China destroy bitcoin

Welcome to the weekend, folks. Grab a coffee and let’s recap the biggest news stories of the week in cryptocurrency and blockchain.

China Has “Capability” and “Motive” to Destroy Bitcoin, According to Report

A new report this week claims China could destroy Bitcoin. The report, authored by researchers at Princeton University and Florida International University outlines 19 different ways China could attack the Bitcoin network.

Is it based in truth?

Theoretically, yes. The report points to the fact that 74% of Bitcoin mining hash power comes from China. And five of the six largest Bitcoin mining pools are located in the country.

bitcoin mining pools

If those mining pools collectively orchestrated a 51% attack, they would control the network, and bring it down if they wish.

However, it’s important to point out that the Chinese government doesn’t own these mining pools. And the mining pools themselves have little incentive to execute a 51% attack (it would kill the value of bitcoin, making their efforts worthless).

What is concerning is the level of Bitcoin centralization in China.

The report goes on to explain how China’s “Great Firewall” appears to give Chinese miners an advantage. It slows down miners outside China and incentivizes those within the firewall to generate “empty blocks” (the blocks contain no transactions, but the miner receives a bitcoin reward anyway).

This, coupled with cheap electricity in China, is centralizing mining power in one country. And that’s a problem.

Note: the report in question has not yet been peer-reviewed.

Venezuela Is Forcing Citizens to Use Its Controversial Cryptocurrency to Buy Passports

As Venezuela’s fiat currency, the bolivar, soars towards 1,000,000% inflation, the government is putting its faith in a state cryptocurrency, petro.

Venezuela petro cryptocurrency

The petro was created by the Venezuelan government and its value is backed by the country’s oil price to keep it stable. Citizens are now required to pay for passports and renewals using only the petro cryptocurrency.

But the petro isn’t without controversy. Its creators have been accused of ripping off the Dash whitepaper. The US government has also accused Venezuela of using the petro to defraud investors, and critics say the petro pre-sale didn’t generate nearly as much as the Venezuelan government claims.

Cryptocurrencies Pose No Risk to Global Financial Stability

In somewhat brighter news, a report this week concluded that cryptocurrencies are not a risk to the global financial system.

The report carries some weight. It was released by the Financial Stability Board and is backed by the Bank for International Settlements, the world’s oldest financial institution.

However, it does go on to say there may be a tipping point in the future.

If they continue to grow, the report claims, cryptocurrencies may one day pose a threat to the reputation of current banks and financial systems. There may be a risk of exposure if traditional banks adopt crypto on a wider scale.

And there may be risky consequences if bitcoin or other cryptocurrencies become a common payment method.

Price News

The cryptocurrency market suffered an epic $16 billion wipeout on Thursday. It took place in just a few hours, dragging bitcoin down 4%.

bitcoin price
Chart: Coinmarketcap.com

As usual, altcoins bore the worst of the fall. Ethereum, XRP, and others fell in the region of 10%.

That’s all for this week. We’ll be back bright and early on Monday.

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bitcoin mining profitability

Bitcoin mining has become drastically less profitable this year, despite soaring revenues. What’s behind this dip in profitability? Block Explorer editor Ben Brown explores.

New research from Diar reveals that Bitcoin mining has generated record revenues of almost $5 billion so far this year. That’s already higher than 2017 with three months to go.

However, that revenue hasn’t translated into profit.

High energy costs and increased competition in the space means the average bitcoin miner is struggling to make a profit.

In fact, September marked the first month when bitcoin mining became unprofitable for anyone paying retail prices for electricity.

Worryingly, this means bitcoin mining will increasingly be dominated by the “deep pockets” of mining corporations like Bitmain.

bitcoin mining profits infographic
Credit: Genesis Mining

Mining a Bitcoin Costs More Than Buying One

According to further data by Fundstrat, it currently costs $7,300 to mine one bitcoin.

Yet, we can go to Coinbase and buy one bitcoin for less than that – $6,600 at the time of writing.

To come up with its $7,300 figure, Fundstrat takes into account a $4,000 energy fee (at $0.06 kW/h) and $3,300 for equipment, wear-and-tear and other overheads.

So what makes bitcoin mining currently so unprofitable?

More Mining Competition Than Ever

Despite the bitcoin bear market, mining activity is stronger than ever. Bitcoin’s hash power has doubled since May, which means more and more miners are competing to generate Bitcoin blocks.

Hash rate explained: In order to generate a bitcoin block, miners compete to solve mathematical puzzles. The first to solve the puzzle with computational power generates the block and receives the bitcoin reward. The total number of attempts to solve the puzzle per second is called hash rate. The more miners working to solve the puzzle, the higher the hash rate.

The hash rate hit a record high in August. In other words, there are more miners working to generate bitcoin blocks than ever before.

bitcoin hash rate chart
Chart from: Blockchain.com

More competition means each miner requires more energy and computer power to generate a bitcoin block.

Energy Rates are Choking Mining Profits

Because miners need more and more energy to compete, electricity prices are choking their profits.

Diar estimates that anyone paying a retail energy price of $0.10 kW/h can no longer make a profit on bitcoin mining.

Add that to overhead costs such as equipment, rent, and salaries, and you begin to see why profits are declining.

It’s no surprise that 81% of bitcoin’s hashing power originates in China. That’s because energy rates are relatively lower – an average of $0.08 kW/h at retail price.

Bitcoin Mining: Dominated by “Deep Pockets”

Energy prices are even lower when bought at wholesale prices, which only large mining pools can afford to do.

In other words, the dominance in bitcoin mining will shift more and more towards big companies like Bitmain. Bitmain owns two of the largest bitcoin mining pools and commands up to 75% of the world market for mining equipment.

As you can see in the chart, bitcoin mining is already dominated by a small number of pools (Bitmain owns BTC.com and Antpool. At one point in June, Bitmain edged close to 51% of bitcoin hashrate).

bitcoin mining pools chart
Chart from: Coin.dance

With bitcoin prices in a bear market, hash rates at a record high, and fierce competition, miners are increasingly incentivized to join larger mining pools.

And here’s where it interesting. The vast majority of Bitmain’s revenue comes from selling mining equipment (95%). So it’s in Bitmain’s interest to keep bitcoin mining profitable for its miners, wherever they are in the world.

Since Bitmain can purchase cheap energy wholesale in China, where it owns 11 giant mining facilities, it can offset the more expensive mining costs in, say, the US. Bitmain can therefore lure miners to a larger pool by offering more security.

Big Companies Can Afford to Take a Short-Term Hit

The profitability issue is also linked to the fact that bitcoin is at a significantly lower price today than it was in January, offering a lower return. Companies like Bitmain can afford to play the long game, betting on higher profitability when the crypto market turns around.

By that point, Bitmain will have swallowed up more miners and increased its market share.

This all means that power, dominance, and control over bitcoin mining will shift yet further to just small group of mining pools.

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coin renders

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Gemini To Become First BitLicensed Exchange To Offer Trading in Zcash
The New York State Department of Financial Services has authorized Gemini Trust Company to offer trading of Zcash, Litecoin and Bitcoin Cash. Tyler Winklevoss, Chief Executive Officer of Gemini Trust Company, LCC said, “We are proud be the first licensed exchange in the world to offer Zcash trading and custody services and look forward to providing customers with a safe, secure, and regulated place to buy, sell, and store Zcash, an incredible new form of digital cash.”

Crypto Mining Company Coinmint Moving To Revamp 1,300 Acre Alcoa Plot
Once used for aluminum smelting, an Alcoa plant in Upstate New York is going to be converted into one of the world’s largest bitcoin mining centers. CNBC reports Coinmint said Tuesday it “would invest up to $700 million in the upstate New York location, which it expects to be the biggest bitcoin mining center in the world. The project will create an estimated 150 jobs over the next 18 months.”

Cryptocurrency Theft Malware Now An Economy Worth Millions
According to a new research report titled “Cryptocurrency Gold Rush on the Dark Web” by Carbon Black, the market for malware and tools designed for the theft of cryptocurrency is growing swiftly. ZDNet states, “The researchers estimate that over the past six months alone, a total of $1.1 billion has been stolen in cryptocurrency-related thefts, and approximately 12,000 marketplaces in the underbelly of the Internet are fueling this trend.”

Image courtesy of Carty Sewill, http://cartyisme.com/.

coin renders

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DNotes Global Announces Its DNotes Digital Currency Is Now Listed For Trading On stocks.exchange
The recently upgraded version of DNotes will join major cryptocurrencies like Bitcoin, Ether, and Litecoin, as well as a host of altcoins that are actively traded on the exchange. “With DNotes 2.0, we’ve accelerated our push to achieve real adoption of digital currency on a global scale” says DNotes co-founder Alan Yong. “As part of that effort, DNotes has added a new blockchain transaction invoice system that attaches an invoice number to any DNotes transaction – something that was specifically designed to simplify digital currency adoption for merchants who might otherwise be forced to use third-party solutions to manage crypto transactions. We’ve also improved our CRISP savings program and will be adding other new features in the near future.”

Denmark Joins EU Blockchain Partnership
Denmark plans to implement blockchain in shipping. Brian Mikkelsen, the Danish Minister for Industry, Business and Financial Affairs, said Denmark will be “the first country in the world [to] use blockchain technology to register ships in the Danish ship registers.”

Slovenia Opens First Bitcoin City
Coingeek is featuring a story on the first ‘Bitcoin City. It’s located just outside of the Slovenian capital in Ljubljana. “The huge former shopping destination stretches over a massive 475,000 square metres and has over 500 retail stores. The complex dubbed ‘BTC City’ also received a boost of late when the country’s outgoing Prime Minister, Miro Cerar visited the site. He added a certain common touch to proceedings by buying a cup of coffee using a cryptocurrency payment gateway.”

GMO Unveils Japan’s First-Ever Bitcoin Mining Rig
CCN reports Tokyo-based tech services company GMO Internet has this week unveiled the first bitcoin mining rig wholly-developed by a Japanese company.

Image courtesy of Carty Sewill, http://cartyisme.com/

coin renders

Use our news to inform cryptocurrency trading decisions, stay up-to-date on happenings in the industry, and more!

Hospital Launches Cryptocurrency Addiction Rehab Clinic
A Scottish hospital has launched a crypto rehab unit and by all accounts, the calls are flooding in. “Cryptocurrency users can get hooked by the volatile fluctuation of prices online which creates a ‘high’ when they buy or trade a winning currency,” said Castle Craig Hospital in a press release. “This can be exciting but also addictive and, like gambling addiction, can be financially disastrous.” MarketWatch features a 10 question survey for you to determine if you’re a pathological cryptocurrency addict.

Venezuela Bans Crypto Mining Rigs From Entering the Country
Despite the Venezuelan government embracing cryptocurrency with open arms, reports BlockExplorer’s Tony Spilotro, the country has taken a stand against cryptocurrency mining, going as far as to ban related computer equipment from entering the country.

Trading App Startup Taylor Says All Funds Have Been Stolen In Cyberattack
Taylor, a smart cryptocurrency trading assistant, was robbed of all of their funds, ZDNet reports.
The attack is said to have taken place on Tuesday of last week. In a Medium blog post, the Taylor team said “all of our funds have been stolen. Not only the balance in ETH (2,578.98 ETH) but also the TAY tokens from the Team and Bounty pools.”

Blockchain NW, Seattle’s First Crypto Conference, Begins Next Week
Seattle’s first blockchain conference begins Tuesday, June 5. The event will feature 50+ speakers who specialize in blockchain business and technology. Special to this event is a Blockchain career fair set up to match Pacific Northwest employers and employees. And if there was any doubt, tickets can be purchased with cryptocurrency.

Image courtesy of Carty Sewill, http://cartyisme.com/