Bitcoin is a decentralized network that facilitates peer-to-peer transactions without the need of a government or bank. Bitcoin is being touted by some as the future of money. It could well be a future global reserve, and some believe the Bitcoin standard is inevitable, but what if something was to go wrong with it?
Could something threaten Bitcoin’s inevitability? Well, it’s a software protocol, but it certainly isn’t fragile. In fact, it is the most robust of networks, and it certainly needs to be if it’s to replace established financial networks.
Bitcoin is the most secure of networks, but all software networks have vulnerabilities, don’t they? So, what is the biggest threat to Bitcoin?
Wouldn’t a 51% Attack be a threat to Bitcoin?
Many believe a 51% attack would be the end of Bitcoin. Something that would eradicate the robust and decentralized brand Bitcoin has built for itself, but is it really a threat to Bitcoin?
A 51% Attack is an attack on the Bitcoin network by a group of deceitful miners, who would try to take control of more than 50% of the network’s mining hashrate.
If they were successful, they would be able to prevent transactions and halt payments between users. They would also be able to reverse transactions that were verified only while they were in control of the network, meaning they could double spend a certain amount of coins.
It would no doubt harm Bitcoin short term, but the effect of a successful 51% attack is greatly exaggerated.
51% Attacks would be extremely expensive to even have a chance of pulling off, and would take an enormous amount of coordination from all corners of the world. They’ll deliver little benefit and they can easily be thwarted, so for such enormous costs and little rewards it’s unlikely we will see any 51% attempts.
Wouldn’t a Quantum Computer be a threat to Bitcoin?
Quantum computers, which were once thought to be an impossible feat, are now expected within the next 20 years.
Bitcoin’s cryptographic functions are considered to be secure, because breaking them would take an enormous amount of processing power, that no single computer could achieve.
Quantum computing, however, will be able to go beyond the limits of traditional computing by leveraging quantum mechanics, thus making any traditional computing system vulnerable to it.
It’s believed, therefore, that a quantum computer would break Bitcoin’s cryptographic shield in a matter of days.
Quantum resistant algorithms already exist, and could quite easily be integrated into the Bitcoin protocol. It would take some changes, but it could definitely be done to protect Bitcoin against a quantum computer.
Some say if a Bitcoin miner was to own a quantum computer, it would give him the edge when hashing. No doubt it would, but it’s hard to imagine only one person owning a quantum computer, and don’t forget ASICs mining rigs are very powerful machines today, so how powerful will they be when the threat of quantum computers is real?
An Electricity Outage
Wouldn’t a global power outage be a threat to Bitcoin?
An electricity outage would certainly damage Bitcoin in the short term, but then again it would also cripple the world economy, and make business and everyday life impossible.
If an electric failure was to happen for whatever reason, then Bitcoin would switch off, but as soon as the electricity came back on again it would just start working from the very transaction and block where it had left off.
What’s more, Bitcoin would most likely be one of the first things to start working again when the electricity was switched back on.
Remember Bitcoin is decentralized around the world, so unlike any other centralized server it will definitely be close to a part of the world that electricity is switched back on first.
And even if the Internet wasn’t working it wouldn’t affect Bitcoin transactions. Of course the Internet makes it easier to transact, but Bitcoin transactions can be sent across any communication channel.
We have already seen commercial satellites being used for Bitcoin transactions. So, if it was a natural disaster that was to wipe out the electricity connection, then satellites wouldn’t be affected by any power outage on earth. And when electricity was switched back, a simple satellite dish would easily connect to the satellites that have the Bitcoin protocol downloaded on.
Wouldn’t a government crackdown be a threat to Bitcoin?
Could governments crackdown on Bitcoin ownership? Sure! We have seen it before like China’s supposed crackdown. The price dropped a fair bit but like Bitcoin always does: it rebounded again.
Bitcoin and blockchain is a brand new innovation that is set to disrupt many industries for the better. Innovation produces wealth, and let’s just say for example the U.S. government banned Bitcoin, but Switzerland, the U.K. and Japan didn’t.
What do you think will happen to all this innovation, wealth and intelligence? They will simply go where they’re welcome, and those governemnts will reap the benefits. And the beauty of decentralized, open source networks is that people can easily work remotely, so employees for businesses built on Bitcoin wouldn’t necessarily have to relocate either.
Changing things like tax status with Bitcoin could be harmful, and might send it underground, as it would alienate many investors, who wouldn’t want to go against the government in order to use Bitcoin.
That said, however, more than half the world live under authoritarian and/or corrupt regimes with failing economies, and opposing their government can be a matter of life or death for some.
So, breaking a law to use Bitcoin would be, as is already for many, a necessity rather than an option for getting around government rules and regulations.
But what if there was government crackdown throughout the world? Well, all governments have never been able to agree on anything ever in the past, so why would that change now?
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The truth is, gold is more of a threat to governments than Bitcoin is. The gold market cap is money out of the fiat system, just like Bitcoin’s, but at $10 Trillion, gold is more than 50 times bigger, and governments don’t see gold as a threat. So, I think we have a long way to go before governments see it as a threat.
And remember, gold was actually banned in the U.S. in 1933, and by 1934 the price of gold had rocketed more than 30%. And alcohol had never been so popular than it was during prohibition, so I think a government ban might just backfire in more ways than one.
Government Issued Stablecoin
Wouldn’t a government issued stablecoin be a threat to Bitcoin?
Government issued stablecoins are coming. It’s common knowledge that governments are racing to be first, as they believe it will give them an edge as the digital economy blooms and a digital currency becomes easier to distribute and control.
Three of Bitcoin’s best features are that it’s decentralized, immutable and programmable. Any government-backed stablecoin will not be decentralized, and it will most certainly not be immutable.
Governments will have complete control over their stablecoin, however, and this will make it easier to deflate and inflate as suits them, but the most worrying thing is that the stablecoin will posses one of Bitcoin’s best features: programmable.
Because Bitcoin is programmable, industries can be built on top of it, and because there is no need for a middleman, it will benefit business no end. Sure industries will be built on government stablecoins, but the problems we have today will be magnified.
Programmable money in the hands of a centralized entity means they control your life. Imagine a business or you don’t comply with how your government expects. With a programmable stablecoin they can cut off your wealth in an instant.
If you think this is Big Brother fear mongering, look what’s happening in China. They have a social point system, where you lose points for breaking laws, however small. If you jaywalk too often you’re not allowed to use public transport, or even get a passport. Imagine when the Chinese government has complete control over its people’s money.
Sure, China is an authoritarian regime but western societies are slowly taking civil liberties away from its people, and when they have programmable money they will have you.
So, government stablecoins are more a threat to societies than Bitcoin. And I believe they’re actually good for Bitcoin, because it will make it easier for people to transfer wealth from government money to Bitcoin, especially as they hear stories of other people’s money being switched off.
Wouldn’t a catastrophic bug be a threat to Bitcoin?
Bitcoin is a software protocol, and every chunk of code is buggy, so couldn’t a catastrophic bug be a threat to Bitcoin.
For sure there have been bugs found in the Bitcoin code, and a bad one as recently as 2018. Back then the vulnerability could have been used to actually create more Bitcoin than the 21 million hard cap.
It was disovered and patched and all miners and nodes upgraded the software and things carry on as normal.
If this hadn’t been discovered and amended it would have been a disaster for the Bitcoin price, no doubt about that.
But the fact is, it was discovered, and was fixed. Bugs are found continuously in code, and because Bitcoin is a network worth over $150 billion and is the hope for a peaceful and democratic future for many, it magnifies the severity of bugs.
Bugs are a threat, but because Bitcoin is open source, and is such an important innovation we have some of the best computer scientists working on it. They are continuously checking for bugs, and although a catastrophic bug could theoretically slip through the web, I don’t see it happening.
Attacking The Price
Wouldn’t attacking the price be a threat to Bitcoin?
Of course the price can be attacked, and many believe this already to have been the case, several times.
Was it the reason the SEC quickly ushered in Bitcoin Futures back in 2017? Futures are a sign of a maturing market, but they also help manipulate a price.
Market manipulation is rife in all markets, and the lower the market cap, the easier it is to manipulate. But remember, there is nothing like Bitcoin. It’s a global asset, that’s not confined to any market opening and closing times.
It’s tradable 24/7/365. The market is never closed, so manipulating the price is very risky, and a manipulator could end up with major losses.
A coordinated attack from government and media could harm the price. Of course government influences thought, especially when it has the media behind it.
As we have seen before, however, every time there’s fud from China or any other country, the price has always bounced back from an initial drop.
It would take a coordinated attack from all governments to ban Bitcoin for it really to affect the Bitcoin price, but that would mean they would all have to agree on the same thing, and as we know: governments can’t agree on anything.
A Better Altcoin
Wouldn’t a better altcoin be a threat to Bitcoin?
Wrapping It All Up
There is a threat to everything. Even the world economy is going through a catastrophic threat at the moment. Years of quantitative easing is the biggest threat to the global economy, and it’s being covered up by a pandemic.
As for Bitcoin, it’s a software program, but not just any software program. It is powered by hundreds of thousands of powerful computers, spread around all corners of the globe.
Nothing can be changed in the protocol without consensus from the community, and its main application is peer-to-peer money. It allows us to send value to each other without the authorities controlling and charging us for it.
While nothing is 100% secure, Bitcoin is the most secure network ever created. As of 22nd May 2020, it secures over $166 billion, and as that grows it will naturally get even more secure.
Things like a power cut, government crackdowns and catastrophic bug would hurt Bitcoin, no doubt, but these are unlikely, and the people working on Bitcoin are some of the best computer and maths scientists out there.
Bitcoin will become one of the greatest innovations in history. It’s main threats came when nobody knew about it, and that’s why nothing can ever be created like it again. Bitcoin isn’t threatened, it’s inevitable.
Author: Tommy Limpitlaw