Today we will share the analysis of Sebastien Meunier, a financial services analyst with 15 years of experience in business innovation. He speaks in Fintech and is a veteran startup mentor.
Before entering the speculation, let's start with the facts: Bitcoin has been declared dead more than 200 times.
Can you destroy Bitcoin? The 7 (unlikely) paths to disappearance
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Although the first cryptocurrency in the world has operated with a time of activity close to 100 percent (for almost 10 years), it is still fashionable to predict its demise. Even supposedly intelligent people are known to spread something that I will call "bitcoin disorder". They continue to predict the disappearance of Bitcoin even if they are shown to be wrong on a daily basis.
But if we say that these people have a level of intelligence, the only explanation for failed predictions and emotional arguments is that they never take the time to study and understand how the system works.
In this way, I would like to help by listing all possible ways in which Bitcoin could be destroyed.
Technically speaking, bitcoin will live while a handful of computers run the bitcoin software on a network. Only an extreme scenario would lead to annihilation. It is likely to remain the superior cryptocurrency in the coming years, unless the community destroys itself due to greed or neglect.
Scenario 1: Armageddon
Probability (next 5 years): Close to zero
Impact: sudden death
If all sources of electricity, internet and data communications were closed around the globe, the bitcoin nodes could not contact each other. The system would be useless.
A temporary closure of the Internet worldwide would undoubtedly create confusion among the bitcoin community, but it is important to keep in mind that the system (in theory) would simply start over from the longer chain.
Even if hardcore fans or museums continue to run their software forever, bitcoin will never be technically extinguished.
Scenario 2: critical error
Probability (next 5 years): low
Potential impact: sudden irrelevance
In this scenario, a bitcoin update could contain an error in the level of the infamous DAO project (built in ethereum blockchain), which puts the integrity of the system at risk.
Even if the community agreed (which is not guaranteed) to fix the code, install the new version and restart the system, it would undoubtedly cause a price collapse and a bifurcation.
The bitcoin community is aware of the risk: any modification of the code is peer reviewed and tested, according to the contribution guidelines. That said, only NASA can produce software code with zero defects.
Scenario 3: bifurcated to irrelevance
Probability (next 5 years): low
Potential impact: slow irrelevance
Bitcoin can be divided several times if the community does not agree on the way forward, for technical reasons (or "because of the money").
The Bitcoin Cash division, which occurred last summer, was not so harmful to Bitcoin because it saw the network nodes and hash power shrink. Theoretically, several divisions could occur in which this network would fragment even more and its power would be reduced.
If this happened, I believe that bitcoin would lose its dominance, sinking slowly into irrelevance. Again, it is the interest of the community not to allow this to happen.
Scenario 4: joint government repression
Probability (next 5 years): medium to low
Potential impact: sudden irrelevance
Governments can not destroy the bitcoin itself because of its decentralized nature. However, they can control and restrict their use in their jurisdiction.
For example, they can close the bank accounts of the encryption companies and can prohibit the creation of any related business. If only a handful of countries prohibit cryptocurrencies, the impact will be limited because companies will simply move to friendlier jurisdictions.
This is exactly what happened after China banned their domestic exchanges last year. And while the likelihood of one or more governments pursuing bitcoin in the same way is almost assured, I believe that a global ban is almost impossible (imagine that the United Nations reaches such a consensus).
In addition, bitcoin is already legal in Japan. If EE. UU., The EU, the United Kingdom and China jointly ban cryptocurrencies, that would be very harmful.
However, they are more likely to regulate the cryptocurrency market to raise tax revenues while protecting individual investors.
Scenario 5: important hack
Probability (next 5 years): Medium to high
Potential impact: temporary block
This scenario could occur in different ways.
In the first, called 51 percent attack, a malicious network actor could try to hack the protocol. This is theoretically possible, but its probability is close to zero.
From the inside, 51 percent of the attackers would destroy their own source of profits. From the outside, it would require a large investment in mining and energy equipment, so it would not be profitable
Most likely it is a hack in an application created on the protocol.
When Mt. Gox was hacked in 2014 (an example of this attack), it handled 70 percent of all bitcoin transactions. Today, there are many more exchanges around the world. If one of them were pirated and a large amount of bitcoin was stolen, the price would probably plummet, but the bitcoin would probably recover.
Recently, for example, $ 400 million in NEM were stolen from the Coincheck stock exchange: the price of NEM only fell between 15 and 20 percent and recovered in one day.
Scenario 6: "best" cryptocurrency
Probability (next 5 years): medium to low
Potential impact: gradual irrelevance
Is it possible for a "better" currency to replace bitcoin? (By "better", I mean more profitable and with lower transaction costs for users)
Let's face it: it's more about economy and less about convenience. That cryptocurrency would have to be much "better" to overcome the network effect and brand equity of the current bitcoin profits.
The fact that there is not yet
Now what do you think about these possibilities? I would like to know your choice and your point of view on the subject is very interesting for all of us.
