The dominance of United States of America in economics and technology is under threat. U.S. may be bracing for an economic ‘bang’ that may leave it tumbling from the top echelon that it holds in the economic charts. A time frame as to when this is going to happen is unclear but we’re coming slowly to it.
The reason: Cryptocurrency.
It might seem like a juvenile thought — how virtual currency can cause the alarming scenario we just laid out for you but it’s not solely about the currency, it’s about whose backyard this currency is taking root in.
Who better to threaten America’s dominance than Asia’s economic hub and long standing geopolitical rival that just happens to have a central control on crypto mining pools: People’s Republic of China.
As of now, China holds monopoly over cryptocurrency mining with largest mining pools that include Bitmain, a Chinese company that contributes to almost 1/3rd of all bitcoin mining pool’s hashing rate with its pools BTC.com and Antpool.
Together, China holds 51% of the bitcoin network, accounting for 61% of ethereum’s weekly capacity. Further, 80% of the mining on the bitcoin blockchain is centralized in China, despite the country’s ban.
This may seem like a hard pill to swallow but China effectively controls cryptocurrency, atleast bitcoin and ether.
How? you might ask.
Having control on these cryptocurrencies gives the miners an unheard option: rewriting the ledgers — the computer file for recording transactions measured by account type.
The attackers would be able to prevent new transactions from gaining confirmations, allowing them to halt payments between some or all users. They would also be able to reverse transactions that were completed while they were in control of the network, meaning they could double-spend coins.
This Defcon 1 situation, also coined as a 51% attack, for cryptocurrency, if it happens at all, could theoretically be a perfect counterfeit and the basic cryptographic hurdle the blockchain was built to overcome.
This is what the monster under the bed looks like: A monopoly on virtual currency that was built for the sole purpose of decentralization of currency.
That’s a tough one for the regulators: Brewing the perfect potion to keep crypto safe and most of all — preventing a gang fight over turf from breaking out.
USA government’s own accountability body acknowledges the problem in a report highlighting how its regulatory structure is looking for new ways to avoid the 51%.
Other countries are acknowledging and addressing this situation far better than USA one might argue.
UK published a report in 2016 on distributed ledger with the effective summary being:
Distributed ledger technology provides the framework for government to reduce fraud, corruption, error and the cost of paper-intensive processes. It has the potential to redefine the relationship between government and the citizen in terms of data sharing, transparency and trust. It has similar possibilities for the private sector.
European Union, on July 21st 2017, opened a 500.000€ call for proposals to set-up a European Expertise Hub on blockchain and distributed ledger technologies.
U.S. should take a leaf out of EU and UK’s policies about distributed ledger as soon as possible. China is not coming slow. Grave national security implications stand tall if this situation turns southwards.