5 threats to Bitcoin

I was talking to a friend, the past year, about what would be a good time to get back into the market. Bitcoin hit 3500 dollars, some miners were forced to quit, and I figured that meant 3500 dollars was the production price and hence the bottom price of Bitcoin. The bottom is always the best moment to enter the market. With the upcoming halving next year, the production price of Bitcoin is going to double as the reward is halved, so the price is going to go above 7000 dollars. A sure shot.

I didn’t get back into the market. For some reason I had my doubts about Bitcoin, mainly the stance of a number of governments on cryptocurrencies.

Donald Trump for instance isn’t very fond of cryptocurrencies :

“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity….”

That did make me wonder, am I just being (mildly) paranoid or are their any actual threats to Bitcoin ? I had my own ideas about that, but I also did a search on Google to see what other people think of it.

This is my list with the 5 main possible threats to Bitcoin.

1 quantum computers

With the advent of quantum computers, the current cryptography of Bitcoin and the blockchain becomes obsolete, the entire system becomes transparent, and does not offer any anonimity anymore.

I do not know if that is an actual threat, Bitcoin isn’t entirely anynomous, anyway, something the market has become aware of. And people don’t care, in general. Those who do care about anonimity, usually prefer Monero or zCash, and quantum computers are sooner a threat to these ‘privacy-coins’.

2 Superminers, centralization of miners, and a 51% attack

What if… some company develops a superminer, far more powerful than current miners ? And what if they sign an exclusive contract with one miner-group ? That would increase the chances of a 51% attack, and double-spending.

3 Government bans

The Donald is a possible threat to Bitcoin. Regulation is good in itself, a natural part of the integration of blockchain-systems in the socio-economic system. Blockchain and cryptocurrency are the New Kid On The Block, and as the blockchain-industry grows and develops, it will become increasingly regulated, as shown with the AML and KYC regulations for the exchanges. 

But there is also a chance the diverse governments are going to ban cryptocurrencies like Monero, zCash, and also Bitcoin, because the dark web are very fond of ‘anonymous payments’, and the governments don’t like that. The reputation of being ‘crime coins’ is a threat to Bitcoin, Monero and zCash.

4 Green activism

The Bitcoin system consumes more energy than the country Switzerland, according to some estimates. And the power consumption keeps growing. Some miners use renewable energy, but still it is an enormous energy consumption, and for what ? So people can transfer values without an intermediary ? Is it worth it ?

I haven’t actually heard any objections from the ‘green’ environmentalist corner, and that surprises me. Greta Thunberg may not have heard about Bitcoin, yet. If the green corner do set their sights on Bitcoin, duck and cover, because the West is becoming increasingly ‘green minded’, and an anti-Bitcoin lobby from the green corner could easily lead to a ban on proof-of-work mining and hence on Bitcoin.

5 Coding bugs

Yes, coding bugs. There was one in a previous release of the Bitcoin software, that could facilitate double-spending, it would just require a massive amount of hashing-power, similar to a 51% attack, and no one exploited the bug. The Bitcoin core developers fixed it.

That remains a major threat to Bitcoin, coding bugs.

The narrative around Bitcoin is changing, it was always promoted as a currency, a coin and payment system. But lately (also because Bitcoin has too little capacity to actually function as a ‘global’ payment system and other competing cryptocurrencies scale a lot better) the narrative is changing, Bitcoin is promoted as an asset and value-store, ‘digital gold’. The branche is actively trying to get ETF’s on the market, so investors can have their exposure to Bitcoin.  Some advocate that investors should also invest some money in Bitcoin as asset, to diversify their portfolio.

That does mean that Bitcoin needs an extremely solid reputation and a lot of trust. Any coding bugs would put a severe dent in the reputation of Bitcoin and could hinder the development of the narrative of  ‘digital gold’.

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