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posted: November 23, 2024
tl;dr: China definitely has the resources and expertise to attack the Bitcoin network...
The Strategic Bitcoin Reserve (SBR), as proposed by Senator Cynthia Lummis, is great news for China! (An aside: does China already have Lummis on the payroll?) The SBR would have the U.S.A. sell off some of the world’s preferred central bank zero-counterparty-risk asset, gold, and buy Bitcoin instead. Obviously this is great news for Bitcoin pumpers, who are revealing themselves to be no different than the Detroit automakers, Wall Street bankers, and semiconductor companies who all beg the U.S. government to send billions of dollars their way (and some thought the Bitcoiners were free-market libertarians - ha!). But it is even better news for China, because China can destroy the U.S.A.’s Strategic Bitcoin Reserve whenever it suits China’s purposes. Here’s how.
Don’t convert Chinese wealth to Bitcoin
Let the United States and its allies liquidate their gold and other sovereign wealth for Bitcoin ledger entries. The United States may indeed become the dominant nation-state on the Bitcoin blockchain - let them. China and its allies should remain cautious about Bitcoin, and refrain from putting any significant amount of wealth onto the Bitcoin ledger.
Eventually, when enough important people notice that China and its allies are not following the U.S. lead, announce that China is finally going to acquire Bitcoin. Don’t actually follow through.
Keep acquiring gold
Gold has been money for five thousand years and is readily accepted worldwide. China knows how to secure its gold reserves. The U.S. selling its gold will reduce the price, so China can take advantage and buy more. There’s no danger that the entire world will someday lose interest in gold.
For all the current hype about Bitcoin, you might think it has more than doubled since April 22, 2021, but it hasn't - see this post
Do not listen to Bitcoin pumper Michael Saylor
Saylor is either an idiot or intentionally misleading when he speaks about how nation-states cannot successfully attack the Bitcoin networks. Watch here.
Saylor makes a blatant error when he states that blocking the Bitcoin network for six hours requires sixty blocks. A new block is placed on the Bitcoin blockchain every ten minutes, which is six blocks per hour, or thirty-six blocks over six hours. That’s one clue that Saylor’s mind isn’t very sharp. But the huge flaw is when he says that one way to take over control of the Bitcoin blockchain is to hijack every data center operated by Amazon (AWS), Microsoft (Azure), and Google (Cloud). Saylor says this would be dramatically insufficient, and then starts scaling this flawed approach, which proves nothing other than how stupid an idea it is.
The reason it’s stupid is that Bitcoin mining computers use dedicated Application Specific Integrated Circuits (ASICs) which are far faster at executing the Bitcoin protocol than software running on the general-purpose Central Processing Units (CPUs) found in the aforementioned data centers. Saylor actually indirectly refers to this fact when he says that the total cost of the computer equipment on the Bitcoin network is $20 Billion. Can China afford $20 Billion? Good!
Quietly acquire Bitcoin mining nodes
The goal is to acquire enough Bitcoin mining nodes to launch a 51% attack. There are many ways to do this. China may be able to buy mining equipment from the companies that make and sell it; after all, this is not military-grade restricted technology. China could design and build its own Bitcoin protocol ASIC and mining computers. The mining equipment can be tested by placing portions of it on the Bitcoin network at various points in time.
Launch the attack at the right strategic moment
Destroying the United States’ Strategic Bitcoin Reserve will reveal how vulnerable the Bitcoin network actually is, which will cause the price of Bitcoin to plummet to near zero and all the wealth stored on the Bitcoin blockchain to become nearly worthless. Accordingly, this is a one-time attack to be done when China wishes to inflict significant financial damage on the United States. A direct analogy would be when the United States froze the U.S. Treasury assets of Russia shortly after the start of the War with Russia.
There will collateral damage: some of China’s allies and friends may have placed some wealth on the Bitcoin blockchain, which will be all but gone. All’s fair in love and war.
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