’s just not going to happen.”
“I own bitcoin,” said Garlinghouse. “Many people consider it as digital gold. I acknowledge, I’m long crypto. I’d advise folks to only invest in crypto only what you’re willing to lose. It’s early to tell how it is going to play out. I think it’s a pretty good investing strategy.”
Garlinghouse paused for a moment, then added: “I’m not an investing advisor – ignore everything I just said!”
Only invest what you can lose, diversify, don’t be greedy, don’t FOMO, look at the long picture, set stop losses, learn from your mistakes and always pay attention to bitcoin! Happy trading!