Ben Kaiser from one of the most impressive universities in America, Princeton University and Alex Ledger from Florida International University have written a paper together on what China is impacting Bitcoin.
The paper, titled ‘The Looming Threat of China: An Analysis of Chinese Influence on Bitcoin’ describes all the multiple different ways that China could be manipulating Bitcoin. One of the most interesting parts of this paper is the ‘Great Firewall of China’ which observes all the internet traffic across the country with filters. Even if you take out the attack from China, the latency that Firewall has impacts the whole Bitcoin Network and since over 70% of all Bitcoin mining hash power comes from China, this is a big deal.
China has banned trading – when it comes to traditional currency to Bitcoin trading – the Bitcoin mining hash rate in China has been steadily increasing from about 50% in 2015 to the current 74%. More than 80% of Bitcoins hashrate is within six major mining pools and five of these are controlled by agencies based in the country.
According to Bitcoin News, the paper says:
“The Great Firewall of China doesn’t prevent outbound packets from reaching the global internet but it definitely slows them down via inducing packet loss. On the global internet, there is a rate of 0.2% packet loss, while that rate is 6.9% behind the Great Firewall of China. The lost packets must be re-requested and re-sent, increasing latency from 81 milliseconds for the global internet to 218 milliseconds behind the Great Firewall of China.”
This is a big impact on the Bitcoin block propagation. It can take four seconds for blocks on the same side of the Firewall to propagate between nodes but it can take just over 17 seconds for blocks to propagate between nodes on the side. This results in a 450% slowdown.
Chinese miners are now at a disadvantage since miners outside of the Firewall will be to broadcast a block much faster to the network and still receive a block reward. This goes through even if a miner inside the Firewall found a block earlier.
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