Centralization. A word that is like kryptonite to the superheroes of Bitcoin’s digital currency space. No one wants Bitcoin’s future, transactions, or funding too centralized, whether you are a Core Developer or a casual 1 BTC owner and fan. Yet, isn’t that what has happened? China seemed to discover Bitcoin in the summer of 2013, and the Bitcoin mining and exchange markets have never been the same. As of 2015, about 80% of the Bitcoin mining takes place within The People’s Republic of China. Is that a bad thing? Does this endanger Bitcoin’s future? Is the West threatened by that fact?
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Bitcoin is just a cute speculative investment for Americans. For anyone outside of the U.S., it can represent much, much more. Is this level of interest and dominance a good thing for Bitcoin? Having one billion people potentially gravitate towards Bitcoin is better than being dominated by a country a quarter of the size. Yet, given the penchant for the Chinese government to have a strong hand in many successful Chinese business sectors, there is potential for a major conflict of interests. You can see a downside, since the People Bank of China, directly run and managed by the Chinese government, has dropped the hammer on Bitcoin investors and owners before, why can’t they do it again with Bitcoin?
At least in the U.S., the government has carried a “laissez-faire” approach to Bitcoin due to corporate business interest and a need for tax revenue by the government. American greed has gone a long way in protecting Bitcoin in the West. Also, American legislation has defended Bitcoin well. The Citizens United case has made the legal precedent of money as a form of speech and information, which has huge ramifications for Bitcoin. If the U.S. Government wants to ban Bitcoin, they risk creating a solid legal precedent that Bitcoin is money and is a legal form of information and speech by Constitutional law and current legal constructs. Not a road any government bureaucrat wants to head down.
Plus, Bitcoin has been used in religious tithing as donations, and there are many American laws protecting the freedom of religion. And politicians also have little incentive to attack Bitcoin, as they can now legally get donations in Bitcoin via a judgment by the Federal Election Commission, so why close a potential long-term stream of income? Politicians love getting bought off, regardless of how, so Bitcoin is on a pretty solid legal ground in “The Land of The Free.
China is looking to take over the world, economically. With gold reserves rumored to approach 10,000 tonnes, and ads touting a golden renminbi as the next global reserve currency, it may be only a matter of time before they succeed. China is still a global production hub, and holder of the vast majority of the world’s “rare Earth elements,” which are needed for every cellphone, hybrid car and computer known to man. And cornering the Bitcoin mining market doesn’t hurt their economic position at all, with or without the government’s influence.
Bitcoin was designed to be a part of the future of money, and China is definitely a part of Bitcoin’s future, but is this a problem people in “The West” should worry about? Not according to Bobby Lee, head of China’s largest Bitcoin exchange, BTCC.
“Bitcoin will never be centralized because no one is ever stopped from mining Bitcoins. You don’t need a license to participate in the Bitcoin economy. It’s not like (there are) only two (mining) companies. There’s a very healthy mix of companies, so I’m not worried about that at all. I think China is more interested (in Bitcoin), so you see more (Chinese) activity.”
The world’s largest Bitcoin wallet companies are western, with Blockchain.info and Coinbase sporting over 3 million each, yet no one says Bitcoin wallets are “centralized.” China has over 1 billion inhabitants, so they have plenty of weight to throw around, just through basic economic inertia. They may create little technology, or even have the ability to control it, but they seem to have the building blocks for many global economic sectors under control.
Whether it is their production capabilities, market size, and potential, or national aspirations to move “The West” to the role of spectator, China is coming. Those $30 daily Bitcoin price spikes? That’s China calling. In the short-term, China controlling the Bitcoin market isn’t a bad thing at all, if you like instant appreciation of your digital asset. Long-term, we’ll have to wait for the other shoe to drop.