Bitcoin (BTC), the world’s largest cryptocurrency by market capitalization, could face a major security threat due to its unsustainable growth trajectory. According to a recent analysis by Justin Bons, founder of Cyber Capital, BTC must double in value every four years or sustain extremely high fees to maintain its current level of security.
Is Bitcoin’s Security Linked To Its Price?
In Bons’ analysis, he highlights that Bitcoin’s security model is based on its mining network, which requires a constant flow of new miners to maintain its security. However, suppose the price of Bitcoin continues to rise at its current pace. In that case, it will eventually reach a point where the cost of mining will become too high, leading to a decline in the number of miners and a subsequent decrease in security.
1/9) BTC has to double in value every four years for the next century or sustain extremely high fees
Just to maintain the current level of security
Such growth is impossible since it would exceed global GDP in 31 years based on current price
Therefore; BTC security is doomed!
— Justin Bons (@Justin_Bons) April 23, 2023
To put it simply, Bitcoin’s security is inextricably linked to its price, and if the price continues to rise at its current pace, it will eventually become unsustainable. Bons suggests that BTC may need to find a new solution to maintain its security or risk becoming a victim of its success.
Furthermore, Bons argues that Bitcoin’s security and technical foundation are “made out of the sand” and that the cryptocurrency’s growth model is based on “false hope.” He suggests that paying hundreds of dollars for a single transaction is unrealistic in a competitive market and that when fees spike, users leave, leading to a decline in the network’s overall security.
Bons also blames the unnecessary addition of the block size limit for exacerbating the problem. He argues that this limit has created a free market prone to spikes and volatility and has led to a decline in Bitcoin’s overall security.
Will BTC Have More Options In The Future
Ultimately, Bons’ analysis suggests that if BTC’s growth trajectory continues at its current pace, there will come the point where the network’s security budget will run out completely, leaving it vulnerable to censorship and double-spending.
According to Bons, only two choices will be left: allowing censorship and double spending to occur as the network gets 51% attacked or increasing BTC’s supply inflation beyond the 21 million limits. Bons suggests the latter is the best option, though both options will likely occur as the network forks.
However, it’s important to note that not all experts could agree with Bons’ analysis. Some may argue that Bitcoin’s security can be maintained even if its growth slows. Others suggest that new technologies like the Lightning Network can help reduce transaction costs and maintain security.
The Lightning Network is a second-layer payment protocol built on the Bitcoin blockchain. It was designed to address some scalability issues Bitcoin faces, particularly the slow transaction processing times and high fees associated with on-chain transactions.
The Lightning Network creates a network of payment channels between two parties, allowing them to transact with each other off-chain. Smart contracts secure these payment channels and facilitate multiple microtransactions between the parties without broadcasting each transaction to the Bitcoin network.
While the Lightning Network is not a complete solution to Bitcoin’s scalability issues, it represents a significant step forward in improving the efficiency and usability of the Bitcoin network. As such, it will likely play an increasingly important role in the future of Bitcoin and other cryptocurrencies.
Featured image from Unsplash, chart from TradingView.com