Bitcoin security risks

Today I saw a tweet from Blue Fox Notes, which talked about the future when Bitcoin's security budget may no longer be attractive to miners. In order to maintain the security of Bitcoin, one of the solutions is to have a super meme coin on Ethereum, which is Bitcoin based on ERC-20, and then Ethereum will guarantee its security.

Then I suddenly remembered that at the end of the previous article, a reader left a message and talked about a similar problem. The gist of that message is as follows:

Once the computing power decreases, the cost of attacking the Bitcoin network becomes lower. If miners withdraw, it means that the network is paralyzed, so there is a risk that the value of Bitcoin will return to zero.

The two are talking about the same problem, and I actually wrote about this problem in my article a long time ago. It is not new. In my impression, Bitcoin pioneers probably thought about this problem as early as when Satoshi Nakamoto was still active on the forum.

What’s interesting is that every time it is mentioned, it is quickly forgotten by everyone. Then, when it is mentioned again as an “amazing discovery” several years later, it will set off a round of heated discussions in the community...

The security of the Bitcoin network is maintained by miners. The fundamental reason why miners are willing to maintain this network is economic interests. Miners can get two kinds of rewards through mining: one is the block reward of Bitcoin, and the other is the transaction fee contained in each block.

After the miners get these rewards, they sell the coins, deduct the equipment, electricity, maintenance fees, etc., and the remaining is their net profit.

After Bitcoin hits a new high every four years, the high profits from mining will attract a large number of new miners to join; but every time a bear market comes after a bull market, miners can’t make ends meet, which will cause a large number of small and medium-sized miners to withdraw reluctantly.

This cycle repeats itself over and over again, and this kind of story plays out over and over again.

From the time Bitcoin went online to now, after several rounds of brutal market baptism, basically only miners with strong strength can survive and persist until now. So the general trend is that there are fewer and fewer miners, and the computing power is becoming more and more concentrated.

Why can these strong miners persist until now?

The fundamental reason is that the price of Bitcoin has been hitting new highs, which ensures that although the block rewards obtained by miners have been decreasing, they can still make profits overall because of the high price of the currency.

In this process, a phenomenon has become increasingly obvious: that is, the increase in Bitcoin is getting smaller and smaller, and it is no longer possible to repeat the increase of dozens or hundreds of times in the early days.

Like any financial product, Bitcoin cannot soar forever. One day, its price will remain at a near-stable level.

On the other hand, according to the rule of block halving, around 2140, Bitcoin's block reward will be infinitely close to zero, and then Bitcoin miners' income will basically only be transaction fees.

Therefore, there will inevitably be such a day in the future:

By then, the price of Bitcoin will be in a very small range for a long time, and miners can only rely on transaction fees to make profits.

At that time, if the existing Bitcoin operating rules remain unchanged, and if we still want to rely on miners to mine instead of relying on external forces to maintain the security of Bitcoin, there are only two possibilities:

One is that the price of Bitcoin rises extremely high, so high that we can't imagine it now.

The second is that Bitcoin begins to carry the application ecosystem, like Ethereum, where there are a large number of applications for high-frequency transactions, which continuously provide miners with generous transaction fees.

Otherwise, Bitcoin will really face the security risks mentioned in the above two statements.

The first possibility is not very meaningful for us to discuss now, because I believe that kind of thing is not something that our generation can see.

The second possibility is that our generation may be able to see it. This is also why I paid great attention to the emergence of the inscription ecosystem.

Unfortunately, after about two years of experiments, I think the practice of carrying application ecology on Bitcoin is not optimistic.

However, I still see that there are still many VCs and venture capitals actively investing in Bitcoin's second layer or Bitcoin's ecological projects--------This really requires courage and I admire it.

Back to reality, I think the security risks of Bitcoin do exist, but each generation has its own things. Our generation is proud enough to witness and participate in this miracle and do its best in it. In our lifetime, we don't need to worry about this hidden danger.

The next generation should have a good solution to this problem.