Jason Deane has analyzed some of the myths that have been circulating around bitcoin for years. Despite the fact that there are still many challenges ahead for the king of cryptocurrencies, some of the previous rhetoric seems to have lost its power. Is this really the case? Let’s see.
Myth 1: China controls
Bitcoin This assumption, long held by anti-Bitcoinists, was based on the claim that China not only owns the majority of the global hash rate, but also much of the application-specific integrated circuit (ASIC
) manufacturing capacity. In other words, they could set the rules and, at least on paper, control the rules of the game.
Except that, as recently proven, this was not the case in reality.
According to the Cambridge Bitcoin Electricity Consumption Index (graphic below), China once controlled as much as 74.8% of the global hash rate, but by April 2021, just before the Middle Kingdom announced a nationwide mining ban, it had already dropped to 46%. By today’s standards, that number will be a tiny fraction of what it once was, as a result of mines being dismantled or moved elsewhere. As a result, the share of other countries in the global hash
rate is definitely increasing. global hash rate distribution of the Bitcoin network; source: link
theoretically had enough computing power to undermine the economics of Bitcoin in the style presented in an article
self-proclaimed Bitcoin heretic Joe Kelly (the validity of its claims can be verified and evaluated by you).
China’s recent actions, on the other hand, seem to significantly indicate that the country’s authorities are now actually thinking about only one thing: central bank digital currency (CBDC
). China has clearly set its sights on its own digital currency. Deane is speculating that it might even be possible for China’s CBDC to become a global reserve currency if the authorities manage to get rid of this non-sovereign competitor for good.
Moreover, with a one-party system and highly counter
olated society, taking over all the hardware to launch an attack would probably be child’s play.
Instead, however, China chose to relinquish any form of control it would ever have over the Bitcoin network, even though it probably had the most to gain.
We could (and probably will) argue about the details of why this happened, but the bottom line is that China’s “control” over Bitcoin is no longer true and will almost certainly never become so again.
Myth 2: The 51% attack will undermine confidence in Bitcoin
Without going into technical details, the simple explanation is that a51% attack occurs when a single rogue entity controls more than half of the global hash rate on the Bitcoin network.
As a result, this rogue entity can potentially reverse transactions or prevent new ones from being confirmed or written to the blockchain. In addition, an attacking entity could reorder transactions.
An attacker could overwrite current transactions, effectively returning BTC to users who had previously paid for a service they may have already received, allowing them to re-spend their funds – a classic “double spending” problem ( double spending).
You can read more about the 51% attack here:
This, of course, would seriously undermine the credibility of the entire system. A few days ago, the weekly average value transferred through the network was a record $188 billion. Imagine if those transactions were reversed!
According to data from Crypto51, a website dedicated to continuously calculating the cost of attacks on cryptocurrency networks, a successful takeover of the Bitcoin network would cost – at the time of this writing – $1,937,470 per hour of attack:
At first glance, this seems like a relatively small amount of money, especially for someone (such as some government or corporation) who could sustain an attack for a long enough period of time to cause real damage.
But there are all sorts of problems with this scenario.
First, where would an attacker get the equipment to carry out the attack? We’re in the midst of a chip shortage that could last a long time, and even used machines are at a premium. At best, you would need months and months more of, say, $5 billion to acquire most of the equipment available in the world and put it in your location, assuming, of course, that you could accumulate enough power to run itto have.
Second, how would you keep such a move a secret? You would not be able to reveal your plans because there is a high probability that no one would sell you the equipment. In practice, this is impossible on the scale that is now required for an attack initiative of this nature to have any chance of success.
Since even China hasn’t confiscated machines on this scale and hasn’t tried to do so, it’s incredibly unlikely that a less autocratic government would attempt it, even if it had enough computing power. Either way, no country is currently in such a “comfort zone”.
The financial incentive to launch such an attack is… zero. You would burn billions of dollars worth of wealth without gaining anything else in return. The only ones interested in reprocessing such a scenario seem to be some powerful nations who would not want Bitcoin to undermine the authority of their currency.
Myth 3: Bitcoin will be stopped by environmentalists (or some variation thereof)
According to the Bitcoin Mining Council, BTC mining is not only the cleanest and most efficient industry in the world, but is becoming so more and more every day. Of course, for those who believe that bitcoin has no value, no dimension of energy consumption will ever be any justification anyway.
Again, this is one of those scenarios that seems viable in theory, but is flawed on multiple levels in practice.
First, there is no central organization that has the power at the global level to force any action. We have already observed this with all kinds of real-world environmental problems.
Secondly, Bitcoin creates an incredible dimension of efficiency in an unprecedented way. It can harness energy that would otherwise be produced and written off. Bitcoin technology actually reduces CO2 emissions by preventing extremely harmful gas flaring on a scale that is becoming increasingly significant.
In other words, every day more and more Bitcoin power becomes cleaner, more environmentally focused, and increasingly acts as a way for large power producers to more efficiently balance the load on the grid. It’s unlikely that any of these companies now want to give up the economic and environmental benefits they currently enjoy.
If you would like to learn a little more about this topic, read this article.
Myth 4: Governments will kill Bitcoin
No, governments will not kill Bitcoin. It is true that some countries will try (and have tried in the past) to ban BTC, but so far no one has succeeded in doing anything other than pushing its use underground, exacerbating probThe only sure way to achieve this would be to cut off access to the Internet for citizens. The only sure way to achieve this would be to cut off Internet access to citizens, which would however be tantamount to economic suicide.
However, even this solution is already outdated and does not guarantee success. Over the past few years, new developments have made it possible to use Bitcoin without an Internet connection. While this is not common (since using the Internet is the obvious first choice) – to cut off people’s access to Bitcoin – you would also have to block satellite access, shut down the cellular network, and block amateur radio signals. Good luck with that.
So, if it’s not technically possible, some government could look to its legislative body to regulate, though that’s also an approach that would mostly cause governments more problems than benefits.
For one thing, Bitcoin is global and all you can do is remove yourself from the network, not stop it altogether. If you think all governments are going to join forces and try to ban Bitcoin worldwide, we already know that’s not going to happen. Here’s why.
However, it can be argued that authoritarian states could implement a ban that would actually prove to be effective enough.
According to the World Population Review, about 2.7 billion people (about 34% of the world’s population) live under some form of dictatorship or autocratic system. While most of us can visualize extremes like North Korea at this point, it turns out that the vast majority of these people (1.5 billion) actually live in China and Russia.
A complete ban on Bitcoin in any of these jurisdictions with very harsh penalties for breaking the law might succeed through fear, intimidation and harsh enforcement. But any country that does so risks alienation by assuming adoption continues along its current trajectory. In this day and age, this is a risky strategy.
But even if it did, and all of these countries somehow put aside divisive issues and worked together to remove their citizens from the Bitcoin network, that would still leave 66% of the world’s population who would almost certainly still have access to the network in one form or another.
There are of course other considerations, such as allowing Bitcoin to be used and setting very high levels of taxation and compliance that would stifle users to the point where BTC would become unattractive to them. However, because of Bitcoin’s truly global status, it would be relatively easy to avoid these by moving funds elsewhere, hiding them, using them only natively, and so on. Once again, they would end up pushing Bitcoina to go underground and risk innovating elsewhere.
It seems that governments will eventually realize that trying to stop Bitcoin is completely pointless at this point. Those countries that prove progressive and open to innovation will almost certainly gain an economic advantage over the next few decades.
Myth 5: Quantum computing will render bitcoin useless
Quantum computing is an experimental computational field that overturns the old ideology in which everything is represented in a binary state, being a representation in terms of zero or one. This new way of thinking allows several simultaneous states to coexist, creating vast multidimensional spaces in which very large computational problems are represented.
This is an incredibly exciting – and incredibly complex – area of technical development that has been going on for at least two decades, but some people have begun to wonder if Bitcoin’s SHA-256 algorithm (the basis of the entire network) can be “cracked” by a quantum computer.
On the surface, this claim is by no means baseless. However, if we take a deeper look, three obvious problems surface.
First, the question of motivation. What exactly will building a very expensive quantum computer do to destroy a financial network? This brings us back to the same question that came up earlier – how will the attacker benefit from destroying the global network?
It is of course possible that someone could try to cause damage to their enemies in this way, but as we have already seen, this is extremely difficult to achieve. It also seems more likely that the target would turn out to be not that far off – it could be the existing banking system, for example, rather than Bitcoin itself – at least to begin with.
Second, quantum computing is still highly experimental. Even the most advanced developers are still years (perhaps even decades) away from reaching the full potential of quantum computing, so any concerns seem irrelevant at this point. Even if we were to have access to this technology within the next five years, there are still problems to be solved.
This latest hurdle involves the Bitcoin algorithm. Should quantum ever prove to be a real threat, it would be possible to improve the encryption element of the network using just this technology.
In other words, this is just a digital version of the space race or arms race. As new weapons are developed, new defenses are created.
If you want to learn more about quantum computers in the context of Bitcoin, take a look here.
The Other Myths in One: Pyramids, Ponzi and Criminals
Early on, some people compared Bitcoin to the pyramid and Ponzi schemes of the past, almost certainly based on a misunderstanding of what any of these structures actually are.
These days, few of those comparisons remain, and for good reason. A moment’s reflection quickly makes one realize that they are not onot related in any way.
In the same way, while “criminal use” used to be a strong argument against bitcoin (probably because of Silk Road), this is no longer true.
Of course, criminals use bitcoin – they will always use anything of value and but the percentage (and dollar value) of global BTC transactions currently attributed to criminal activity is virtually negligible.
Bitcoin now has tremendous momentum and is gradually sweeping the list of possible points of failure, block by block. With each passing day, the network is growing in strength, becoming more widely used and expanding.
However, the network of the world’s largest cryptocurrency remains all the time in a state of some kind of experiment and has to go some way before it reaches any kind of maturity. This means that it is entirely possible that new challenges not previously considered may evolve along with the network.
study source: link
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From the Editor
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