And the Risks That Threaten U.S. National Security
Bitcoin, as a decentralized digital currency, is not only an alternative innovation to financial systems based on centralized institutions but is also considered a matter of national security. Experts believe that Bitcoin’s decentralization plays a crucial role in protecting individual freedoms and the financial sovereignty of nations.
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In this report, we examine this issue in detail by analyzing and compiling information from several foreign sources, including “CryptoQuant,” to understand why Bitcoin’s decentralization might undermine U.S. national security. Additionally, we explore the relationship between Bitcoin and national security.
Examining the Bitcoin Protocol and Its Functioning
To precisely understand the connection between Bitcoin and the issue of U.S. national security, it is necessary to thoroughly understand the technical and internal ecosystem aspects of this innovation—just as a doctor delves into the internal layers of a patient’s issue before diagnosing an illness and prescribing treatment.
How the Bitcoin Network Works
The extent of Bitcoin’s ecosystem operation is so vast that to fully comprehend it, one must have a considerable grasp of four fields: mathematics, computer science, economics, and cryptography. The core link between Bitcoin and national security lies in how this protocol operates and how its units—BTC coins—are mined.
Bitcoin is mined using specialized devices called “ASICs” (Application-Specific Integrated Circuits). Essentially, the Bitcoin mining network consists of a chain of ASIC devices distributed across different geographical locations worldwide. This chain creates, develops, and manages the Bitcoin blockchain network.
The blockchain-based network of this digital currency is designed to automatically add a new block to its chain of previous blocks every 10 minutes. As of the time of writing this text, the Bitcoin blockchain network consists of approximately 867,290 blocks.
Each of these blocks contains a specific amount of BTC, which is awarded to the miner of that block. This reward incentivizes participation in the Bitcoin mining process.
In other words, the design of the Bitcoin network protocol ensures that whether 100 million ASIC devices are connected to the network at this moment or only 10 million, the protocol will use a specific mechanism called “Bitcoin Network Difficulty” adjustment to maintain the approximate block mining time at 10 minutes.
Suppose the number of active ASICs in the network increases (meaning the competition to mine each block rises). In that case, the Bitcoin network will automatically increase its difficulty in maintaining the block time to 10 minutes, and vice versa.
Bitcoin’s Features: A Threat to U.S. Global Dominance
Given how the Bitcoin network infrastructure operates and how this asset is created, distributed, and managed, some argue that Bitcoin could challenge the survival of U.S. global dominance. In other words, certain features embedded in Bitcoin pose a challenge to the continuation of America’s hegemony, including:
1. Financial Sovereignty and Bitcoin Control
One of Bitcoin’s fundamental principles is that it operates outside the control of any central authority, such as governments and banks. This feature of Bitcoin can help some countries maintain financial sovereignty, especially those that rely on external financial systems like the “SWIFT” network or the U.S. dollar for trade and are vulnerable to political and economic pressures.
For these countries, using a decentralized currency like Bitcoin can reduce dependency on these systems and enhance resistance against economic restrictions. For example, nations like Iran and Venezuela, which face severe international sanctions, could turn to decentralized currencies to free themselves from reliance on foreign financial systems.
2. Resistance to Cyber Warfare
Centralized financial systems that depend on banks and payment processors are primary targets for cyberattacks. However, Bitcoin’s decentralized structure makes it significantly more resistant to such attacks. This digital currency operates on a network of nodes (interconnected computers), making it nearly impossible to attack directly.
Any successful attack on the Bitcoin protocol would require control over more than 50% of the total computational power of the entire network—a feat that is practically very difficult to achieve. This resilience makes Bitcoin a key component of national cybersecurity strategies.
3. Preventing Economic Crises and Hyperinflation
Many countries experiencing economic instability and hyperinflation, such as Argentina and Zimbabwe, have demonstrated the consequences of government mismanagement of monetary policies. In these situations, Bitcoin functions as a decentralized store of value, allowing people to protect their assets from inflation.
In such circumstances, Bitcoin can help prevent internal unrest by providing citizens with access to a secure and reliable currency.
4. Protection Against Geopolitical Instability
Bitcoin and other decentralized assets serve as a hedge against geopolitical and regional instability worldwide. International financial markets are highly interdependent, and any financial crisis can have widespread effects globally. Bitcoin’s decentralized nature ensures that no government can freeze or confiscate assets during a crisis—this is especially valuable during times of international tensions.
5. Combating Authoritarian Controls
Bitcoin allows individuals to circumvent authoritarian financial and political controls. In many authoritarian regimes, governments use financial systems to control people’s activities. By relying on Bitcoin’s decentralization, individuals can prevent governments from easily seizing their assets, thereby strengthening personal and financial freedom.
6. Strategic Economic Competition
Bitcoin is also regarded as a tool in the global strategic economic competition, particularly between the U.S. and its rivals like China and Russia. China, for instance, has developed its own digital currency (the digital yuan) to expand its influence in global markets. In this context, Bitcoin, as a decentralized currency, could serve as a counterbalance to state-controlled digital currencies.
Bitcoin’s Risk to U.S. National Security from Experts’ Perspective
Some experts believe that Bitcoin’s decentralization and the way its units are mined could create conditions that threaten the national security of the United States.
For example, Rajiv Khemani, co-founder and CEO of Auradine, a company specializing in Bitcoin mining equipment and chip production, stated in an interview with Cointelegraph: “Overall, decentralization is rooted in a national security issue.”
Rajiv Khemani explained: “Since the Bitcoin network consists of a collection of mining entities or individuals, each of them connects to ASIC devices through their own operating system and guides the network. Therefore, over time, the mining operating systems, which act as a third party in the traditional financial system, can be updated and modified.”
Theoretically, this issue could be exploited to jeopardize the energy network or conduct a 51% attack on the Bitcoin network. In further detail, Khemani described a specific scenario:
“Companies developing these types of operating systems and Bitcoin mining chips could embed malicious codes in their products, causing these codes to halt mining operations in a specific geographical area. Consequently, this would reduce the network difficulty and create conditions for a 51% attack on the Bitcoin network.”
In this interview, Khemani emphasized the necessity of caution when evaluating foreign hardware and software used in Bitcoin mining. He also identified supply chain risks as another potential factor for attacks on the Bitcoin network. According to Khemani, if Bitcoin mining hardware is predominantly produced within a single jurisdiction, that country could restrict the export of such products at any time, thereby disrupting access to critical mining hardware in other parts of the world.
Previously, Senator Elizabeth Warren, who is well known for her anti-cryptocurrency stance, had criticized digital currency miners in the U.S. She believes that the electricity consumption of these mining tools is devastating to the power grid. Warren also warned the Senate committee that Bitcoin miners outside the U.S. could use mining facilities for espionage on U.S. military bases.
In response to this American senator, the CEO of Auradine pointed out that due to Bitcoin’s ecosystem design, there are limited ways to steal BTC coins or conduct espionage through it, as Bitcoin mining hardware lacks strong memory and surveillance capabilities.
Instead, Khemani believes that the U.S. should implement policies encouraging domestic production of ASIC hardware, ensuring that no country controls the majority of Bitcoin’s total hash power or its specialized mining hardware supply.
Concerns About the Geographic Distribution of Bitcoin Network Hash Rate
The CEO of Auradine is not the only one sounding the alarm about the concentration of Bitcoin’s hash rate and mining pools.
According to a report by CryptoQuant in May of this year, just two mining pools, AntPool and Foundry, controlled more than 50% of the Bitcoin network’s hash rate.
In September, Ki Young Ju, founder of CryptoQuant, pointed out that Chinese mining pools accounted for 55% of the hash rate, a claim that sparked serious discussions.
Under these circumstances, the data analysis platform TheMinerMag stated: “It is incorrect to claim that China dominates Bitcoin’s hash rate solely based on the geographic location of mining pools established in China. Bitcoin miners participating in Chinese mining pools are geographically distributed. Therefore, it is very difficult to say that any one country controls the majority of the network’s hash power.”
Bitcoin: A Tool for Transforming the Current Global Disorder
Overall, considering Bitcoin’s fundamental features, it can be said that this project is directly connected to the national security of various countries. On one hand, this digital currency can help protect the sovereignty and financial independence of non-U.S. nations, resist cyber warfare, and safeguard individual freedoms against authoritarian governments. In other words, each country can utilize Bitcoin in different ways to play its role in the global economy.
On the other hand, Bitcoin’s decentralization poses challenges for the U.S., which is currently the world’s superpower. These challenges come in the form of reduced control over global financial systems and the process of de-dollarization.
