While China government has opted a stern perspective in matters related to cryptocurrency, claiming that the country has the potential to “kill” Bitcoin(BTC) wasn’t on anybody’s mind until the researchers from Princeton University and Florida International University released their scientific work.
The paper titled The Looming Threat of China: An Analysis of Chinese Influence on Bitcoin”, reveals that China could kill bitcoin or at least damage the blockchain’s stability considerably. The paper put light upon the love-hate relationship between China and cryptocurrencies. On one hand, the government has exercising a crack-down and on the other, the country is highly popular for mining activities.
It will not be called overstating, that most bitcoins are generated from anti-bitcoin China itself. The authors of the study have based this fact as one of the most prominent scares for bitcoin’s destruction(per say).
A probable 51% Attack
The paper firstly stated that Bitcoin mining ecosystem is “heavily centralized,” quoting a research that suggests that “over 80 percent of Bitcoin mining is performed by six mining pools,” and five of them are located in China. Constructing upon this information the paper details that a 51% attack could be carried out with much ease.
Though there is no single pool has the capacity to carry out such an attack on its own, China does host 74% of the combined mining power making the attack a plausible scenario. An attack of that scale would require several pools to conspire to attack the Bitcoin network. The paper slyly adds that while pools might not be keen on an attack but due to ideological, political, economic or strategic reasons the government of China might exert a veto power over the pools to construct and carry such an atrocity. The paper states:
“Because managers are responsible for assigning mining jobs and propagating completed blocks, they control the inputs and outputs of their miners, allowing Chinese authorities indirect control over that hash power … If the Chinese government assumed control of domestic hash power, this property would grant them an advantage in selecting blocks for the ledger, which is important for some types of attacks.”
The 19 ways of killing Bitcoin
Other ways that the Chinese government can manage to potentially harm bitcoin is by pure censorship in mining range:
“Chinese mining pools could simply announce that they will not mine on chains containing transactions from their list of censored addresses”
In doing so, they completely kill the ecosystem by attacking all its elements also known as a Goldfinger attack:
“Because other Bitcoin miners are loosely organized, and China can bring massive resources to bear, the most likely scenario is a death spiral in which China can credibly threaten a Goldfinger attack, and rational miners will be scared off, thus destroying Bitcoin.”
Furthermore, the paper has classified the possible threats from Class 1 to Class 4, while illustrating 19 possibilities that could be the death of the network, if the government or the miners have sufficient reasons to do so. The danger is not just restricted to the foremost cryptocurrency, the muggy sky also looms over Bitcoin Cash, another cryptocurrency criticized for being excessively centralized.
Though the paper hasn’t been approved by a review committee, it is available for community analysis.