Security Risks of Bitcoin

Today, I saw a tweet from Blue Fox Notes (@lanhubiji) discussing a future scenario where the security budget of Bitcoin may no longer be attractive to miners. To maintain Bitcoin's security, one proposed solution is the emergence of a super meme coin on Ethereum, which is based on ERC-20 Bitcoin, and its security would be guaranteed by Ethereum.

Then I suddenly recalled that at the end of a previous article, a reader also commented on a similar issue. The gist of that comment was as follows:

Once the hash rate declines, the cost of attacking the Bitcoin network decreases. If miners exit, it would mean the network is paralyzed, thus posing a risk of Bitcoin's value going to zero.

Both discussions address the same issue, which I have actually written about in earlier articles. It's not a new topic; as I recall, it was already considered by Bitcoin pioneers back when Satoshi Nakamoto was still active on forums.

Interestingly, every time this issue is mentioned, it is quickly forgotten, only to resurface years later as a "remarkable discovery," sparking another round of heated discussions in the community…

The security of the Bitcoin network is maintained by miners, and the fundamental reason miners are willing to maintain this network is economic interest. Miners can earn two types of rewards through mining: one is the Bitcoin block reward, and the other is the transaction fees included in each block.

After miners receive these rewards, they sell the coins, deducting costs for equipment, electricity, maintenance, etc., leaving them with their net profit.

Every four years, after Bitcoin hits a new high, the lucrative mining profits attract a large number of new miners to join; however, after each bull market, when the bear market arrives, many small and medium miners are forced to exit due to losses.

This cycle repeats over and over again, with these stories playing out time and again.

Since Bitcoin's launch, after several rounds of brutal market cleansing, only the financially strong miners have been able to persist until now. Thus, the overall trend is that there are fewer miners, and the hash power is becoming more concentrated.

Why have these financially strong miners been able to persist until now?

The fundamental reason is that Bitcoin's price has been continuously hitting new highs, ensuring that although the block rewards miners receive are decreasing, they can still profit overall due to the rising coin price.

In this process, one phenomenon has become increasingly evident: the percentage increase in Bitcoin is getting smaller and smaller, and it is no longer possible to replicate the early days of skyrocketing increases of dozens or hundreds of times.

Like any financial product, Bitcoin cannot keep rising indefinitely; one day, its price will stabilize at a relatively steady level.

On the other hand, according to the halving schedule, around the year 2140, Bitcoin's block reward will approach zero, at which point Bitcoin miners' income will primarily consist of transaction fees.

Therefore, there will inevitably come a day when:

At that time, Bitcoin's price will remain in a very small fluctuation range, and miners will only be able to profit from transaction fees.

If the current operational rules of Bitcoin do not change and still rely on miners for security without external forces, there are only two possibilities:

1. Bitcoin's price rises extremely high, to a level we cannot currently imagine.

2. Bitcoin begins to support an application ecosystem, with numerous applications on it conducting high-frequency trading, continuously providing miners with substantial transaction fees.

Otherwise, Bitcoin will indeed face the security risks mentioned in the two statements above.

The first possibility is not particularly meaningful for us to discuss now, as I believe such an event is not something our generation will witness.

The second possibility, however, is something our generation might see. This is also why I have been highly attentive to the emergence of the inscription ecosystem.

Unfortunately, after about two years of experimentation, I believe the practice of supporting an application ecosystem on Bitcoin is likely not optimistic.

However, I still see many VCs and venture capitalists actively investing in Bitcoin's second layer or ecosystem projects—this truly requires courage, and I admire it greatly.

Back to reality, I do believe that the security risks of Bitcoin do exist. However, each generation has its own challenges, and it is enough for our generation to witness and participate in this miracle and contribute a little. In our lifetime, we probably do not need to worry too much about this risk.

The next generation should have good solutions to this problem.