The Chinese government recently banned Bitcoin mining and trading.
This is a factor that played a major role in lowering the price of cryptocurrency, which has repeatedly progressed despite various controversies.
What is the nature of the coin that the Chinese government is doing?
Is it just because of overheating?
Following these related questions will help you check for yourself whether you are'investing' or'speculating' coins.
What happened recently?
- China has been responsible for more than 60% of the world's bitcoin mining...
Deputy Prime Minister Liu Heo, head of the economy of the central government of China, announced a policy on the 21st that ``Bitcoin trading as well as mining is prohibited.''
Deputy Prime Minister Liu Heo presided over a meeting of the Financial Stability Development Committee and said, "By striking bitcoin mining and trading activities, we must firmly stop the transfer of individual risks to the entire society.
China has banned new issuance and trading of virtual currency since September 2017, but since mining was moderately blinded, about 60% of the world's bitcoins have been mined in China.
According to the Alternative Finance Center (CCAF) at Cambridge University in the UK, 65.08% of the world's bitcoin mining was done in China as of April last year.
Bitcoin mining sites in China are concentrated in the western interior regions (Xinjiang Uighur Autonomous Region, Neimung Autonomous Region, Sichuan Province, etc.) where electricity bills are relatively cheap.
Mining is a huge electricity consuming task, and the computers used for it dissipate huge amounts of heat.
Even after the cryptocurrency transaction was officially banned, Chinese people have used simple payment systems to secretly trade between individuals, but it is expected that the Chinese government will come up with measures to block this as well.
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Why is the Chinese government?
So, why is the Chinese government trying to ban Bitcoin mining as well as trading?
Just because using too much electricity in the mining process is environmentally destructive?
Are you worried about the damage of investors if the bubble in the coin market goes out?
That may be a reason, but a more fundamental reason can be pointed out.
From its inception, Bitcoin is a person who cannot get along with the Chinese government.
Bitcoin, why did it appear in the first place?
-Anarchist elements inherent in Bitcoin
Satoshi Nakamoto developed Bitcoin in 2009.
This point was just after the global financial crisis triggered by the subprime mortgage crisis.
Satoshi's philosophy of making Bitcoin is based on'distrust of central managers who could not prevent this crisis'.
'Blockchain' was used as a technological means to realize this vision.
[Click] Learn about'blockchain' and'one time mining'
What are you mining?
A sends 1 coin to B.
B sends 0.5 coins to C.
In this way, numerous transactions that take place in various places are gathered in a'memory pool' on the network.
Then, some of the'miners' around the world have to go ahead and pick a few of them, tie them together into one block, and attach the block to the chain of previous blocks.
As an analogy, it makes a history book of bitcoin trading, which is similar to choosing the author to write each page on a daily basis.
So, who among the miners is chosen as the creator of the new block?
It is a'miner' who solves the mathematical operation task required by the system the fastest.
The first problem would be a super computer armed with powerful CPUs.
However, in order to be selected as a recorder of Bitcoin's history, a computer that can continuously throw the dice as quickly as possible is more suitable.
(The reason'miners' use computers with graphics cards connected in a row is because graphics cards are more suitable for such parallel processing.)
Anyway, miners selected through this competition process (that is, the most computational task). The first computer) selects several transactions in the memory pool, combines them into one block, and sends them to other mining computers around the world.
These mining computers are also referred to as'nodes', and these nodes verify that there is no abnormality in the newly arrived block and then confirm.
When all nodes are confirmed, the new block is connected to the chain of existing blocks, and it is recognized as the history of bitcoin transactions.
It takes an average of 10 minutes to add a new block through this complex process.
The'average' of 10 minutes means that some transactions are included in a new block in 1 minute and confirmed by the network, but some transactions may not be included in the new block after an hour.
So, which transaction can be chosen first by the miner who creates the new block?
That is, it is a transaction that offers more fees.
(When sending or paying bitcoin, you are supposed to write how much commission you will pay to the miner.)
'Coin' is the cost of mining?
In addition to the commission received from the transaction party, the miner receives'Bitcoin newly issued by the system' in exchange for creating a new block. It is at this point that the figurative expression of'mining' emerged. A valuable thing that didn't exist yet was compared to a'action of digging gold' that was created in exchange for some work.
The miners of digital coins receive two things as income: the price (i.e., newly issued coin) and the fee proposed by the trading party by participating in the maintenance of the transaction system. Computers that perform the mining process draw a lot of electricity and generate considerable heat. So, if the price of bitcoin falls, miners will suffer a deficit due to electricity and equipment maintenance costs. In fact, the mining process requires very powerful computing power, so several large mining pools (called'mining pools') dominate the world. Individuals do not compete with these mining associations, but participate in these mining associations at a fee to perform part of the computational process and receive a share of the performance according to their contribution.
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The processes of'mining (i.e., creation, verification, and management of block chains)' and'reward (new issuance of bitcoin)' described so far are just like that according to the rules of the system originally designed by Satoshi Nakamoto.
This system is an open ecosystem, anyone can participate if certain conditions are met, and it is maintained by the contribution of everyone.
(You can also become a'full node' and become a member of the Bitcoin system maintainer. The entire Bitcoin blockchain published so far at https://bitcoin.org/en/download-Currently 350 GB You just have to download more than a byte-, connect your computer to a p2p network and keep it running 24 hours a day.) This system is inherently, essentially, decentralized.
For this reason, China has no choice but to hate it...
Here, let's go back to the first question.
Would the Chinese authorities really like a system that is inherently decentralized and rejects centralization?
The answer to this question vividly shows what happened to Alibaba's founder, Chairman Ma Yun.
Ma Yun crashed shortly before success while trying to establish the world's largest financial group called Ant Group by grasping the vast amount of Chinese transaction information.
The CCP does not want to share its power to control information with anyone, and does not allow any challenge.
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Isabella of Massachusetts University Amherst Weber (Isabella Weber) Economics Professor In the May 21 online column'Why China cracked down on Bitcoin' published in the business media Fortune, he pointed out:
The Chinese government is interested in creating a'digital currency issued and managed by the central bank (CBDC)' using some of the characteristics of blockchain technology.
The CBDC of China's central bank will give the Chinese government a vast amount of information about Chinese finance and commerce, and internationally, it can be used as a means to crack the US dollar's financial monopoly.
However, it is difficult to expect the Chinese authorities to tolerate private cryptocurrencies that are decentralized and difficult to track.
And, recently, the United States is also tightening regulations on cryptocurrencies such as bitcoin.
Economic critic Park Yeon-mi appeared on SBS Onews on May 21 and pointed out as follows.
“Since the past, there have been many cases of hackers and criminal organizations trading with bitcoin. Looking further, the US Treasury Department is concerned about'bad' transactions on the surface, but more fundamentally,'the dollar that can replace the dollar' It can be said that we don't want a transnational currency to appear.”
[Read the article] The US also regulates cryptocurrency (economic critic Yeonmi Park) If
you are investing in virtual/
cryptocurrency
, you need to keep in mind the situation where the authorities of the world's two largest super powers are tightening the reinforcement of regulation.
Furthermore, if you are trading so-called'Job Coins' in addition to some leading coins that have a clear technical base and a large transaction volume among virtual currencies, you need to ask yourself more calmly about what risks you are facing.
Park Jung-ho, a special professor at Myongji University, recently appeared on SBS'What Street' and presented the following checklist on investment and speculation.
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Are you investing or speculating?
(Production: Senior reporter Hyun-sik Lee, Reporter Sun-i Jang / Designer: Haeun Myung)