Biggest threat facing bitcoin is not that China will control more than 51% hash rate and damage Bitcoin’s resiliency. No, that is not the biggest threat.
While there are many aspects that could.
We are under the governance and control of Governments around the world. Some better than others but every single government on the planet is only concerned about one thing: Being in power. The governments really don’t care if they have to take down millions of people in their quest to stay in power.
I know it is quite a morbid outlook but one that has been proved over and over again throughout history. Funny thing is when we are living through what will one day be history for future generations, we mostly live in denial.
What can the government do to stop or at least slow down the Bitcoin revolution?
When Reserve Bank of India declared that the banks cannot provide services to any businesses that provide cryptocurrency related services, many amazing projects had to shut down. Russia recently hinted that it will declare bitcoin as ‘illegal’. While the crypto market has not heeded to this warning – what happens if all of the G20 nations declare it as illegal?
Change taxation rules
What if governments declare that you can trade all the bitcoin you want but you have to pay 70% tax on the profits? Or what about 90%? For those of you who are thinking about how far fetched this idea – here is a sample from our history where the taxes in the US reached 94%. Yes, 94%. The common public will not care how much bitcoin gains are taxed at since more than 99% of them are not invested in Bitcoin and cryptocurrencies.
In 1933 Franklin D Roosevelt issued Executive Order 6102 which made it illegal to hold gold in any form, not even in certificate form. It was not until 1974 that gold became legal. In the interim 40 years, the government had full authority to seize gold from anyone who was hoarding it illegally. Can Bitcoin survive a seize or surrender order if one is issued against Bitcoin?
Introduction of digital dollar
A government issued digital dollar could undermine the importance of Bitcoin as it could steer people away from ever exploring bitcoin and what it represents. Also, the government can mandate use of digital dollar and ban bitcoin which could bring overnight adoption to digital dollar and threaten bitcoin’s relevance.
Virus attack on mining equipment
The other big threat that bitcoin faces is the technology itself. In theory, a concerted attack on the mining equipment could bring down the bitcoin network. Many factors will play into this scenario where the virus may not be successful in bringing all shields down in time before someone finds a way to kill it. However, this is a threat that exists as potential in theory.
Privacy coins, like Monero, could replace Bitcoin’s status
Bitcoin initially got popular because it was thought anonymous only to realize that it is easily traceable back to the owners through IP address, etc., There are ways to keep Bitcoin anonymous but that takes some technical expertise. What if privacy coins like Monero reignite the passion for privacy and self-governance and steer people away from Bitcoin? It is a probability that lingers.
Another Crypto could dethrone Bitcoin
What if real Satoshi Nakamoto reveals his identity and it is indeed Craigh Wright? That made me regurgitate a little, but you see the point. Bitcoin distribution is quite skewed at the moment with over 42% of total circulating supply owned by .0007% which is worse than 1% owning 35% of wealth in the traditional space. This resentment could give way to other coins that promise fair distribution, better technology, greater scalability and flexible DApps deployment. Will this happen in 2020 or 2021, unlikely. Can it happen in the next decade? There is a probability.
People also speculate these issues that could threaten the Bitcoin ecosystem:
Drop in price: What if bitcoin’s price drops so much (for whatever reason) that
speculators, long-term investors, miners all leave the space?
Miners switching to other coins: Miners are businesses and businesses care for profits whether it comes from mining bitcoin or some other coin.
While these are definitely things of concern, we think the reasons we listed above could cause permanent damage while issues revolving around the price will always find a way to self-correct.
What according to you is the biggest threat facing Bitcoin? Did we miss any?
Thank you for reading and sharing this article.
Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.
We do not endorse or guarantee the accuracy of the information and claims made.
All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.
Get ‘Week in Crypto’ news updates in ONE email.
We never spam your inbox and we only send one email per week
with updates, news, eBooks, tax updates, and more!
Get knowledge, not spam! Subscribe here.