China’s State Newspaper Recognizes ‘Bitcoin’ in a Bittersweet Symphony

November 11th, 2019

The most prominent and influential state-run news agency in China, Xinhua (‘New China’), just published an article on Bitcoin and blockchain.

The title of the article, Bitcoin: The First Successful Application of Blockchain, looks positive. However, when one goes through the material, it leaves a bitter after taste.

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Xinhua article on Bitcoin: The First Successful Application of Blockchain Technology

The news article recognizes Bitcoin’s characteristics features and its resilience over the past ten years.  Mattew Graham, the CEO of Sino Global Capital, tweeted and translated the article for the western media. It explains ‘How it Works’ and elaborates to explain mining and limited supply.

However, on its utility, it still seems stuck in the past. The news article says that the anonymity and decentralization of Bitcoin make it favorable to criminals. It said,

Currently, the most important uses of Bitcoin payments are black market transactions and ‘darknet’ transactions.

Moreover, it also raises the ‘exessive energy consumption’ argument against Bitcoin mining. The article notes that “production and mining consumes a lot of energy.”

Furthermore, a rudimentary analysis of the top 10 mining pools also raises questions on its decentralization. According to them, the barriers to entry in mining are increasing as the difference increases. The article cites,

The total computing power of the top 10 mining pools accounts for 75% of the total computing power.

Last but not least, on the intrinsic value of Bitcoin, it said that ‘Bitcoin is just a bunch of data’ and ‘it is difficult to ensure the stability of its price.’

According to them, over the past 100 years, people have moved away from gold and silver because a legal currency is far more stable. Since the state currency is ‘backed by national sovereign credit,’ it cannot depreciate sharply or exhibit unhealthy volatility.

Hence, while it recognizes Bitcoin as a successful application of Blockchain, it seems to be endorsing its digital currency. The Chinese digital currency on a blockchain would likely offer the same features of Bitcoin as an exchange medium along with the security of the state.

In a choice of accepting or competing with Bitcoin, the Chinese seem to be moving to compete with it from being unable to restrain it.