Watch: Could China shut down the Bitcoin network? | The Crypto Mile
China-based cryptocurrency miners have the potential to regain dominance over the bitcoin network. Yahoo Finance talked to an expert about the risks this would present for the world’s largest digital asset.
On this week’s episode of The Crypto Mile, Yahoo Finance UK spoke with Jameson Lopp, bitcoin expert and co-founder of digital asset security firm Casa. The conversation centred on the longstanding concerns about the concentration of bitcoin’s (BTC-USD) mining hash-rate within China.
“An authoritarian nation-state, like China, could conduct an attack that would kill the bitcoin network and make it temporarily unusable,” Lopp told Yahoo Finance.
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Such an attack would manifest as a “51% attack”, where a single entity gains control of over more than half of the bitcoin hashrate, enabling them to control the verification of transactions and the mining of new bitcoins.
“An authoritarian style 51% attack on the bitcoin network, from say the Chinese government, could come in the form of not allowing any transactions to happen on the network, or only allowing white-listed transactions to go through,” Lopp added.
The bitcoin hashrate
The hashrate is a measure of the amount of computational power that bitcoin miners are utilising to process transactions and safeguard the network. A higher hashrate signifies more processing chips are being used to mine new bitcoin and verify transactions on the network.
China recently dominated the world’s share of the bitcoin hashrate. And, according to Jameson Lopp, this dominance is something they could quickly regain.
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“In 2019, about 75% of global hash-rate was coming out of China. But, 2021 saw the Chinese government’s biggest crackdown on bitcoin mining. The hashrate was cut in half, and many miners went to friendlier jurisdictions,” Lopp said.
He added that despite the Chinese government ban, there are still many miners spread across the vast country. According to recent data from Statistica, Chinese miners still control 21% of current bitcoin mining output. The US maintains the largest share, at 35.4%.
Could China regain mining dominance?
There are still concerns over China’s ability to regain its former dominant position. “Nearly all of the silicon chips used in bitcoin mining are produced in China,” Lopp said. Re-routing this supply to domestic miners would deny those overseas access to new hardware, giving Chinese miners a competitive advantage.
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These silicon chips are called ASICs, and are tailored for a single, specific task. In the case of bitcoin mining, this is solving the cryptographic puzzles required to mine the digital asset and verify transactions.
“While China doesn’t have an overwhelming hashrate, if something changes and it becomes a slightly more friendly place again for miners, China could dominate the network,” Lopp said.
“If regulations ease in China, they have the tools at hand to quickly reach new zeniths in mining,” he added.
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