The very purpose of using bitcoin is that they are completely trustless but if Bitmain tends to increase their hashrate higher than 51%, it breaks the purpose of why bitcoin was created. Even today people believe in Ghash and Bitmain that they won't do anything bad to the network if such a situation happens in some near future.
It's highly impossible for China as a country to completely manipulate the market since if someone needs to manipulate or take control of the bitcoin system (as like CZ thought of doing that during the Binance hack) a particular mining company like Bitmain alone should have 51% of the network hashrate. Ghash was a mining company where majority of the miners joined hands, but sooner Ghash instructed some miners to look for a different pool thereby making the mining industry again trustless.
The mining system is protected because you cannot expect all the miners to unite in order to break the chain. Those who try to break the consensus will be caught. This is something like the balance between yin-yang or good and bad.
This is quite true. Theoretically a 51% attack is possible, but to practically execute such an attack I think we need atleast 60-65% of the hashrate as 51% of the hashrate is constantly needed by the miners to create a chain longer than the current original chain. I had been running a full node last year just for learning purposes and deleted the blockchain later and converted it to a reg-test mode to regain space in my PC. During that time, I have once seen
REORGANIZE keyword being shown in
debug.log but that actually means a chain reorganization has taken place and the client shifted to a longer chain.
If someone has less than 51% hashes and still trying to broadcast false transactions, their IP address would be permanently blacklisted (caught) by the node as TheUltraElite said. There is a code written in the client for blacklisting of the nodes if they try to broadcast or accept false transactions or blocks.
I must have made myself more clear. When I said potential risk to the bitcoin network I actually meant that the bitcoin fees might get increased whenever China wanted.
Tx fees and mining are completely unrelated to each other. Fees increases only when there is large number of pending transactions in the mempool whereas mining doesn't gets slowed down or gets faster.
If they control 66% of global hashrate then they can stop all the mining operation whenever they want which will make the network congested and thus the bitcoin transaction fees would be increased. Am I missing something here ?
Let us consider your scenario that Bitmain or China completely stops their mining operation (which is highly unlikely), at that moment the mining will depend upon other mining companies which will significantly take more time to solve the 2016 blocks. Difficulty adjusts every 2016 blocks and if these blocks take more time to get solved, difficulty reduces thereby making miners to find new block under the current target more easily. By this way new miners would jump in the network and help in mining btc. This might make the China/Bitmain worthless again.
Say we have three miners A, B and C. Now they are mining at similar hashpower and now A quits. So the proportional prize for B and C will increase.
...snip...
This was how mining has been incentivized so that people dont leave the mining process.
Perfectly right. A little more additions to the post.
A quits and thus making B and C mining those 2016 blocks. It takes a lot more time than A,B and C mining cumulatively. Hence the difficulty drops and when B and C solve the block they are rewarded. When B leaves, C mines the blocks alone and it takes even more time than B+C cumulatively to mine 2016 blocks. Difficulty gets reduced to suit C's hashing power and thereby C becomes the sole owner of that prize.
