Bitcoin’s security threatened by unsustainable growth, analyst warns

by James · April 24, 2023

Bitcoin (BTC), the world’s largest cryptocurrency by market capitalization, may be facing a major security threat due to its unsustainable growth trajectory. According to a recent analysis by Justin Bons, founder of Cyber Capital, BTC needs to double in value every four years or maintain extremely high fees to maintain its current level of security.

Is Bitcoin’s security tied to its price?

In Bons’ analysis, he highlights that Bitcoin’s security model is based on the mining network, which requires a constant flow of new miners to maintain security. However, suppose the price of Bitcoin continues to rise at its current pace. If so, it will eventually reach a point where the cost of mining will become too high, leading to a decrease in the number of miners and a subsequent decrease in security.

1/9) BTC must double in value every four years for the next century or maintain extremely high fees

Just to maintain the current level of security

Such growth is impossible as it would exceed global GDP in 31 years based on today’s price

Therefore; BTC security is doomed!

— Justin Bons (@Justin_Bons) 23 April 2023

To put it simply, Bitcoin’s security is inextricably linked to its price, and if its price continues to rise at its current rate, it will eventually become unsustainable. Bons suggests that BTC may have 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 foundations are “made of sand” and that the cryptocurrency’s growth model is based on “false hope”. He suggests that paying hundreds of dollars for a single transaction in a competitive market is unrealistic, and that when fees increase, 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 a 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: allow censorship and double spending to occur when the network is 51% attacked or increase BTC’s supply inflation beyond the 21 million limits. Bons suggests that the latter is the best option, although both options are likely to arise as the network branches.

However, it is important to note that not all experts may agree with Bons’ analysis. Some might argue that Bitcoin’s security can be maintained even if its growth slows. Others suggest that new technologies such as 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 faced by Bitcoin, 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 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 is likely to play an increasingly important role in the future of Bitcoin and other cryptocurrencies.