70% of Transactions, or How China Raises Its Bitcoin Influence

Chinese economy’s perspectives and potential are among the most favorite subjects of discussions for economists and political experts. China’s evident domination in some economy sectors sometimes even worries the international community.

China’s influence is also present in bitcoin industry, and therein, it’s way higher than in traditional economy. Chinese investors’ involvement in cryptocurrency is significant enough to enable the country’s local processes to impact bitcoin price.

Chainalysis‘s new research proved that 70% of bitcoin network transactions go through Chinese pools in the year 2016, which enables them to effectively order implementation of technical amendments in bitcoin’s source code. 40% of transactions go through exchanges located guess where.

Image by Chainalysis

One may question whether bitcoin is actually decentralized, even though this topic is a commonplace for crypto-community. Anyway, the influence isn’t concentrated in one company or government entity, but distributed amongst four private companies.

Currency for Criminals, or for Speculators?

The same Chainalysis research shows other interesting data concerning bitcoin dissipation across various markets. This piece of info is specifically valuable for those who still believe that Bitcoin is currency for criminals laundering their money or selling drugs online.

As we may clearly see from the picture above, there are only 85.4 thousand Bitcoins in the dark web, while dark markets are the eighth most popular destination for cryptocurrency, outranked by scams and Ponzi schemes.

Chinese, American and other cryptocurrency exchanges are the first items on the list; their market share is the biggest.

China Wants Bitcoin to Be Safe

That’s the bottomline for this April’s meeting at Grand Hyatt, where American representatives met up for the sake of discussing bitcoin ecosystem’s further development. Contrary to their US peers, who seek to adapt bitcoin for the requirements of modern-day economy and put a lid on block size debate by increasing its mass adoption, Chinese players are reluctant to act rapidly, and prefer the network to expand gradually and remain safe. In this context, the competition between the East and the West gains a completely new meaning.

At the April’s meeting, American delegates argued that the network should expand referencing transaction delays haunting bitcoin network from time to time.

“We kept coming back and saying, ‘For better or worse, you have this leadership in the industry, and everyone is looking to you to show some leadership,” Brian Armstrong, Coinbase CEO, described the meeting.

Some community members believe that Chinese companies’ interest is in short-term profiting without any care for the project’s long-term development or bitcoin’s ideology. Bobby Lee of BTCC declines such allegations, as well as suggestions that China-based companies have agreed to act together in order to decide bitcoin’s further fate.

“It was almost like imperialistic Westerners coming to China and telling us what to do. There has been a history on this. The Chinese people have long memories,” Lee commented on the meeting later.

Startup Investments and the Government Stance

China’s bitcoin expansion also covers investments in bitcoin-related startups. Less than a week ago, Baidu participated in Circle’s investment round and helped the startup to raise $60 million more. Also, recall Wanxiang, which had invested in its own blockchain lab in association with Ethereum foundation. Investment in Factom and the startup’s projects in China are also worth recalling.

As Western partners launch parcels of blockchain consortiums, China also creates one. Some members of the national consortium, like Ping An Bank, are also members of R3CEV, thus possibly diversifying their risks.

The government’s stance towards cryptocurrencies also becomes more friendly. Thus, should respective amendments to the country’s Civil Code pass, virtual currencies may become one of natural human rights in China.

When it comes to investment in particular blockchain systems, Chinese investors prefer three projects apart from bitcoin, namely Litecoin, Ethereum and Factom. So, whatever happens to the industry in the near future, China has already become one of the basic investment indicators, and the country’s internal events will impact the industry way more than speculations around Brexit.

by Ivan Meir