$BTC (-0.16%) - What are the biggest threats to the network?
A slightly different post from me today. As I usually only write absolutely bullishly about Bitcoin, I still see dangers that could even cause Bitcoin to fail.
When you have almost your entire net worth in an asset, you often think about it -> and I would like to share this with you today and give you a brief assessment of what I think about it.
1. disagreements in the community and hard forks
Bitcoiners often like to argue with nocoiners, but Bitcoiners also often argue passionately with each other. All you have to do is go to "Bitcoin Twitter" and take a look at how the bubble is always shouting at each other😂
So what could happen in the future?
What if the disagreement over the continued existence of Bitcoin continues to polarize and different camps form again like in 2016/17, each wanting to take a different path for the Bitcoin network?
Back then, a camp formed around "Bitcoin Jesus" Roger Ver in the so-called "Blocksize Wars", which called for larger blocks. The aim was to increase the block size limit per block from 1 MB to 8 MB. This would have meant that Bitcoin could have accepted more transactions per block and would therefore have been more suitable for paying for goods and services. However, it would also have had the disadvantage that decentralization would have suffered greatly. Until now, anyone with a small mini-computer and a hard disk could operate a Bitcoin node at home - by increasing the block size limit, this would perhaps only have been possible in future via larger service providers with corresponding computing capacity.
And so there was a Bitcoin hard fork in 2017, from which $BCH (-0.68%) emerged from. The users then opted for $BTC (-0.16%) and Bitcoin Cash is therefore only worth a fraction of Bitcoin today.
(If anyone is more interested in this, I could recommend the book "The Blocksize War" by Jonathan Bier (yes I know, cool name) 😊)
What happens if this happens again? What if at some point there are even three camps of relatively equal size? What if people lose confidence in Bitcoin due to the inconsistencies and risks involved?
That's why I'm always a little skeptical of Bitcoin "leaders" like Roger Ver back then or Michael Saylor today. These people enjoy a high reputation in the community and are polarizing. What if Michael Saylor wants to push the community in one direction at some point?
2. coordinated bans by states
Another significant risk is that governments around the world could attempt to ban Bitcoin in a coordinated manner. Governments could take measures to prevent the trading, use and mining of Bitcoin, which would lead to a drastic decline in the acceptance and value of Bitcoin.
Again, given the "unity" that exists in our world, I think this is highly unlikely. In my opinion, game theory will always prevail here and some states will open their arms wide as soon as others ban Bitcoin.
3. threat from quantum computers
The development of quantum computers could pose a threat to the security of Bitcoin. Quantum computers could be able to break the cryptographic algorithms that secure Bitcoin, including elliptic curve cryptography and SHA-256. If this happens, attackers could manipulate transactions, hack Bitcoin addresses and destabilize the entire network.
What sounds terrible now is still miles away - but I would never rule out that it might not be possible at some point.
But until then, there will be a creeping process of quantum computers getting closer and closer to possibly being able to do this and until then, updating the Bitcoin network to "quantum secure addresses" can prevent the network from failing - but beware! This can only be done with a hard fork - i.e. a fork of the network (as with $BCH (-0.68%)) and therefore also involves risks.
4 The failure of self-custody
Another potential weakness of Bitcoin lies in self-custody, i.e. the self-custody of one's own coins. If self-custody does not catch on and the absolute majority of users rely on service providers such as banks and crypto exchanges, this could undermine the central idea of Bitcoin. Assuming that the majority of available coins are held in the Bitcoin spot ETFs in the USA - similar to gold in the past - the USA could issue an executive order and confiscate a large proportion of Bitcoin.
Therefore: Move your coins to a hardware wallet!
5th revelation by Satoshi Nakamoto
The identity of Satoshi Nakamoto, the mysterious creator of Bitcoin, remains unknown to this day. However, should Nakamoto be revealed and, for example, sell his approximately 1 million Bitcoin, this could significantly destabilize the market. The sale of such a large amount of Bitcoin would cause the price to plummet and presumably shake confidence in Bitcoin. In addition, the revelation of Nakamoto would destroy the founding myth of Bitcoin with the unknown "creator".
Nevertheless, I think that Bitcoin could even recover from this - after all, Satoshi no longer has any power over the network and the price could simply stabilize again after a while.
Conclusion
Even as an absolutely convinced Bitcoiner, you should think about the risks of Bitcoin. After all, nothing in the world is 100% secure. Nevertheless, I consider all the dangers mentioned to be highly unlikely and can therefore continue to sleep well. If at some point there are signs that, for example, different camps are forming in the community that are all looking for a new hard fork or we are moving in a direction where quantum computers could slowly become dangerous, I will reduce my position accordingly.
Now I would like to know:
What is your opinion on the threats to Bitcoin I mentioned?
What potential dangers do you see for Bitcoin?
Have a great start to the new week! ☀️
