Why is China's interest in Bitcoin growing? The country’s increased interest in the currency has shown no signs of abating over the past couple of months, leading to all kinds of fun theories about currency wars.
Chinese downloads of the original Satoshi client, as maintained by the Bitcoin core development team, have increased in recent months. For the month of January, China ranked seventh amongst downloaders of the software, accounting for just 3.66 percent of downloads. As recently as April, Chinese downloads accounted for 13.15 percent of the total, lagging the US, which downloaded 27 percent of the clients. Play with the charts here.
Things have changed considerably over the last month. From the start of May until June 4, China soared to the top of the charts, surpassing even the US. During that period, Chinese addresses accounted for just over one quarter of all downloads of the original Bitcoin client. The US had a still-respectable 21.94 percent.
The signs are that China is using them, too. The Bitnodes project, which maps node activity around the world, shows China clearly in the lead, with 22.8 percent of the active nodes, compared to 20.2 percent in the US, which is second ahead of Germany.
So, why is it happening? "China seems to be actively encouraging its population to take it up," argued Johnathan Turrall, co-founder of MetaLair, the software company promising the still-elusive, decentralized, peer-to-peer crypto county exchange system.
"It is showing it on TV, and explaining to people how they can take it in payment for their business. Nothing goes on TV in China without the say-so of the party," he said. "The party never does anything officially, but if it's on TV, it's being endorsed."
Here is an online video of the TV show (click CC for subtitles):
Others spotted this trend early. The Genesis Block noticed a spike in Chinese downloads in early May, shortly after the video allegedly aired, and attributed it to the beginnings of a currency war between China and the US. It pointed to China's 2009 appeal to replace the dollar as a global reserve currency, and further saber-rattling since. It also pointed out China’s position as a major holder of US currency, arguing that if enough trade switched to Bitcoin, China could begin leaking US dollars onto the market, driving down the reserve currency’s value (although some might argue that the Fed doesn't need any help).
Not everyone is convinced that this is an engineered attempt to pump bitcoins at the expense of US currency, though. “I’m sure there are many people in China fascinated by money in all its various forms, and so a non-fiat money is especially interesting and the media would respond to this,” said Barry Naughton, a professor of Chinese economy at UC San Diego, adding that he doubted China was endorsing Bitcoin.
“Also, since China’s capital account is still not open, people will be especially interested in something that might allow them more freedom with their money, including the freedom to move it offshore,” he added.
Apparently, Bitcoin isn't China's only dalliance with cryptocurrencies. In early May, someone introduced ChinaCoin (CNCoin), and got some initial interest from the community, including a couple of test mining pools. However, support for this coin quickly faded, and even its discussion forum failed to materialize. The person who introduced the coin on Bitcointalk was a relatively new poster, and the coin languished.
One final thought is that China has 1.35 billion people, compared to the US's 314 million. If interest in Bitcoin spreads virally in China, as it has elsewhere in the past few months, it is perhaps unsurprising that the numbers jumped so quickly in a short period of time. The upward trajectory of Chinese nodes shows no sign of slowing, but what would be really interesting is a statistic showing the hash rate coming from China. We're still looking for that – if any readers have any pointers, please let us know in the comments.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.