FUD stands for Fear, Uncertainty, Doubt. In this series of blog posts titled FUD we will discuss Feasible yet Unlikely Destinations in blockchain.
If you have ever worried that Bitcoin could be “killed” the short answer to this question is ‘yes’. However, killing Bitcoin would be no small task. The following is an incomplete list of ways Bitcoin could conceivably be “killed” and what this would entail.
#1 - Nuclear Holocaust
The beauty of Bitcoin, and blockchains in general, is their decentralized nature. Thousands of full nodes across the world store the immutable Bitcoin blockchain on their own local disk space. The current size of Bitcoin’s blockchain is about 155 GB allowing it to easily fit on the harddrive of any computer made in the last 4 years.
In order to truly destroy Bitcoin an attacker would have to destroy every copy of the Bitcoin blockchain. With tens of thousands of copies of the Bitcoin blockchain stored across the globe many believe the only way to do this is global nuclear war. While the Electromagnetic Pulse (EMP) and subsequent fireball would wipe many hard drives clean there are undoubtedly a number of copies of the blockchain stored in Faraday Cages and safes that would be protected from the EMP.
Essentially, in this scenario Bitcoin would be killed because, well, humanity has been killed. Any humans left would not have the electricity or internet to run Bitcoin and honestly would have much bigger problems than needing digital money.
#2 - Worldwide government crackdown
Numerous countries have already tried and failed to ban Bitcoin. The internet is a very difficult thing to censor, especially when fighting against intelligent and motivated geeks. With the use of a VPN people have been able to get around government bans in different countries.
Clearly a major country like the United States, China, or the EU could impose stiff penalties for any business or entity that transacts in Bitcoin. In the short term this would hinder Bitcoin’s adoption as a currency however in the long term it would likely only stifle growth in the country that bans it. Furthermore, individuals could still hold Bitcoin as a form of “digital gold” or store of value.
While very unlikely, the major governments of the world could jointly ban the use of Bitcoin by calling it a threat to their central banks, funder of terrorism, or other accusations. While this would cause Bitcoin’s value to plummet it would not “kill” the cryptocurrency as people could still covertly use the blockchain. It is also a very unlikely thing to happen as governments almost never cooperate like this.
#3 - Spawn Camping Attack
Since Bitcoin is a Proof of Work cryptocurrency there is a fixed cost to 51% attacking the system. In a 51% attack a malicious attacker (we’ll call them The Joker, because he doesn’t need a reason to attack) obtains 51% of the hashing power of the system in order to subvert the blockchain for their own purposes. The cost of a 51% attack is the combined cost of all of the miners currently mining Bitcoin.
Say there are currently 50,000 ASIC miners currently mining Bitcoin. Assuming these 50,000 ASICs stay honest The Joker would need 50,001 ASICs to 51% attack the blockchain (plus the cost of electricity). There are a number of ways this could be done or the numbers can be changed to favor the Joker.
The most expensive way is for the Joker to make or buy from scratch 50,001 ASIC miners. The cost would likely be somewhere between $500 million and $1 billion. While these numbers are quite large, numerous governments, companies, or even individual people have this type of capital available.
The Joker could hide his scheme by creating 2 or 3 mining pools that are initially honest and then go rogue when he is confident he has 51% hashing power.
A less expensive way would be for the Joker to co-opt a large mining pool to go rogue with him. Say a mining pool has 7,500 ASICs. If all of these ASICs were suddenly to go rogue the Joker would only need to buy 35,001 ASICs (the honest mining pool loses 7,500 miners while the dishonest pool gains 7,500). In this example the cost would be cut by 30%.
After successfully 51% attacking Bitcoin multiple times the developers would be forced to change the PoW algorithm. A change in the PoW algorithm would make all ASICs useless. The Joker then would have to use CPUs or GPUs to mine. However, EVERYONE would have to start over from scratch, not just The Joker.
It is conceivable then that if the Joker is willing to spend $1 billion on ASICs he could then spend another $100 million on GPUs to continue his 51% attack. This Spawn Camping Attack would effectively destroy confidence the Bitcoin system although it would be at great cost and questionable gain.
#4 - Fatal, unknown bug in code
Early in the history of Bitcoin an error in the code was exploited so that someone forged 92 billion bitcoins. The problem was an overflow error allowing someone to essentially create Bitcoin out of thin air.
Fortunately the problem was fixed and the forged Bitcoin “destroyed” within about 5 hours. Also, the event occurred in 2010 when Bitcoin was very young and not yet a major world player. The forgery had little effect on Bitcoin because it was still only used by tech hobbyists. If a similar bug were exploited today it would undoubtedly cause a devastating crash affecting the entire cryptospace.
It is very unlikely such a bug still exists, however, as Bitcoin’s code has been security audited countless times. Fatal bugs in the Bitcoin code, while possible, are extremely unlikely.
#5 - Miner, Developer civil war
Some people call it a flaw while others call it a feature: anyone can fork the Bitcoin blockchain. Don’t like where the devs are taking the technology? Make your own hardforked chain and develop it how you want. But if no one else uses your fork of Bitcoin then your fork will be worthless.
We recently saw this when two mining pools started the Bitcoin Cash hardfork. BCH disagreed with SegWit2x and hardforked August 1st, 2017 so that block sizes could be variable, up to 8mb.
Recently another hardfork was hastily announced called BTC GPU and yet another fork is anticipated in November 2017 to introduce SegWit2x. By 2018 we could see 4 different Bitcoin chains operating.
Some applaud Bitcoin’s ability to deploy numerous scaling fixes to let the “strongest chain survive” but others see a nightmare scenario forming. With no strong leadership Bitcoin may have multiple chains competing for dominance. This could cause a great deal of uncertainty and uncertainty is poisonous to adoption. What business or other entity would want to use Bitcoin when they risk picking the wrong hardfork?
Furthermore, the BCH hardfork created money from thin air. If a stock were to split at a 1 to 3 ratio then the price of the stock would decrease equivalently. We saw no such action with the BCH hardfork.
However, Bitcoin is not a stock so this analogy does not hold. The BCH hardfork is more akin to a central bank simply printing more money. When central banks print money the value of the money deflates. For every successful Bitcoin fork it should be expected that in a RATIONAL market the value of Bitcoin would deflate. While this has not yet been seen with BTC/BCH it is fully possible we are not in a rational market.
Should Bitcoin forks continue due to a developer/miner civil war it is possible a slow erosion of confidence in Bitcoin could lead to its demise. The only counter-argument is that eventually the strongest, most adopted chain will win out but this assumes risk averse investors won’t first take their money to a fork resistant chain like Litecoin, DASH, and others.
#6 - Combined Hardfork and Spawn Camping Attack
In this scenario the Joker could take advantage of, or even advocate for a hardfork and then 51% attack a weakened Bitcoin chain.
Imagine the Joker, with already a large mining pool, successfully advocates for a contentious Bitcoin hardfork, Bitcoin Joker (BCJ). Some percentage of miners, say 10%, also join the BCJ chain. On the BCJ chain Joker controls a larger share of the hashing power with his ASICs. With this power he receives more of the block reward for mining and uses it to buy more ASICs.
At some point he will amass enough hashing power to attack the BTC chain which is weakened by the loss of miners to the BCJ chain. Perhaps through BCJ price manipulation Joker could get miners to jump back and forth between mining BTC and BCJ (depending upon the more profitable chain to mine) and attack BTC during vulnerable periods. This is all speculative and the economics are unclear on if this could work, but it’s an interesting scenario to think about.
#7 - Escalating Electricity Costs
Again, Bitcoin secures its network by requiring miners to perform PoW. PoW provides security because it costs a great deal of electricity to confirm a transaction.
A report on Motherboard recently calculated that the cost to verify 1 Bitcoin transaction is “as much electricity as the daily consumption of 1.6 American Households.” The article also notes the Bitcoin network may consume up to 14 Gigawatts of electricity by 2020 with a low estimate of 0.5GW.
In a world valiantly fighting against climate change this amount of wasted energy is difficult to justify. Should the electrical cost of securing the Bitcoin network continue to increase it may eventually suffocate the system.
People have already started discussing how to reduce Bitcoin’s energy waste. It is likely Bitcoin will solve this problem in the future given the number of smart brains working on the problem but hopefully it doesn’t result in yet another hardfork, Bitcoin Green anyone?
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