Bitcoin [BTC]: Bitcoin Nodes fall in China as new blockchain regulations take effect

The number of Bitcoin nodes in China seems to have gone down considerably over the past week, recent data from Bitnodes seems to suggest. If so, this development would constitute another roadblock to the wider use of cryptocurrency throughout the world. However, there may be a very disturbing reason behind such a decline.

A bitcoin node is very critical to the basic functioning of the blockchain technology on which the cryptocurrency operates. It is essentially a ‘full client’ that shares blockchain and transaction data with others to form a network. Simply put, the more the number of nodes in a network, the more secure the network is likely to be.

However, as the data from Bitnodes suggests, the number of nodes is falling. This is especially so in China where the number of nodes has fallen from 421 to 382 in a single 24-hour window between 4th and 5th February. In fact, it has been reported that the number of nodes was fewer by 75 after a similar window between 1st and 2nd February. China now only accounts for only 3.97% of all nodes in the world. It would seem thus, that the network-building key to Bitcoin is stalling owing to the falling number of nodes in countries such as China.

There are, however, a few reasons for the falling numbers. For starters, unlike mining, running a full node doesn’t come with incentives. Despite the fact that running a node contributes to the coin’s decentralization, higher costs associated with electricity or network may dissuade those who are already running and those who want to. Further, collective mining pools have gradually weakened the consensual nature of mining and by extension, discouraged those who wished to provide nodes for the Bitcoin network.

In China, however, another reason may be in play. The Chinese State recently introduced regulations that it hoped would promote the ‘healthy development of blockchain technology’ in the country. Under these regulations, any node that is being run without government approval is illegal. The regulations instruct all nodes to be registered with the government, as well as allowing the government access to these nodes when need be. At its simplest, it would seem that the Chinese government’s regulations are attacking the heart of cryptocurrency’s decentralization principle by allowing the government access to such data.

Therefore, it would seem that there is a multitude of reasons associated with the falling number of nodes in China. However, this should ideally be no cause for worry as new nodes are cropping up elsewhere in the world, especially as the Lightning Network keeps scaling.

Source: Twitter

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