I have to correct you here.

All block-chain based algorithms work on a basic formula: 1.) "Data Miners" have to "mine" the currency. This is primarily being handled by GPUs at the moment. GPUs made in China.

First, the top miners use ASICs. Made mostly in China as most hardware is made there.

Second, not all blockchains are based on proof of work. That is one model. You have proof of space and proof of stake as alternatives. In proof of stake, there is no mining, while proof of space relies on storage space.

For any of this to work, obviously, everything has to be connected to the internet. An internet held together almost entirely by hardware made in China.

Well if you believe China controls all our hardware or the internet, then we have far bigger problems than crypto.

So we'll ignore for the moment the fact that as more and more people use the system, there's an inherent "slowness" to Block Chain that would ultimately result in a backlog of transactions that would exponentially grow to the point that NO transaction would be able to be completed within your lifetime... We'll ignore that glaring problem for the moment entirely.

You are talking about Bitcoin. Not all cryptocurrencies work like Bitcoin does. Even then, Bitcoin has various solutions to that issue. This is an evolving space where answers are still being determined.

And it’s not that a transaction can’t be completed, it’s that you will have to pay more to get it processed more quickly.

The only thing we know for sure is that no decentralized system will be as fast as a centralized one, because it has to contend with the overhead that comes with verification over blind trust.

Now how fast it can be nobody knows yet.

But over time, they came dangerously close to owning more than 50% of the nodes in Bitcoin. They knew that if they DID get the majority, the value of Bitcoin would drop to zero.

Well it would go to zero if they attempted to cheat with the majority, yes. What you don’t mention in your analysis is that if adoption were global, then China would not be a problem. Bitcoin is very small, even now. By the time you see a country like the US adopt Bitcoin for day to day transactions, China would just be one part of the overall market. A large part, but not >50% of it.

What if they embed something in the chipset of the GPUs that recognizes bitcoin farming being done on the GPUs, and purposely return incorrect information on rare occasion?

Wouldn’t change anything about how Bitcoin works. Or any other crypto. The GPU, or any piece of hardware, operates on a very low level. It can’t affect a high level protocol like Bitcoin.

What if they quietly mandate that all GPU chipsets return false "primes"?

They can return what they like, but the network is looking for a particular number. The wrong one would just be rejected.

Just the muddying of the bitcoin operations this would cause would be enough to crash faith in the currency, causing it to devalue entirely.

You think it hasn’t already been tried? People have flooded Bitcoin with garbage transactions before. They fix the oversight that allowed such behavior, people update their software, and the network goes on.

So on this day, the hardware simply drops all bitcoin protocol packets that are not bound for the whitelisted servers. On this day, those whitelisted servers authorize false transactions. Creating coins that shouldn't exist, moving coins from one wallet to another, etc. It doesn't matter. The point here isn't to steal the coins, the point is to kill ANY faith in the currency.

Can’t happen. To participate in the Bitcoin network, you need to be running the software. The software is what determines the functionality, not the hardware, and this software is open-source so everyone can read what is in it.

So basically, the thing that makes cryptocurrency "secure" is specifically that it isn't popular. As soon as it becomes a "worldwide" currency for a state actor to take interest in, it will be destroyed. And no amount of fiddling with the algorithms or wishing will change that.

You have it backwards. Crypto is at its most vulnerable right now when adoption is low. Not because any state actor can stop it, but they might kill its utility through regulation and make it a black market technology. People would still use it, however they would risk being labeled a criminal and maybe even imprisonment depending on how crazy governments get.

Any currency that is based on wishes and dreams (read: not physically backed by a tangible item of value) will ultimately collapse. And this includes the U.S. Dollar. It's just a matter of time. A currency is only as valuable as the faith that people put into it. And with Bitcoin, there are many ways to destroy that faith.

Cryptocurrencies are based on mathematics and electrons, and the fact that you don’t need a central authority to run it.

There is no such thing as a “tangible item of value”. Objective value doesn’t exist. Money is a concept. It is a set of objective properties that something must have to be useful as a medium of exchange. Anything can serve as a currency, but money needs certain properties to be trusted.

Bitcoin fulfills those properties the same way that precious metals do, and it has advantages that they don’t, in terms of security and portability.

We live in exciting times. I wouldn’t second guess crypto yet. It has only just begun and Bitcoin is only the first version.