Why Chinese miners won’t plot a 51% attack on the Bitcoin network

More than half of the world’s Bitcoin hashrate comes from China, raising concerns among many about the concentration of this power. Jameson Lopp, co-founder and CTO of Casa, explained in an Aug. 9 blog post why Chinese miners are not a threat to Bitcoin.

While many have raised concerns about so much hashing power being concentrated in China, Lopp noted that even in the event of a 51% attack on Bitcoin, there are limits to what an attacker could actually do.

He explained that attackers can't arbitrarily steal people's bitcoins or change the consensus rules. They can't reverse valid transactions. The only thing they can do is double-spend their own bitcoins.

For 51% attackers, the best way to seek maximum profit is to cash out into "censorship-resistant currencies or stablecoins" through crypto exchanges. However, they will encounter big problems with withdrawal restrictions and KYC in the exchange. For attackers, selling a large number of Bitcoins at once does not make much sense from an economic perspective.

“After an attack, the value of your Bitcoin holdings will likely be significantly reduced, so a successful large-scale attack could actually shoot you in the foot. You’d better not get it wrong when connecting to the target exchange. For example, one hacker returned $25 million in stolen funds after revealing his IP address.”

Miners take action

Lopp believes that it is almost impossible for a nation-state to fully control mining farms, and Bitcoin stakeholders will immediately take urgent action against such behavior.

Even if the attack shifts from targeting individual miners to easier mining attacks — 70% of China’s hashrate is coordinated through fewer than 10 mining pools — it’s easy for miners to switch pools. It’s also hard to do covertly because there are so many independent companies issuing social media alerts against malicious actors.

“It is difficult to imagine a nation-state being able to quickly and covertly seize enough computing power to execute an attack scenario lasting more than a few hours.”

According to Lopp, Bitcoin computing power has been concentrated in China since 2015 because most of the mining chips are produced in Asia. On top of that, China also has "abundant cheap energy" and has political and economic stability that can facilitate mining infrastructure.

Lopp concluded that any large-scale mining attack would have “limited effectiveness.” As previously reported, in the long run, competition for semiconductor production and cheaper energy will continue to rise worldwide, and China’s mining advantage will not last forever.

Source: Cointelegraph