Bitcoin, the first and most popular cryptocurrency, has been around for over a decade now and has survived various challenges and controversies, including hacks, forks, scams, and regulatory crackdowns. Some critics and skeptics, however, claim that Bitcoin is inherently flawed, unsustainable, and vulnerable to various forms of attacks. In this article, we examine the arguments against Bitcoin’s resilience and explore the ways that Bitcoin could potentially be killed.
The Attacks on Bitcoin
Now, let’s examine the different ways that Bitcoin could be attacked or disrupted, and assess their feasibility and effectiveness:
Hack
Bitcoin’s ability to withstand attacks is based on three main factors: its simple design, the massive computational power dedicated to ensuring the system’s security, and the requirement for agreement among distributed nodes before any changes can be made. To put it in digital terms, it’s like surrounding a school playground with the entire infantry and equipment of the U.S. military to safeguard it against invasion. This comparison demonstrates the excessive level of security that Bitcoin has.
Bitcoin is essentially a ledger that tracks the ownership of virtual coins. With only 21 million of these coins in existence and just a few million addresses holding them, there are typically no more than 500,000 transactions happening daily. The computing power required to maintain this system is minimal, and even a basic laptop can handle it while browsing the internet. However, Bitcoin doesn’t operate on a single laptop since this would require trusting the laptop owner and make it easy for hackers to attack.
Bitcoin’s approach to computer security is entirely different from other computer networks. Instead of securing individual computers, Bitcoin assumes that all computer nodes are hostile attackers. It doesn’t establish trust in any network member but instead verifies everything they do through proof-of-work, a process that requires significant processing power. This approach has been highly effective because it makes Bitcoin’s security dependent on brute processing power, making it impervious to access or credential issues.
To hack Bitcoin, a node would need to corrupt the ledger of transactions to fraudulently move coins to a specific account or make the system unusable. However, since nodes have a low cost of detecting fraud, and the cost of adding a block of transactions is high and constantly increasing, it is unlikely that attackers will succeed. The majority of nodes in the network have an interest in Bitcoin’s survival, making it even harder for attackers to win.
The design of Bitcoin has a significant asymmetry between the cost of committing a new block of transactions and the cost of verifying their validity. While it is technically possible to forge the record, the economic incentives are heavily against it. Therefore, the ledger of transactions constitutes an indisputable record of valid transactions to date.
51% Attack
A 51% attack is a method used to create fraudulent transactions by utilizing a large amount of computing power. This involves spending the same coin twice, which cancels out one of the transactions, and allows the attacker to scam the recipient. If a miner who has a significant portion of the computing power is able to solve proof-of-work problems quickly, they can make a bitcoin transaction on a public chain that receives confirmations, while simultaneously mining another chain with the same bitcoin to a different address, belonging to the attacker.
The recipient of the first transaction will receive confirmations, but the attacker will use their computing power to make the second chain longer. If the attacker successfully creates a longer chain than the first one, they can reverse their transaction, thus profiting from it. However, this attack is difficult to implement in practice, as waiting for confirmation of the transaction reduces the likelihood of success. If the recipient is willing to wait for six confirmations, the chances of an attack’s success are very low.
While theoretically feasible, the economic incentives make executing a 51% attack unlikely. A successful 51% attack could damage the economic incentives for using Bitcoin, which would decrease demand for Bitcoin tokens. Bitcoin mining is capital-intensive and requires significant investments to produce coins, so miners have a long-term interest in the network’s integrity. The value of their rewards depends on it. To date, there have been no successful double-spend attacks on any Bitcoin transactions that have been confirmed at least once.
The closest instance to a successful double-spend attack was in 2013 when a Bitcoin betting site called Betcoin Dice had approximately 1,000 bitcoins (worth around $100,000 at that time) stolen from it through double-spend attacks using significant mining resources. The attack was successful because Betcoin Dice was accepting transactions with zero confirmations, making the cost of the attack relatively low. If they had accepted transactions with at least one confirmation, it would have been much harder to pull off the attack. This also implies that Bitcoin’s blockchain is not suitable for mass consumer payments since it takes up to 12 minutes to produce one confirmation for a transaction. If a large payment processor is willing to approve payments with zero confirmations, it becomes a lucrative target for coordinated double-spend attacks that utilize heavy mining resources.
In conclusion, while a 51% attack is theoretically possible, it is unlikely to occur due to the heavy economic disincentives. Owners of computing power would not utilize their investment in this way. Therefore, there have been no successful 51% attacks on nodes that have waited for at least one confirmation.
Hardware Backdoors
The Bitcoin network can be attacked in various ways, including by tampering with the hardware used to run the Bitcoin software. Malware could be installed on mining nodes, allowing hackers to take control and launch a 51% attack. Similarly, spying technology could be used to gain access to users’ private keys, compromising their Bitcoins.
Even a partial disruption could lead to a loss of confidence in Bitcoin and a decrease in demand for it. An attack on the mining equipment used in the network would be particularly effective, as there are only a few manufacturers of this equipment. However, the increasing popularity of Bitcoin mining means that more hardware makers are likely to enter the market, reducing the impact of any single manufacturer’s operations being compromised.
To mitigate the risk of these attacks, Bitcoiners rely on a culture of verification rather than trust, emphasizing technical competence and thorough examination of hardware and software. The open-source peer review culture is also a significant defense against these types of attacks.
While attacks on the network could still cause significant costs and losses to individuals, it is unlikely that they could bring the network to a standstill or destroy demand for Bitcoin completely. Overall, the economic incentives of Bitcoin are what give it value, rather than any particular piece of hardware. Nevertheless, Bitcoin’s resilience would be strengthened by diversifying its hardware providers to avoid making any of them systemically important.
Internet and infrastructure attacks.
Bitcoin is often misunderstood as being vulnerable to shutdown by taking down its communication infrastructure or even the entire internet. However, this is not the case, as Bitcoin’s software protocol can be implemented on countless computers distributed worldwide. Unlike traditional networks that rely on centralized hardware and infrastructure, Bitcoin has no single point of failure or indispensable hardware structure. Any computer running the Bitcoin software can participate in its network and perform its operations.
Bitcoin is similar to the internet in that it is a protocol that allows computers to connect, rather than the infrastructure itself connecting them. The amount of data required to transmit Bitcoin information is relatively small, and the blockchain, which is used to transmit Bitcoin data, requires only 1 megabyte of data every 10 minutes. This means that Bitcoin does not need the extensive infrastructure required by the rest of the internet. Countless wired and wireless technologies around the world are available for data transmission, and only one of these is necessary for a user to connect to the network.
Attempting to prevent Bitcoin users from connecting to one another would necessitate the destruction of the world’s information, data, and connectivity infrastructure, which would have catastrophic consequences for modern society. Shutting down communication infrastructure would cause significant damage to essential services and matters of life and death. However, dispersed machines can always connect to each other using protocols and encrypted communications, making such an attempt futile.
It is unrealistic to expect a single force to shut down all of the world’s computers and connections simultaneously. With so many people utilizing countless computers and connections, it is virtually impossible to make them all stop functioning at once. The only conceivable scenario where this could happen would be in an apocalyptic situation where there would be nobody left to even question whether Bitcoin was operational or not.
Therefore, the idea that Bitcoin can be shut down by shutting down the internet or communication infrastructure is unlikely to happen. Bitcoin’s software protocol can be implemented on any computer worldwide, and any attempt to shut it down by destroying infrastructure would have disastrous consequences for society.
The increase in the cost of nodes and the decrease in their quantity.
Bitcoin is known for being hard money due to the difficulty of tampering with its supply, and for being an uncensorable digital cash because it cannot be intervened by third parties. However, these properties depend on the consensus rules of the network, particularly the money supply, remaining stable and difficult to modify. This is maintained by making it risky and disadvantageous for a member to deviate from the current consensus rules, which is possible because of the significant number of nodes running the software, making coordination impractical. The risk is that if the cost of running a node rises significantly, it would become difficult for users to run their own nodes, leading to a decrease in the number of nodes on the network and eventually rendering the network ineffective as a decentralized system.
This is the most significant technical threat to Bitcoin in the medium and long term, in my opinion. At present, the primary constraint on individuals running their own nodes is their internet connection bandwidth, which is generally manageable since blocks are less than 1 megabyte. However, if a hard fork increases the block size, the cost of running a node would increase, and the number of operational nodes would decrease. Although technically feasible, it is unlikely to happen because the system’s economic incentives prevent it, as evidenced by the widespread rejection of proposals to increase the block size so far.
In conclusion, while the destruction of humanity’s telecommunication infrastructure may make for an exciting plot in sci-fi stories, the more realistic threats to Bitcoin that could undermine its fundamental design are related to the stability of its consensus rules and the number of nodes running the software. These critical factors must be preserved to ensure the continued success of Bitcoin as a decentralized digital currency.
The Breaking of the SHA-256 Hashing Algorithm
The SHA-256 hashing function plays a critical role in the Bitcoin system’s operation. It converts data into a fixed-size hash using a mathematical formula that cannot be reversed, making it impossible to derive the original data from the hash. However, as computing power advances, it may become feasible to reverse-calculate these hashing functions, which could lead to the theft of Bitcoin addresses.
This is a significant technical threat to Bitcoin, and the solution is to adopt a more robust form of encryption. However, this requires a hard fork where most nodes in the network abandon the old consensus rules for a new set of rules with a new hashing function. This poses challenges similar to those previously discussed, such as coordinating the fork, but this time, users who remain on the old implementation will be susceptible to hacking.
As a result, it is likely that a vast majority of users will participate in a hard fork. The only question remaining is whether the hard fork will proceed in an orderly manner, with all users migrating to the same chain, or if it will result in the chain splitting into several branches utilizing different encryption methods.
While it is possible that SHA-256 encryption may be compromised, network users are economically motivated to transition to a stronger algorithm and to do so in unison. Therefore, it is likely that a hard fork will occur to ensure the continued success of the Bitcoin network.
Conclusion
In conclusion, the answer to the question of whether Bitcoin can be stopped is a resounding no. The decentralized nature of Bitcoin makes it immune to any attempts to shut it down or manipulate it.
Due to its peer-to-peer network, spread across the world, Bitcoin does not have a single point of failure. As a result, even if some nodes go down, the network as a whole will continue to operate. This makes it almost impossible to completely shut down the Bitcoin network.
Moreover, the decentralized nature of Bitcoin also makes it resilient to government control or regulation. While governments may try to regulate or ban Bitcoin, this has proved to be ineffective. Such actions have only served to drive the currency underground, with people finding new ways to continue using it despite the restrictions.
Sources
How Bitcoin can be destroyed | Saifedean Ammous and Lex Fridman
- Cryptography private key and public key (March 7, 2023)
- Fiat Currency vs Bitcoin: Understanding the Differences (March 6, 2023)
- CBDC vs Bitcoin: Key Differences 2023 (March 6, 2023)
- Bitcoin vs. Ethereum: What are the Difference? (March 5, 2023)
- What is a Blockchain Smart Contract? (March 5, 2023)
- Bitcoin Lightning Network and how does it work? (March 4, 2023)
- Monthly Crypto News February 2023 (March 3, 2023)
- What Factors Influence the Value of Bitcoin? (January 6, 2023)
Naren is a finance graduate who is passionate about cryptocurrency and blockchain technology. He demonstrates his expertise in these subjects by writing for cryptoetf.in. Thanks to his finance background, he is able to write effectively about cryptocurrency.