Analysts Claim Sichuan Floods Led Bitcoin Hashrate to Drop, Highly Unlikely
Strong storms and heavy rain in the Chinese province of Sichuan have led investors in the cryptocurrency market to speculate its possible impact on the hashrate of bitcoin.
This week, in an interview with FT, social trading platform Carboneum CEO Max Kortrakul said:
“The pictures of the flooding in Sichuan are alarming and give the impression that the bitcoin hashrate must surely have taken a hit.”
Analysts Debate on the Case
On June 30, Eric Meltzer, a partner at China’s largest cryptocurrency fund INB, first released a photograph of a mining facility in Sichuan that was affected by a massive flood which destroyed most of the ASIC miners within the center.
The photograph spread out across the global cryptocurrency community relatively fast, leading investors to speculate whether the minor drop in hashrate on July 1 was caused by the flood or just a simple variance in mining power.
Meltzer stated that local analysts believe the minor drop in bitcoin’s hashrate was caused by two driving factors; the Sichuan flood and the heatwave in Eastern Europe that decreased the efficiency of large-scale mining facilities.
Apart from some researchers, the majority of the cryptocurrency community has said that a flood in one mining facility simple is not enough to affect the global bitcoin hashrate.
Currently, Bitmain, the $12 billion cryptocurrency mining equipment manufacturer and blockchain conglomerate, operates two pools that own nearly 50 percent of the Bitcoin network’s hashrate. But, most of the hashpower stored within Bitmain’s pools are geographically distributed and only a small portion of the hashpower originates from China.
As such, given the lack of large-scale mining facilities in China at a size that is sufficient to negative impact the global computing power of the Bitcoin network, Hong Kong Bitcoin Association president Leo Weese said that the minor drop in hashpower may have been caused by a variance in the chart.
“In reality these charts are just guesses based on how many blocks have been found in a day,” Weese said.
Beijing Bitcoin Meetup host and former Wyre and OKCoin executive Neil Woodfine echoed a similar sentiment as Weese, explaining that the drop was nothing more than standard variance or change in hashpower.
“[Hashrate dip of bitcoin] was really no more than standard variance. Typically, only bitcoin is mined on specialised hardware and the alternative currencies are mined on gaming graphics processing units.”
Hash Power of Bitcoin is Now Too Strong
As bitcoin and security researcher Andreas Antonopoulos explained, the hashrate of the Bitcoin network has increased to a point in which it is no longer possible for a single institution or facility to gain sufficient control to have real impact on the network.
“I don’t worry about that [51% attack on bitcoin] at all. This cannot be done with bitcoin anymore. This is something that could only be done with nascent altcoins. Bitcoin has achieved a level of computing that no single nation state can overthrow it with computation alone. The effort to do so would require a massive covert operation of chip fabrication then the coordinated assault that would give them dominance over the next block for 10 minutes until we kick those bastards off the network, rework the protocol around them, they would be revealed, they would have lost a billion dollars doing this and all they got to do is one double spend.”
Considering the large hashrate of bitcoin and the tendency of the hash power distribution to change drastically in short periods, it is possible that the minor dip in hashrate on July 1 simply coincided with a flood in Sichuan which did wipe out a bitcoin mining facility.
Joseph Young is a finance and tech journalist based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering exclusive content, interviews, insights and analysis of cryptocurrencies, innovative and futuristic technologies.
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