Apart from the security and privacy of your coins there are also other concerns around Bitcoin’s stability and security that deserve our attention. These risks are endemic to Bitcoin’s design and its young ecosystem, and they are often outside of our control.
While there is little we as individuals are able to do about them, understanding these risks helps us understand Bitcoin as a whole, and allows us to make better decisions about how much we can trust the network.
Its proponents advertise Bitcoin as a decentralized network that cannot be controlled by anybody. Indeed, the cryptocurrency experiment now valued at more than US$300 billion is close to impossible to shut down—even its users don’t know how to turn it off.
Some obvious things could stop Bitcoin, of course. But they often raise more complications and are themselves highly complicated.
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What could an organization do to make Bitcoin worthless?
Shut down the Internet
How does one turn off the internet? Apart from the high amount of cooperation this would require from private entities and governments, we don’t know how to shut down the internet. The network was in part designed to keep going even after a nuclear strike, and it does not have a kill switch by design. The internet itself is also highly resilient against attacks, and information would just route around each part that we turn off.
Even if significant parts of the internet were shut off or damaged, Bitcoin’s bandwidth requirements (currently 1 MB per ten minutes at a minimum) might be small enough to successfully broadcast over radio waves or the telephone system.
On top of that, would any organization really want to turn the internet off? The internet has many other uses, like sending cat photos. The economic damage from turning the internet off would be gigantic, and it would very likely even cost lives.
Destroy all the nodes and miners
The Bitcoin network is made up of individuals, groups, and organizations that run the Bitcoin software on their laptops, phones, and even Raspberry Pis. Some of these participants also run dedicated computer chips, called Bitcoin miners, to exchange electricity into Bitcoin. In a kind of digital lottery, where those who make the network more secure might get some Bitcoin.
While some of these Bitcoin miners and node operators are highly visible, they’re not going to be interested in shutting down their systems voluntarily. It might be possible to seize or destroy some miners or node operators, but this will only make mining more profitable for those who operate secretly.
As a response, Bitcoin mining will go underground, and nodes will hide behind VPNs and the Tor Network. As long as there is money to be made in Bitcoin mining, people will risk their freedom to take part. For example, Bitcoin mining remains attractive in Venezuela, where Bitcoin is illegal.
Make Bitcoin illegal
If a state were to make Bitcoin illegal, it would become much harder for people to buy Bitcoin miners, exchange Bitcoin into paper money, or accept it as payments in a store.
But as in the world of online drug markets (which are also, to some degree, driven by Bitcoin), people are very much willing to break the law for some profit, and the pseudonymous nature of Bitcoin will make it hard to track down its traders, owners, and users.
Mine empty Bitcoin blocks
The only guaranteed way to bring Bitcoin to a halt and make it worthless, is to participate in the network yourself and disrupt it from within.
It’s part of Bitcoin’s anarchist nature that anybody can take part in the system anonymously, as long as they conform to the rules laid out in the Bitcoin software. For example, no rule states that blocks have to be filled with transactions to be valid, so a miner could theoretically just mine empty blocks.
If all blocks were empty, nobody could transact on the Bitcoin blockchain, and without the ability to send money, it would become worthless.
With just 10% of the global Bitcoin computing power, an organization could significantly slow down the Bitcoin network. As the evil operation expands, it will eventually reach 50% of the total hashing power, allowing them to keep all the blocks empty.
Bitcoin nodes accept the longest valid blockchain as valid, so if a group has more than 50% of the total hashing power, they can eventually create a chain longer than the other, honest miners, who would prefer to fill up their blocks with transactions.
Bitcoin’s founder, the pseudonymous Satoshi Nakamoto, explains:
“The race between the honest chain and an attacker chain can be characterized as a Binomial Random Walk. The success event is the honest chain being extended by one block, increasing its lead by +1, and the failure event is the attacker’s chain being extended by one block, reducing the gap by -1.”
Lexie M writes about information security, bitcoin, and privacy. She is excited about empowerment through technology, space travel, and pancakes with blueberries and blogs for ExpressVPN who is TechRadar’s number one VPN provider. This is an excerpt from Lexie’s eBook called “Bitcoin Security and Privacy : A Practical Guide” which is free to download on iOS, Android, Kindle Kobo and Nook.