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Research: China is capable of destroying Bitcoin

A joint research team from Princeton University and Florida International University discovered believes that China’s growing influence over Bitcoin’s key infrastructure makes it possible for the Chinese government to influence heavily of even destroy the world’s major cryptocurrency.

The idea underlying bitcoin opposes any forms of centralization, whereas the infrastructure of its network is supposed to motivate all its users to maintain the stability of the ecosystem. However, according to the research published by the academics from Princeton and Florida universities, such a view is, in fact, quite far from current reality. First and foremost, this is due to the consolidation of mining infrastructure:

“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.“

Perhaps, there would be less cause for concern, should such a consolidation of mining power occur in a country with less unpredictable political conjuncture. China’s government, however, takes a far more direct role in managing economic activity than its western counterparts and in many ways is more motivated by ideological concerns.

The research also describes the ways in which the Chinese government could seize control over Bitcoin Network. These fall into the following categories:

• disruption of competing miners;
• undermining consensus and destabilizing Bitcoin;
• de-anonymization;
• censorship.

For example, the researchers believe that the threat of China carrying out a double spend attack is not too unrealistic. Through controlling Chinese domestic internet infrastructure and manipulating the speed of information exchange between mining pools, state-backed hackers would be able to execute quite a successful one: by sending transactions to two pools while dramatically slowing down the second pool’s operating speed, they would make the first pool easily override the second one, thus invalidating the second transaction.

Chinese authorities have been proceeding with their anti-cryptocurrency campaign since 2017. Though crypto activists more than once succeeded in masterminding various workarounds, it may potentially lead to harsher punitive measures in the field.