﻿Bitcoin is vulnerable to sabotage from the Chinese government because of its overwhelming exposure to the country, researchers have warned.

Beijing could render the Bitcoin network effectively useless by taking control of the powerful computers used to maintain the digital currency, which are largely based in China, according to a report from security companies Hacken and Gladius.

Bitcoin is seen by its supporters as free of government control, a feature that is highlighted as one of its key benefits.

GETTY IMAGES As Bitcoin has grown, it has required more expensive and powerful computers.

The digital currency is maintained not by any central organisation but by a collection of "miners", computers that are rewarded in new Bitcoins for updating the ledger of all transactions known as the blockchain.

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As Bitcoin has grown, it has required more expensive and powerful computers, and meant mining has migrated to parts of the world where electricity is cheap, in particular China.

Some 77.7 per cent of the "hashpower" - the computing strength behind Bitcoin - is now based in China, according to the report, leaving the network vulnerable. The majority of the specialised hardware used to mine Bitcoin is also made in China.

"It is obvious what this country can do to the network. [It] is over-exposed to China and the government can sabotage it," said Vladyslav Makarov, an author of the report.

Bitcoin transactions must be confirmed by a consensus of users, which protects the currency from cyber attacks.

However, if one party were to control more than half of its processing power, they would be able to manipulate Bitcoin in a way that renders it useless, the report says. Such a "censorship attack" would cause transactions to grind to a halt, be completed twice, or result in Bitcoins disappearing from wallets. These events could be launched by Beijing if it coerced enough miners in the country.

Beijing has already proven itself to be sceptical of Bitcoin and other cryptocurrencies, prompting fears about financial stability and capital flight. This year China has already banned initial coin offerings, a form of crowdfunding that involves companies issuing cryptocurrency-like tokens, and has shut the online exchanges that allow people to buy and sell cryptocurrencies.

Neither act dampened appetite for Bitcoin, whose price rose to an all-time high near $US20,000 this month, before dropping back last week.

An attack on the network could have potentially devastating effects. Even if it does not completely freeze the network, it could cause a confidence crisis that leads to Bitcoin's price collapsing.

"It is obvious that a huge amount of hashpower concentration in a single jurisdiction is detrimental to the health of the Bitcoin ecosystem," said Hacken's Hennadiy Kornev.

Adam Anderson from Gladius said that the damage from such an attack could be limited by cloning, or "forking", Bitcoin to create a version less vulnerable to Chinese influence.

"[However], I'm not sure faith in Bitcoin could be restored," he said.