China Embraces Blockchain Technology As CNY BTC Trades Less Than 1% Of Global Crypto Trading

  • China’s National Audit Office & Ant Financial is leveraging blockchain technology
  • China’s central bank crackdown on cryptocurrencies has resulted in the Chinese yuan (CNY) accounting for less than 1% of global Bitcoin (BTC) trading.

China’s central financial institution, the People’s Bank of China (PBoC), recently announced that the Chinese yuan (CNY) is now used in less than one percent of the world’s total Bitcoin (BTC) trading. According to CryptoCompare data in September 2017, CNY BTC trading accounted for over 90 percent of global bitcoin trades. In order to reduce the number of bitcoin transactions involving the Renminbi, the Chinese government moved toward banning cryptocurrency purchases using fiat currencies.

CryptoCompare BTC CNY Bitcoin TradingSource: CryptoCompare

Moreover, authorities in China placed travel restrictions on employees of crypto exchange Huobi and OKCoin. Both these exchanges had one of the highest crypto trading volumes in China at the time. Additionally, 85 initial coin offerings (ICOs) and 88 local cryptocurrency exchanges, which constituted the majority of China’s crypto economy, have now shut down. Due to the government-imposed restrictions, Huobi shifted its operations to Singapore, a country offering a more favourable crypto environment.

Meanwhile, OKCoin, now known as OKEx, has moved its headquarters from China to crypto-friendly Malta. Cryptocurrency exchange Binance, whose Q1 2018 profits exceeded that of Deutsche bank, Germany’s largest financial institution, also shifted its operations from mainland China to Malta due to regulatory pressure.

$1 Billion In Chinese ICO Investments Returned To Investors

During its nation-wide crypto crackdown, the Chinese government labeled ICOs as an “illegal public financ[ing]” method. ICOs were accused by the country’s authorities of aiding in money laundering and other types of illicit activities, including the issuance of fraudulent and illegal securities. According to a September 22nd, 2017 report by Xinhua news, approximately $1 billion worth of investments in 43 different ICO projects were given back to investors after a government-led crackdown on local crypto-related startups.

Chinese authorities widened the scope of their cryptocurrency ban in February by prohibiting the nation’s residents from trading and acquiring digital currencies through exchanges located in countries outside of China. The heavy restrictions placed by the Chinese government have also led to giant cryptocurrency mining company Bitmain shifting its headquarters from mainland China to Singapore. Bitmain has now established its mining operations in the United States and Canada as well.

Although China’s government has been critical of cryptocurrencies, it has praised and adopted blockchain technology in a number of its routine operations. For instance, the Chinese government’s National Audit Office is reportedly planning to implement a blockchain-based solution for its existing data infrastructure. Billionaire Jack Ma, founder of giant online retail company Alibaba, has also been a strong supporter of blockchain technology, while referring to Bitcoin and other cryptocurrencies as merely a “bubble.” Notably, Ma’s Ant Financial company introduced a blockchain-powered money transfer service on Monday, which is now sending digital payments from Hong Kong to the Philippines.

Weekly Newsletter

BitMEX Research: Lightning Node “Justice Transactions” Deterring Bitcoin Thieves

Michael LaVere
  • BitMEX Research examined "justice transactions" on lightning network, which deter bitcoin thieves. 
  • Found 241 examples of justice transactions, worth 2.22 btc, since the launch of LN in 2017.

A new BitMEX report claims that bitcoin’s lightning network has deterred the possible theft of 2.2 btc thanks to “justice transactions.”

Lightning Network

The research wing of cryptocurrency exchange BitMEX published a new report on July 15 examining the features of bitcoin’s lightning network. In particular, the report focused on so-called “justice transactions,” which involves a punishment mechanism to close channels in the event of suspected foul play.

BitMEX identified 241 justice transactions, worth 2.22 btc, since the launch of lightning network in late 2017.

he Lightning network has been designed with channel closures and incentives to deter dishonest nodes from stealing funds. 

The report states, 

“It should be noted that, by design, when a thief attempts to steal funds on the lightning network, if caught, they do not only lose the money they tried to steal, they lose all the funds in the relevant channel. This “punishment” is expected to act as a deterrent and is sometimes called “justice”.

Monthly justice transactions reached their peak in October 2018. However, due to the rising price of bitcoin throughout this year, the total value redeemed by justice transactions was much higher in February and March 2019. 

Deterring Thieves

BitMEX reports that the 2.22 btc redeemed in justice transactions is the combination of total funds claimed from dis-honest nodes in addition to the value that was attempted to be stolen. 

The research also concludes that the actual number of justice transactions may be inflated relative to the number of attempted thefts, in part due to users experimenting with lightning network, 

“It is also possible that many of the 241 justice transactions do not indicate genuine dishonestly, for instance it could be users testing the system, where the same user owns both lightning nodes in question. For example BitMEX Research is responsible for 5 of the 241 justice transactions, when there was no victim, as BitMEX owned all the nodes and funds.”

While lightning network has yet to reach the capability of mainstream adoption, it offers the potential for faster and cheaper bitcoin transactions. BitMEX claims that the justice mechanism is necessary for deterring and preventing theft on the platform, and will ultimately contribute to the system as a reliable and scalable payment system. 

The research team concludes that there is a “reasonable degree of justice” on the nascent lightning network.