Can the United States censor the Bitcoin ledger and deny Russia access to Bitcoin?

Yesterday, the article "Russia Considers Accepting Bitcoin Payment for Oil and Gas Exports" on the public account "Liu Jiao Lian Pro" wrote that as a response to financial sanctions from Europe and the United States, Russia announced that oil and gas exports to Europe must be settled in its own currency, the ruble, and mentioned that it is open to accepting Bitcoin payments.

So some people are worried that Europe and the United States, which have a large amount of computing power, nodes and bitcoins, will review the Bitcoin ledger and exclude addresses and transactions suspected to be from Russia from the ledger?

We have all heard that Bitcoin is so-called "censorship-resistance." Censorship-resistance means that no one can censor the Bitcoin ledger and deny access to specific users.

If Bitcoin’s censorship resistance holds up, then the United States should be unable to censor Russia’s use of Bitcoin.

The question is, is it impossible for the United States, the most powerful country in the world, to accomplish what it wants to do?

Let’s look at how the United States might censor the Bitcoin ledger.

The first entry point is to issue an executive order to miners, or directly legislate. As we have seen, some time ago, the United States required cryptocurrency exchanges operating in its territory to review Russian users and freeze their assets or refuse their use.

Last year, China, which once dominated Bitcoin computing power, voluntarily gave up this dominant position, and its share dropped from more than 75% in 2019 and before to zero computing power in a statistical sense.

At the same time, the United States, Kazakhstan, and Russia have become the new top three in terms of mining computing power: the United States accounts for 35%, Kazakhstan 20%, and Russia 10%. Following them are Canada, Ireland, Malaysia, Germany, Iran, etc. [1]

Russia and Kazakhstan are signatories to the CSTO, so they are in the same boat and at least will not cooperate with the United States.

Of course, if 35% of the computing power can act in unison, it may cause certain troubles to specific users. For example, when these miners grab the right to keep accounts, they will resolutely not package the transactions of specific users.

This will cause these users to wait longer for their transactions to be written into the blockchain ledger.

However, these miners cannot remove these users’ bitcoins from the historical ledger or steal their bitcoins.

Not to mention that miners cannot do it technically, from the perspective of game theory, if miners suddenly gain supernatural power, tamper with historical ledgers, and delete certain specific users' bitcoins, then bitcoins will instantly return to zero. American institutional capitalists and retail investors who hold a large number of bitcoins will definitely be the first to jump out and oppose it.

Capital is most sensitive to security. If the Bitcoin ledger can be tampered with, then the core value proposition of Bitcoin will no longer exist. If the core value proposition collapses, the consensus will collapse.

Bitcoin is originally a consensus currency. It has no intrinsic value. It is 100% consensus value. If the consensus collapses, the value will drop to zero.

Even if miners agree to cooperate with the US government’s censorship orders, can they do it?

Bitcoin addresses are just random numbers in a huge address space, and the total number is comparable to the number of atoms in the universe.

Obtaining a Bitcoin address is extremely simple. Unlike a centralized system that requires registration, obtaining a Bitcoin address and starting to use Bitcoin only requires using a single machine to generate a random number.

No one else in the universe knows what this random number is.

If the US government wants to guess this random number, it cannot guess it even if the universe is destroyed.

How does it know whether a random number is Russian or American?

Perhaps it could require centralized exchanges in the U.S. to “mark” certain addresses. But as long as these exchanges are avoided, Bitcoin on the chain has no identity.

What's more, Russia itself has enough strength to open an exchange on its own.

To open an exchange, who doesn’t have the technology?

Some people have also raised the question of whether the US government could hard fork Bitcoin to achieve censorship.

A hard fork cannot tamper with historical data or destroy existing ledgers.

By creating an artificial network "brain split", it may be possible to try to exclude Russia's mining nodes, that is, to censor the block-producing nodes.

However, the Bitcoin block node itself can be hidden behind the onion network. At this time, the node is like a stealth fighter, and the censor cannot detect its true location at all.

American miners want to create a hard fork, but with their current 35% computing power, it is basically impossible. Back then, our mining tyrants controlled up to 80% of the computing power to create a hard fork, trying to usurp the leadership of Bitcoin, and finally created BCH. Did they succeed?

What if the US government cannot unite miners to conduct censorship and bans all mining in anger? In 2021, we eliminated the mining industry in the Chinese market, which accounts for more than 70%, and the Bitcoin network has withstood this level of test.

The US government, which can only influence 35% of the computing power, can ban Bitcoin mining, but how much harm can it cause to the network? If it does so, it will only isolate itself from the world.

The US government has nuclear weapons and the world's most powerful army, but it cannot defeat a tiny coronavirus.

There are some things in this world that cannot be defeated with fists.

References:

- [1] https://www.statista.com/statistics/1200477/bitcoin-mining-by-country/

(Official account: Liu Jiaolian. Knowledge Planet: reply “Planet” to the official account)