In brief
- Chinese Bitcoin miners currently control 65% of the Bitcoin network hash rate, enough to perform a successful 51% attack.
- Such an attack would require collusion between potentially tens of thousands of individual Chinese miners, and remains extremely unlikely.
- By minting almost two-thirds of new Bitcoin, China has strong, but not absolute control over Bitcoin's market price.
Despite banning cryptocurrency trading and initial coin offerings in 2018, and threatening to crack down on cryptocurrency miners in 2019, Chinese Bitcoin miners have controlled the majority of the Bitcoin hash rate since 2016.
Since cryptocurrency minersminers are directly tasked with securing the BitcoinBitcoin network and generating newly minted Bitcoin, any entity with the majority control of the hash rate also has a strong say about the network and its rewards are governed.
Our interactive #Bitcoin Mining Map is live – using data from three mining pools, the map visualises average monthly share of #Bitcoin ‘s hashrate by country. See it at https://t.co/xG4ORzA11Z pic.twitter.com/ZGvD0CJnbS
— CambridgeAltFin CJBS (@CambridgeAltFin) May 6, 2020
According to a map produced by the University of Cambridge Centre for Alternative Finance, miners in China currently control around 65% of the average monthly share of the total Bitcoin hash ratehash rate. That’s significantly higher than in China's three nearest competitors: the United States, Russia, and Kazakhstan—each of which currently controls just 6-7% of the average Bitcoin hash rate.
China dominates Bitcoin mining industry
This isn't a recent change either. China has dominated the Bitcoin mining industry since its earliest days, as Bitmain and Canaan Creative—two of the earliest movers in the ASIC mining industry—both got their start in China.
Because of this, the barrier to entry for mining in China has always been much lower than in the rest of the world. Chinese consumers are able to avoid the taxes and duties that come with shipping ASIC units abroad, while also benefiting from earlier access to newer generation mining hardware.
Bitcoin miners largely unaffected by coronavirus pandemic
The Bitcoin mining industry has been mostly unaffected by the coronavirus pandemic—beyond the falling price of Bitcoin—according to the biggest miners. Four Bitcoin mining firms told Decrypt that, while supply chains for newer machines have been disrupted, they have faced few major issues. At least one firm has fully adapted to the pandemic, and all employees are now working remotely. And with conditions in China getting better, things are starting to go back to normal. Bitcoin miners help to ke...
Combined with comparatively low energy costs in China, it’s made the country a hotbed for cryptocurrency mining which has manifested in the dominance seen today.
Could Chinese miners launch a 51% attack on Bitcoin?
Since Chinese miners control almost two-thirds of the Bitcoin hash rate, it’s safe to say that they have majority control over around two-thirds of newly minted Bitcoin. Because of this, if almost all of the miners operating in China decided to launch a 51% attack against the Bitcoin network, the odds are high it would succeed. However, such a feat would require an extraordinary feat of collusion between miners, and would likely be less profitable than simply mining as usual.
You would need $21 million to attack Bitcoin for a day
It now costs just north of $21 million per day to sustain a 51% attack on the Bitcoin network for a whole day, according to data from Messari Pro. As it stands, this cost makes Bitcoin almost eight times more expensive to attack than Ethereum, which would set you back almost $2.7 million to attack for a whole day. In brief, a 51% attack—also known as a majority attack—is arguably one of the biggest threats to many blockchains, since it sees a group of miners, or a single nefarious entity secure...
However, this control over the Bitcoin hash rate gives China a good deal of power when it comes to setting the current market rate of the cryptocurrency. A total of around 900 new BTC are minted each day, and around 65% of this goes to Chinese miners—who can then control how and when around $5.5 million in BTC hits the market.
However, since China's Bitcoin hash rate is actually formed by the contributions of potentially tens of thousands of individual miners, it’s unlikely that any large-scale collusion to manipulate the price of Bitcoin is occurring.
Controlling how 65% of newly minted BTC hits the market does put China in a position of power in Bitcoin markets—but it's not a position of absolute control. After all, even if 100% of all newly minted BTC was dumped on exchanges each day, it would typically constitute less than 1% of the total Bitcoin trading volume for that day—enough to briefly dent the price, but not dampen it in the long term.
China’s digital yuan is getting its first big test in the real world
China’s upcoming digital currency will feature in a test pilot on Didi Chuxing, the ride-sharing giant often referred to as the Uber of China, according to Bloomberg. Didi will test the digital yuan as a payment system on its app-powered fleet of cars. Currently, the Softbank-backed startup features local players WeChat Pay and AliPay for payments, alongside global credit cards like Visa and Mastercard. Didi is China's equivalent of Uber. Image: Shutterstock. Didi officials said they are working...
With the Chinese government now looking to launch its own central bank-backed digital currency, it might not be long until China takes a firmer stance against community-controlled cryptocurrencies like Bitcoin. That, more than the activities of China’s miners, could have serious ramifications for the Bitcoin network, its hash rate, and ultimately, its value.
