The main dangers and threats associated with the use of a decentralized electronic cash system Bitcoin.
All the risks associated with electronic cash system Bitcoin can be divided into two large groups:
1.The risks of the system.
2.Risks of use of the system.
Start with the second, because the average user often encounters this problem.
Risks of use of the system
As you know, Bitcoin is a fully decentralized system that has no single center of control. The responsibility for the security of access to the bitcoin addresses that hold actually bitchy (cryptocurrency) rests on the users. Only they have (should have) access to the private keys associated with bitcoin addresses.
Therefore, the safety of using Bitcoin as a system is safe storage and strictly limited access to private keys. Loss of private keys as a result of their loss or theft leads to the loss of control of the bitcoin addresses and, as consequence, to loss of cryptocurrency that is stored at these addresses.
For more information about using the bitcoin wallets and their varieties, read the article "Popular cryptococal: where to store cryptocurrency safer" or in a simplified version of "Guide to bitcoin wallets for your mom."
The system itself Bitcoin is resistant to tampering through cryptographic protection algorithms. Theoretically in the present state of technology this system can't be hacked for a very long, virtually unlimited time, and during its existence (since 2009) has demonstrated its safety and reliability. But various third-party online services that cater to this system, exchange offices, online wallets, crypto currency exchange, etc. — can be and has been the target of hacker attacks in which users lose their money.
Therefore, the storage of cryptocurrencies at various online services bears the risk of loss in case of hacking these services, as well as the unfairness of their respective owners.
Another danger of using the system of Bitcoin is that transaction, it cannot be undone. Also, you cannot make changes to a submitted transfer instruction. In case of an error we can only make refunds from the bitcoin address to which they were sent, and with the consent of the owner of that address.
This means that in the case of an incorrectly entered bitcoin address of the recipient of the transferred funds do not fall back and will be very difficult, and often impossible to return them. Moreover, when there is an error in the address of the recipient of these funds can be irretrievably lost as a whole for the system, i.e. actually withdrawn from circulation.
The risks of Bitcoin
Dangers and threats associated with the system much longer and can be divided into three groups:
1.Technological risks.
2.The legal risks.
3.Social risks or risks of adoption.
Technological risks are risks associated with the technology of Bitcoin. They, in turn, are divided into risks, vulnerabilities and code defects, cracking, and imperfection.
Serious vulnerabilities associated with errors in the code that would lead to irreparable and disastrous consequences so far not been discovered. The bitcoin system has shown its resilience in the nearly 9 years of its existence. It should be noted that this is a constantly evolving platform, which may have technological add-ins and extensions. It was created continue to improve some of the best programmers of the planet. The code of Bitcoin is open and it not only adds confidence in the system, but also allows anyone to analyze, to look for bugs and vulnerabilities and make suggestions for development.
But, nevertheless, this does not mean that some serious vulnerabilities and bugs in the code that could undermine the performance of the system cannot be detected or intentionally or inadvertently introduced at a later date. These can be system or software errors that significantly undermine trust in bitcoin.
Also Bitcoin does have problems with scalability (steady work with a large number of transactions per unit of time). But there are solutions. How this is done, will affect the further development of Bitcoin, as a system.
As mentioned above, Bitcoin is fairly resistant to hacking and you are protected. One of the possible attacks — selection of the private key to bitcoin address is currently, with the current level of technological development of mankind is almost impossible.
To crack the SHA256 algorithm underlying the creation of bitcoin addresses and private keys to them, we will have to make 16 of the 32-th degree iteration. Abilities of modern computers does not allow to calculate such amount in any real terms.
But, the development of technology and technology is not in place. Great expectations in the performance of such operations rely on the so-called quantum computers, and quantum computing. However, it is unknown when will be created a quantum computer the power required and what will be the energy cost of such calculations. However, at least theoretically, the possibility of hacking of Bitcoin in the future exist. The only question is how distant that future is? 10 years, 10 centuries or 10 years?
Another well-known attack on bitcoin is a so-called "attack 51%." But it is very expensive, which in commercial terms is now pointless. At the present time for carrying out such an attack you need to purchase equipment worth more than $4.4 billion plus costs for electricity of about $8 million per day.
Naturally, the network and the market immediately reacts to this attack and the rate of bitcoin will collapse, which makes such event, as noted above, is absolutely meaningless in commercial terms.
But such an attack can be addressed by the government and Central banks who see in Bitcoin a real threat to the existence of monetary systems they control. In the democratic countries of the West, it is hardly possible, because voters will not forgive such actions of their government and the latter is well aware, but in North Korea, China or even Russia — it is possible.
Another kind of technological threats to Bitcoin come from more advanced in terms of technology of crypto-currencies that appear and may appear in the future. But for the success of these new cryptocurrencies is not enough to have a technological advantage, it is necessary to create a network of sufficient size, the community (users, miners) and infrastructure (exchanges, stock exchanges, services, etc.).
In any case, the threat to Bitcoin from new, more technologically perfect cryptocurrency will come gradually, with the growth and the network, and users will be able to respond to it.
Legal risks for Bitcoin come from the actions of States that will seek to establish the legal status of cryptocurrencies and the rules for its use.
The States of the world for the first time faced with such large-scale decentralization as cryptocurrency. Being essentially a technology transfer cost that is not controlled by a single financial center, cryptocurrency, based on the public blockchain, such as Bitcoin, able in the long run to replace the national money and traditional financial intermediation of banks. This creates the threat of the state monopoly on money and their treatment.
Because Bitcoin is completely decentralized, peer-to-peer system does not have a single point of control and failure States have no mechanism of influence on its performance (except "attack 51%" mentioned above). You can't just go and ban cryptocurrency! This will require at least disable everywhere in the world the Internet and(or) electricity.
Therefore, any attempt on the part of States to actually regulate cryptocurrencies, their issue and their transactions are doomed to failure.
But, the state can regulate the area where crypto-currencies come in contact with Fiat money, namely, cryptocurrency exchanges, exchange offices, investment funds and other financial institutions that provide services to the cryptocurrency market. States can also prohibit businesses and organizations to accept bitcoin as payment for goods and services, and citizens to pay in bitcoins.
Some States, particularly authoritarian and totalitarian, can even introduce criminal liability for transactions with cryptocurrencies and their mining.These threats emanating from governments, are likely to be local and apply to individual countries.
The civilized world will go the other way — governments and Central banks of Western countries will create an alternative Bitcoin, the cryptocurrency. Therefore, Bitcoin is waiting for rather not ban, and competition in the money markets.
Social risks or risks of taking come from the public. It's kind of the risks of trust — how will the massive trust of society to a new kind of money. These risks largely depend on the successes and failures of cryptocurrencies themselves, as well as from the mass media, which are able to hide something, and something to inflate.
The process of adoption and penetration of cryptocurrency will be a challenging and time consuming paper Fiat money is also immediately replaced the gold and silver coins. But time is working on Bitcoin — new generation loyal to new technologies and leaving the old, accustomed to trust the government and banks.
It is obvious that public acceptance of cryptocurrency will be more in countries where the credibility of the local currency falls, where high inflation and the government which can not cope with financial crises. So, for example, is already happening in Venezuela and Zimbabwe.
These risks will decrease with the growth of global recognition and acceptance of Bitcoin. But, they are also associated with technological, and especially legal risks. Any technological problem, Bitcoin will increase and social risks, as well as various prohibitions and restrictions of cryptocurrencies adopted by the authorities at the legislative level.