What are the dangers for Bitcoin (BTC)?

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Bitcoin (BTC) is still a very valuable and important experiment. Ever since the start of bitcoin, all kinds of possibilities have been mentioned that can cause bitcoin to fail. All sorts of situations can be imagined that will make things go downhill in the future, but for now the network has been running steadily for more than a decade and is doing what it should do. Still, it is interesting to see where things can go wrong. In this article you will find some attack vectors of bitcoin. Buy 1000 euros worth of Bitcoin without commission? Get started at Bitvavo

Politics

Even US President Donald Trump has no control over bitcoin's network itself. However, that doesn't mean that politicians can't influence bitcoin's ecosystem. We will see many examples of this worldwide in 2020. The policy surrounding the purchase and sale of BTC is becoming stricter. It's already annoying that you have to identify yourself before making a purchase with an approved bank account. But it goes beyond that. De Nederlandsche Bank (DNB) is a regulator and licenser for bitcoin companies in the Netherlands. They require service providers in this industry to collect a lot of data from their customers and share it with the appropriate authorities when requested.

This means, among other things, that exchanges must link an identity to the addresses to which they send bitcoin for their customers. Other examples of political attacks are, for example, a ban on bitcoin payments (such as in Russia) or, for example, the blocking of certain websites. No one can stop a bitcoin transaction, but as a country you can ban it as legal tender. For the time being, this is happening on a national scale, but in the European Union (EU), for example, there are now guidelines that each member state can implement itself. A global ban on bitcoin is difficult to achieve, and we are not even talking about enforcing such a ban. Another horror scenario is the prosecution and arrest of developers.

bitcoin wallet

If used properly, a bitcoin wallet cannot be cracked and is only accessible to those with the private keys. You can access your BTC anywhere with a simple string of 12 or 24 words, even if it is prohibited in the country you are in. However, it is clear that bitcoin cannot protect you outside the payment network against a few men in suits standing at your door. In theory, (local) politics can make it as difficult as possible for you to get started with bitcoin, and that can deter you. If there are black penalties for buying and selling BTC, or even for owning it, you can imagine that many interested parties will drop out (for the time being).

The bitcoin protocol is regularly compared to a living organism. It adapts and the network has been used, attacked and therefore tested for more than 10 years. Bitcoin is open-source and that is also the strength of the project, the protocol is constantly evolving through the work of developers worldwide. Despite the fact that the network of bitcoin consists of tens of thousands of nodes, this protocol is (for the time being?) Human work. And where people work, mistakes are made. Bitcoin developers do not always agree with each other. The great thing about bitcoin is the fact that you can build this network without having to agree on all kinds of things.

bitcoin protocol

What you have to agree on are the rules on the network, code is law within bitcoin. It is not without reason that there are already more than 440 other projects based on the bitcoin protocol. These often arise from disagreement, greed or an experiment. And guess what? All of these networks are falling back in use, price pretty quickly and are actually nowhere near bitcoin itself. Bitcoin has taken the cake when it comes to decentralized money and decentralized networks. Nevertheless, there are of course many dangers in the development process. An idea can be implemented that is initially supported by the majority, but which later does not seem to work out well. It is up to everyone within bitcoin to prevent this as much as possible. That is also one of the important principles for building on and on bitcoin: prevention is better than cure, slow and steady wins the race.

Extra 184 billion BTC

A decade ago, there was a bug in Bitcoin. As a result, in August 2010, no less than 184 billion BTC was created too much. This happened in block number 74,638. Fortunately, Satoshi and some other developers were quick to act. The error was resolved within five hours. With the "patched" version of the Bitcoin client (version 0.3.10), this over-issuance of Bitcoin was nullified. The majority of the miners and nodes accepted this client and the error had no major consequences. This shows that things can definitely go wrong if mistakes are made at the level of development.

Mining

An important aspect of bitcoin is mining bitcoin. Companies are now jointly using billions of dollars in hardware to mine bitcoin. Is it possible that miners are losing interest? Mining is in fact a constant battle between all computers present (and their computing power) for new bitcoin. This process is managed by the Proof-of-Work protocol. Simply put: hardware is used to earn bitcoin. As the number of participants and their "work for the network" increases, the network also becomes more secure. Until now, interest in bitcoin mining is growing rapidly, as long as profit can be made it is interesting for many parties.

Miners can count on extra subsidies until 2140. That subsidy consists of newly issued bitcoin that you receive for finding a block. In addition to these new bitcoin, miners also collect a reward for the processed transaction by means of transaction costs. The big picture makes it interesting to invest in mining hardware and join the battle for new BTC. But what if the costs for mining are too high and / or the price of bitcoin suddenly drops very quickly? Satoshi has also come up with something for that: adjusting the difficulty. This principle can be briefly summarized: when more miners participate, it becomes more difficult to mine. Is interest dropping? Then it gets easier again. If there is suddenly much less interest in mining bitcoin, the protocol will adjust. As soon as there is another (economically) interesting point to mine bitcoin for a certain group, the computer power on the network will pick up again. In short: as long as there is a (reasonable) price for bitcoin, it is likely that interest in bitcoin will remain for the time being. That is an important requirement for miners to keep going and keep the network safe. Most major parties do this not out of the goodness of their hearts, but because they themselves benefit.

51% attack

A 51% attack on a blockchain refers to a miner or group of miners trying to increase the network with more than 50% of the mine capacity or hashrate. In theory, this would allow them, for example, to spend their number of bitcoin twice on the network. That is something that bitcoin can cause a lot of damage at the time. One of the powerful ideas behind bitcoin is that you are sure of your case: the protocol offers certainty and clarity. In 2014 there was a scenario similar to this. There was "one" party that controlled more than 51% of the computing power. It was the mining pool Gigahash. In theory, they could then (as an entire pool) censor or double-spend transactions.

Gigahash immediately promised not to abuse their dominance. In addition, many miners left the pool behind when a DDoS attack was carried out. And under the motto “don't trust, verify”, the network of actors simply remained decentralized (enough). The people behind Gigahash didn't benefit from attacking the network, but they could potentially be annoying. In the video below, Andreas Antonopoulos already explained years ago why an attack on bitcoin using computer power does not make much sense. Should someone successfully launch a 51% attack on bitcoin, the rest of the network will be able to split off and continue without "the cheaters."

Quantum computers

This chapter also includes future supercomputers, or quantum computers. It is theoretically possible to access a bitcoin address that does not belong to you. Pay attention! In theory, in practice that is virtually impossible. Especially at the moment. But it is thus possible to guess this private key by gambling very often. The bottom line is that a computer can then enter a jumble of alphanumeric characters into a Bitcoin wallet in the hope that it will suddenly gain access to addresses with a bit of BTC on them. Undoubtedly, there have been numerous attempts, but fortunately none have succeeded to date. And the numbers below show why. In a now-deleted tweet, someone claimed that bitcoin's days are numbered due to the rise of ever-faster computers.

Bitcoin developer Luke Dash jr previously explained that with a computing power of 600 MK / s (what most high-end graphics cards have today) it will take an average of 38593493520073954175290747912192 years to crack an older Bitcoin address. He is specifically talking about an older address. The 1-style and 3-style addresses are 160-bit. Pre-1-style and bc1-style addresses are 256-bit. Addresses with bc1 are the newest kind of addresses used for bech32 SegWit payments. Danny Diekroeger, developer for the Cash App, also showed that it is almost impossible. "With 1,000,000,000 times the computer power he has now, he has to gamble for 100 years with a chance of 0.000000000000000000000000000000000000000001% that he will find a private key with balance." Danny Diekroeger, developer of the Cash App, adds the following: “With 1,000,000,000 times the computer power he has now, he has to gamble for 100 years with a chance of 0.0000000000000000000000000000000000000001% that he has a private key with balance. ” Bitcoin Despite the dangers, Bitcoin is still happily running. Even if the inventor (s) of BTC Satoshi Nakamoto returns and it becomes known who was behind this wonderful idea, the protocol and the network will continue. Within the editorial team, we are (completely) convinced of a bright future for bitcoin and this beautiful network. It's up to bitcoin to prove that it can survive despite numerous attacks. And everyone is there as a bitcoiner himself.

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