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Research by Princeton University and Florida International University published on October 5, 2018, concludes that China has strong motives and the capability to attack the Bitcoin network.

What’s the deal with China?

Bitcoin security is based on the assumption that in its decentralized infrastructure, no particular party controls more than 50% of the nodes. As of October 2018, around 70% of the mining of bitcoin is carried out in six pools, out of which five are located in China. Though the Chinese government does not directly monitor or controls these pools, the government is capable of exerting influence on mining pools.

Bitcoin Mining Pools.

Source: blockchain.com/pools

The Chinese government is communist; it controls finances and runs a sizeable state-sponsored surveillance infrastructure which tracks almost every citizen. Leadership is motivated not to let bitcoin take over the economics of the country and to protect its big brother influence.

Bitcoin allows the trust to be decentralized amongst all nodes participating on the network ensuring all nodes are equivalent regarding hierarchy with no node having more influence than others. The decentralization of trust is not something governments are looking forward to, especially the Chinese government.

How Can China Attack Bitcoin?

It’s estimated that China has the most extensive mining share of bitcoin than any other country. If the Chinese were to affect the network today, it could be more creative than just forcing the pool managers to attack the network. Below are a few technological implementations China already enforces onto their citizens.

GFW: China operates the Great Firewall which is capable of observing network traffic and injecting new packets in the transmission. In 2017, it was found that approximately 7% of packets from the US never reach China, while packet loss for Hong Kong is just 0.2% which happens to be outside the GFW.

Great Canon: China also operates a more sophisticated traffic tampering tool called the Great Canon which is capable of injecting malicious code in packets. Chinese government works to keep control; they directly control all Internet Service Providers (ISPs) in China.

The research paper reads:

“Blocks found in China are already proximate to a majority share of hash power, so they can reach consensus more quickly than blocks found elsewhere. 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.”

Why Would China Attack Bitcoin?

China has plenty of reasons to attack the bitcoin network. First and foremost – control. The Chinese government does not allow their citizens to access information on the decentralized web; they also will not allow for the decentralization of economic power.

Secondly, for warfare, China could economically attack a country where Bitcoin is a large part of the economy. Suppose it’s the year 2030, and there’s a nation which performs 10 percent of its cumulative transactions on the bitcoin network. China could use Bitcoin in an attempt to destroy that nation.

“To exert influence in a foreign country where Bitcoin is in use, China may aim to weaken or even totally destroy Bitcoin.”

However, China is also home to largest bitcoin mining manufacturers including Bitmain. Negatively affecting Bitcoin would not be beneficial for Bitmain and other companies which are adding billions of dollars in revenue to China’s GDP. The question is will China get a compelling enough reason to attack the Bitcoin network or falsify transactions?