Why is the concentration of Bitcoin (BTC) hashrates in the United States a danger to the blockchain?

The dangers posed by centralization are a recurring topic in the cryptocurrency ecosystem. The recent success of Ethereum’s shift from a proof-of-work to a proof-of-stake consensus mechanism has raised new debates on the risks posed by the centralization ETH staking within pools such as LidoFinance. A similar problem has been raised for Bitcoin and could arise with the concentration of hashrate in the United States. Could Bitcoin find itself facing the same difficulties encountered in China after the migration of miners to American territory?

Source: Adobe

A few years ago, China was the world center of extraction of Bitcoin with a hashrate approaching 75%. According to the last data from Cambridge Center for Alternative Finance, the United States currently accounts for nearly 38% of Bitcoin’s global hash rate and, surprisingly, China ranks second, with 21.11% of the hash rate. American bitcoiners continue to promote and seek to attract mining companies in North America, including regulatory lobbies to create a favorable legal environment for them to operate.

Source: Cambridge Institute for Alternative Finance

It should also be noted that even the distribution of hashrate on the American territory shows a strong tendency towards centralization: Georgia, Texas and Kentucky in fact contribute to almost half of the country’s hashrate, although significant activity can also be observed in the states. of New York, California, North Carolina and Washington.

However, educator and podcast are co-hosts Block DigestShinobi, Note that this calculation could weaken the Bitcoin network in the long run. In fact, the theoretical principles on the security of Bitcoin mining are based on decentralization. Checking the majority of the hash rate by a single entity can lead to a security breach across the entire blockchain architecture, via a 51% attack. Another risk is at the level of regulation and jurisdiction: in fact, in order to operate legally, minors must comply with the laws and jurisdiction in which they are established, with the consequences that this entails. For an electric company, it is relatively easy to identify public companies, mining facilities, or local businesses with a sufficiently high hash rate from their power signature. All of this hash rate is subject to enforcement action by the US government, with varying degrees of difficulty.

Furthermore, it is important to note that the position of the US government and regulators is far from favorable to Bitcoin and the cryptocurrency industry as a whole. The positioning of Bitcoin as a possible alternative to the US dollar as a reserve currency has certainly not escaped analysts. The economic power of the American government, in fact, is linked to this privileged position of the dollar in the global financial system, which makes it possible to guarantee the effectiveness of the sanctions applied to the so-called “rogue” states. While Bitcoin is still a long way from dethroning the dollar, the opportunity for US regulators to control 38% of the hash rate if needed is very real.

This idea might seem absurd at first glance until one of the contributors Bitcoin Core, Peter Toddbrought to the attention of the community the existence of a project called still chain designed by Massachusetts Institute of Technology. The project aims to neutralize Bitcoin’s resistance to censorship. Although project officials have repeatedly denied that the project was intended to apply to Bitcoin, Todd says several sources have confirmed that the goal is to make the Bitcoin blockchain an authorized payment platform by bribing miners.

The events that took place in China, however, can give hope to the cryptocurrency industry. Indeed, most observers agree that the bans imposed by China and the subsequent exodus of miners have demonstrated the resilience of the Bitcoin network. However, it remains undeniable that the concentration of the hash rate in a single jurisdiction is far from ideal for the future of Bitcoin.

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