Bitcoin is specialized in the use case of serving mankind as a currency. From a technological point of view, it tries to achieve this goal as easily and safely as possible — as much code as necessary, but as little as possible — so not to complicate things unnecessarily. Bitcoin came to stay.
The amount of all Bitcoin is limited to 21 million, but you can divide this amount to the eighth decimal place down to a single Satoshi. However, more than 80% of all possible bitcoins are already in circulation. But don’t forget that Bitcoin as a cryptocurrency and the blockchain as underlying technology are still very young. Bitcoin is a child. The current version number is 0.17.0 — in other words: The software has not even reached version 1.0 and the last available Bitcoin will be mined (or minted, if you prefer the term) in the year 2140. If you consider this point in time (and not the arbitrary allocation of a version number) to be the age of majority, then Bitcoin has an “age” of 19 month — assuming that 21 years is the age of majority. 18 years equals an age of 16.5 month. Bitcoin is thus not only a child, Bitcoin is a baby!
Bitcoin apparently did well in its first phase of life. If you stick to the comparison with a toddler, Bitcoin is just learning how to crawl or is taking its first steps. Or do the acquisition of the first language skills and will to communicate manifest in developments such as the Lightning Network? It’s too early to speculate.
What could possibly go wrong?
From Bitcoin’s young age and the application of Murphy’s law, Bitcoin will face many dangers in its future life. For some time now, I have been thinking about the dangers Bitcoin could face that could bring his existence to an abrupt end. It is due to the imponderability of life and the comparatively short human lifespan that this list is pretty general and does not claim to be exhaustive!
Judge for yourself:
5. Sun flare or coronal mass ejection
A direct hit of a coronal mass ejection, which hits the earth almost anywhere, leads directly to the destruction of all electrical equipment and electronics not encapsulated in a Faraday cage.
Electrical cables laid above ground act like global antennas spanning entire continents. They conduct the enormous amounts of energy of a coronal mass ejection directly to the transformer stations, which are irretrievably destroyed. The global satellite network is also destroyed and becomes space junk in minutes. All private computers connected to the power grid and without sufficient shielding by a completely closed metal housing with grounding are destroyed. Whether the contents of the hard disks remain readable is doubtful. Even underground computer centres are only partially protected. Only if they can be disconnected from the power grid sufficiently early and the systems can be shut down quickly enough give the stored data a chance of survival.
If such a disaster occurs, mankind has other problems than saving the Bitcoin, one might think. But this way of thinking is wrong. Especially in case of failure of global communication, governments, banks, infrastructure, production, food supply, security, etc., a globally available and reliable currency, which ensures values and fast value transport across national borders, will become extremely important.
Assuming that all mining facilities are destroyed in one fell swoop, the remaining intact Bitcoin nodes must first contact each other again. This requires the restoration of the power grid and the Internet. The nodes will agree relatively quickly which transactions they consider valid. But the development of new blocks is stopped first of all. The difficulty is too high for the current hardware to generate a valid block within ten minutes. Even if hardware manufacturers and large mining facilities still have hardware in stock, they are likely to have major problems getting enough power to resume full operation. It can be assumed, however, that there is still some orphaned hardware around, which is being put into operation in a very decentralized way. Ideally, the difficulty should decrease every fourteen days until the block production gets going again. I’m not sure if the difficulty adjustment algorithm can start the block production again. But even if that was not the case, the implementation and distribution of a new software version that allows mining on CPUs again or reduces the difficulty manually would quickly remedy the situation. As always, consensus on how to proceed is ensured by acceptance and activatingof a new fork by the majority of nodes.
According to a report published in 2012 by physicist Pete Riley of Predictive Science Inc., the chance of Earth being hit by a Carrington-class storm between 2012 and 2022 is 12%.
Bitcoin should be able to survive a solar flare. It is questionable whether measures can be taken with sufficient speed and determination to protect Bitcoin’s integrity and ensure its continued existence.
The same applies to comparable global disasters (eruption of a supervolcano, ice age, or global nuclear war) that damage the infrastructure sustainably enough to bring block formation in the Bitcoin blockchain to a halt. Unfortunately, I feel like quoting Albert Einstein at this point:
I do not know with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.
Albert Einstein, 1949
4. Quantum computing
Although different teams with different concepts are working under high pressure on the development of quantum computers, it is still a long way to a functioning quantum computer with sufficient computing power. But the time will come …
Bitcoin’s hash algorithm is called SHA-256. In block formation and transaction processing, nodes compete building blocks from unprocessed transactions and attempt to form a hash value over them that has a certain number of leading zeros depending on the level of difficulty. Whoever wins this race and publishes a block that meets this conditions and is accepted by the network receives a reward. These calculations are extensive and correspond to a “trial and error” of solutions — it’s a brute force attack. An target block formation time is ten minutes. At the current level of difficulty, this time span can only be adhered to through the mass use of highly specialized chips (ASIC). Assuming that the hash algorithm is not changed anyway, this is the crux of the possible danger of using a quantum computer.
Regular computers are able to calculate digitally with information units of zeros or ones so called bits. Quantum computers are different. They accept all possible values and thus are able to execute calculations with these super-information states simultaneously. Such information units are called qubits. If one can interconnect qubits in sufficient quantity with each other, the number of parallel executable arithmetic operations increases exponentially. The problem lies in determinating the result.
A functioning quantum computer could perform most of the “testing” of possible solutions for transaction confirmation and block formation in fractions of the time an actual standard arithmetic unit can do. Thus it could form longer block chains and, similar to a 51%-attack, nihilate all transactions already processed and seemigly validated. If this happens in secret, a serious threat to the integrity of Bitcoin must be assumed. A quantum computer could quickly crunch a more than considerable number of blocks back to a state months or years before. A necessary rollback would be devastating. Nobody would trust Bitcoin anymore. It is questionable whether Bitcoin could recover from such a blow.
But there is protection. If the hash algorithm is changed early enought to a “quantum computer safe” version, Bitcoin will fend off such attack easily. Quantum-safe algorithms have already been developed, but apparently not yet tested. Due to the fact that the development of quantum computers is only carried out by a handful of governments, companies and research institutions, it should be possible to take action in due course. It is also questionable whether an attack on Bitcoin would be the first target for a quantum computer. But the danger remains: Under the right circumstances, a functioning quantum computer with sufficient processing power poses a potential threat to the existence of the Bitcoin network in its current form.
3. Software bug in the code
But maybe you don’t need a quantum computer to endanger the integrity of Bitcoin, make a rollback necessary and let Bitcoin die from a lack of trust. A simple error in programming the commonly accepted and used client could destroy Bitcoin.
The scenario described above is closer than one might think. In versions 0.13.0–0.16.2 of the core client was a double spending bug. When validating transactions and grouping them into blocks, a great deal of technical effort is put into eliminating so-called “double spends”. That is a problem Satoshi Nakamoto’s whitepaper for Bitcoin from 2009 is is primarily concerned with. Bitcoin as a digital currency has to make sure that a value is not transferred first to one address and at a second, later time to another. It would be like spending a dollar twice. In the morning for a cinema ticket, in the afternoon for a coffee. Obviously for banknotes double spends cannot happen, for digital financial transaction banks ensure that a double spend is impossible, but in the Bitcoin network, a third party is eliminated as a supervising authority. This is achieved by writing valid transactions into the blockchain and providing the blocks with a timestamp. Only the first transaction is considered legit, all further transactions are discarded by the network.
With the software bug in versions 0.13.0–0.16.2, it was potentially possible to create double spends. To take advantage of this bug, however, a considerable amount of hash power would have been required and a great will to destroy Bitcoin would have been necessary either. These two factors obviously did not come together. Since the blockchain is an “open ledger”, the occurrence of double spends was permanently monitored.
The danger remains. The bug became publicly known and a possible exploitation could be observed. The Bitcoin Core development team is known for testing new versions extensively. However, a similar bug may occur again in the future, and under different circumstances, banks, governments, or corporations may make efforts to destroy Bitcoin by undermining its integrity. Quite apart from that, a random malicious node with enough hash power can also lead to invalid blocks. 100% immunity to software bugs is not possible, but extensive testing and open discussion of the code in public should provide sufficient security.
2. Sabotage (e.g. for political reasons)
This idea seems to be related to the possibility of exploiting a software bug, only that here probably not the intention of personal enrichment is at the forefront, but the clear will to destroy the Bitcoin. As far as not exploiting an existing bug is concerned, a “bad guy or party” with destructive intentions will have more options to attack the Bitcoin network. Sudden deprivation of hash power, block building disruption or banning of Bitcoin-specific network packets, ports or infrastructure are on the table. This would be possible through massive union of governments, hardware manufacturers and large corporations by withdrawal or manipulation of hardware or infrastructure.
Bitcoin seems to be far away from “too big to die” to survive such an attack. At the moment Bitcoin is an ant peeing on an elephant’s leg. But this perception could change and mergers of different globally acting groups and units could have the goal of destroying Bitcoin. But even if the attack options are not foreseeable, Bitcoin already has two trump cards up its sleeve that nobody can beat. One is its flexibility and responsiveness through independent developers. If an attack vector is created, it can easily be countered by changing the code.
Similar to the development of a quantum computer, the community would fend off attacks on Bitcoin by changing the software. A hostile takeover of the hash power would make the entire hardware obsolete in fractions of a second by changing the hash algorithm. This is where the second trump card comes into play: user acceptance. Only software that is accepted and used by users in sufficient quantity is valid. Whatever version of Bitcoin is attempted to be destroyed, the answer will always merged into a new version accepted by enough users.
A chance of such an attack seems to be extremely small since practically the whole world would have to unite to destroy Bitcoin. How often the whole world has been united in the last centuries can be seen in periods of global peace and harmony, or currently in the unity of UN since its existence.
1. Ignorance and disinterest
As an enthusiastic Bitcoin enthusiast this possibility actually came to my mind last, but in ignorance and disinterest, I actually see the greatest danger for Bitcoin or other 2nd-layer technologies like the Lightning Network, which depends among other things on the presence of the Bitcoin blockchain.
Bitcoin has the potential to become a global currency that is not only used on the Internet. It is not necessary invented to wipe out other fiat currencies, on the contrary, fiat currencies must stay to be used to evaluate Bitcoin durig the global mass adoption. Finally, Bitcoin must be assigned a relatively stable value of some established values. Bitcoin should not become a single currency but should serve as a leading currency that exists independently of governments and offers every single user the same benefit.
In my opinion, the only things that stand in the way of this long-standing goal are ignorance and disinterest. If people do not want to recognise or acknowledge the benefits, the value and the possibilities of Bitcoin, Bitcoin will surely die. Therefore I consider HODLing to be a problem in the future, but still a necessary evil at the moment. Every Satoshi that is held but not spent has a counterproductive effect on the transformation of Bitcoin into a globally accepted lead currency. The effect is similar to saving fiat money. Saved money (or gold) is withdrawn from the economic cycle and hinders markets and economic development by decreasing liquidity. Since in addition speculative-manipulative and centralizing effects occur with the HODLing of Bitcoin, it has a bad effect in the long run. Anyway, unfortunately, HODLing is currently (shortly after the collapse of the first large valuation bubble with broad public perception) the only way for smaller investors to adequately participate in the benefits of Bitcoin!
I consider the chances of Bitcoin’s death from ignorance to be extremely small, but it is in the realm of possibility.
You can clearly see from these examples that Bitcoin is not sufficient and immune to all types of attacks, but it still makes sense to trust Bitcoin as your favorite currency. The defensive measures against possible dangers are based on the acceptance of the users and are not subject to the goodwill of third parties.
Bitcoin owes its strength to independence, integrity and sovereignty. Bitcoin’s future depends on only one factor: the trust that its users place in it and in its benefit and value.
One should not completely disregard the possibility of a “suicide of Bitcoin” or some kind of self destruction. A badly organized and executed hard fork or disagreement between different tendencies within supporting groups, or developers, could end the “Bitcoin” experiment. Such disputes have already begun in the past, but Bitcoin has circumnavigated that cliffs sovereignly. Of course, this does not necessarily mean that it can not happen again in the future.