China is serious: After the government announced several times that it would no longer tolerate Bitcoin and mining activities, several mining farms were cut off from electricity between May and July. Within just seven weeks, the hash performance of the Bitcoin network shrank by more than half, from around 180 EH / s (exa hashes per second) on May 14th to below 85 EH / s on July 4th, 2021.
The shutdown of over 50 percent of all miners of a cryptocurrency that is susceptible to a 51 percent attack sounds threatening. Indeed, this threat persisted for years; For some time now, well over half of the world’s miners have been in China.In mid-2020, according to the latest study by Statista, there were a good two out of three miners in the Bitcoin network. That is more than enough to control the Bitcoin blockchain and thus the cryptocurrency both in the short term and permanently.
In fact, control over a little more than 50 percent of the global hash power is sufficient for a so-called 51 percent attack. An attacker exploits the fact that the Bitcoin blockchain is only a backward-linked list, i.e. it cannot be determined on the basis of the blockchain whether there are already newer blocks with transactions that are not yet known. Therefore, a miner distributes a newly found block as quickly as possible to the Bitcoin nodes, which distribute it to other nodes, miners and of course the users’ Bitcoin clients worldwide.
It takes a few seconds to minutes until a new block is propagated over the Bitcoin network – in which another miner can create a competing block and propagate it in turn. Then there are two different but valid versions of the blockchain, a so-called fork has been created. Bitcoin inventor Satoshi Nakamoto foresaw this problem and therefore determined that only the longest blockchain would apply. So it depends on which variant the next blocks were generated for – at some point a blockchain will be longer and the other variant will be discarded.
So that such forks do not occur too often and miners find new blocks faster than they can be propagated in the Bitcoin network, the so-called difficulty is adjusted every two weeks (more precisely: every 2016 blocks) so that it is on average It takes ten minutes for the first miner to put together a new block.
In order to control the Bitcoin blockchain, an attacker needs so much computing power that he can generate new blocks faster than the rest of the world – i.e. more than 50 percent of the computing power available in the Bitcoin network. This can then be used, for example, to block trading in the cryptocurrency, which makes it worthless by simply creating empty blocks without transactions. Or you are working on a variant of the blockchain that undoes a larger sale of bitcoins – with which you then own both the sales proceeds and the bitcoins.