Securing the Bag: My Take On Bitcoins Long-Term Security
The long-term sustainability of Bitcoin's security and mining market remains one of the biggest open questions for the asset. In this piece, I lay out several ideas I use to think through the problem.
G’day Folks,
Once in every Bitcoin market cycle, concerns around the long-term sustainability of Bitcoin mining rises up as a key point of discussion. If you ask an altcoin advocate, they will proclaim that the death of Bitcoin is assured, and is just a few halvings away. If you ask a devout Bitcoin maximalist, they will claim there never was a problem, Bitcoin has already won, and the market will sort it out.
Naturally, the truth is probably somewhere in the middle.
For most people, the influence of mining on day to day trade is pretty insignificant. Miners don’t really affect the BTC price very much, and their influence is very small compared to derivatives, and existing holders taking profit.
However…none of that matters if the security system fails, and the Bitcoin network becomes unreliable and worthless.
From a theoretical standpoint, Bitcoin HODLers should develop some level of understanding about how mining game theory works. Not only is it fascinating, but it is also one of the biggest unanswered questions about Bitcoin’s viability long term.
I have been thinking about this problem in some detail over the last few years, and I became particularly interested in it since the 2024 halving. My mate UkuriaOC pointed out the fact that the Bitcoin Hashrate (the computational power used by miners to process transactions and secure the network) was at an ATH on every halving date, and after a brief pullback, proceeds to moon to set significant new ATHs soon after.
My initial reaction was to ask; why would miners be adding additional hashrate if they know their revenue is about to be cut in half?
In this post, I want to share several ideas and concepts I have found useful whilst thinking through this problem.
I don’t have all the answers, but I believe every HODLer should spend some time contemplating what is arguably one of the bigger risks that exists for Bitcoin: Is the security system of Bitcoin sustainable and resilient long-term?
The purpose of this post is to explore four key questions pertaining to how secure Bitcoin really is.
Does price need to double every 4yrs for Bitcoin to remain secure?
If miners go bankrupt, will that make the Bitcoin network insecure?
Is the ‘security budget’ big enough to prevent a nation state 51% attack?
Is Bitcoin censorship resistant?
Let’s dive into one of the most important, and least understood components of the Bitcoin network.
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