Curtis Spencer, co-founder of the venture capital firm Electric Capital, believes that the Bitcoin network continues to exist “only by the grace of world governments”, which so far do not interfere with the consumption of electricity by BTC miners.
At the Collision Web Summit on Tuesday, Spencer said that regulators are the ones who give Bitcoin a chance to grow without imposing tighter restrictions on the mining process in their countries. We tell about the point of view in more detail and at the same time challenge it.
In fact, Spencer’s point of view makes sense, but only in the case of a very unlikely scenario. Massive restrictions on mining around the world can indeed destabilize the industry and will most likely lead to a drop in the value of BTC. However, the mechanism for mining the main cryptocurrency is created with self-regulation in mind, which will help Bitcoin “survive” even the most tense situation in the international arena.
That is, if the majority of miners leave the network, the blockchain will automatically adjust the difficulty of mining blocks, after which they will be created at a normal rate. Accordingly, the network will work in the same way as it did before the departure of computing power.
However, Spencer has a different attitude to what is happening. In addition, he underestimates the potential of decentralized networks that do not depend on a single governing body.
How can Bitcoin be destroyed?
Here is one of Spencer’s quotes from his speech, in which he shares his attitude to what is happening. The replica is given by Cointelegraph.
Can the government stop Bitcoin? I really think this is quite possible. When you think about the cost of attacking a network, this is not a huge amount on a nationwide scale. See what happened in Xinjiang. In fact, you can stop the cryptocurrency network pretty quickly, especially if the US and Kazakhstan start fighting all the miners on their territory. This will disable 80 to 90 percent of the Bitcoin hash rate. I think the fact that Bitcoin still exists speaks of support from governments.
The Electric Capital co-founder was referring to recent events in the Xinjiang region of China, where roughly 25 percent of the world’s Bitcoin hashrate is concentrated. Earlier, cryptanalyst Willie Wu said that the fall in BTC to $ 50,000 over the weekend was the result of a power outage in the area, which subsequently led to a decrease in hash rate from 172 to 154 million terahashes per second. However, experts rejected this point of view, since the relationship between the price and the volume of ASIC miners in the main cryptocurrency network sounds very doubtful.
The power outage was reportedly initiated to facilitate security inspections in the region, implying that nothing is stopping the Chinese government from intentionally lowering the hash rate. That is, to destabilize the situation in the crypto market, just one government decree and the shutdown of the main resource for miners are enough.
We have clarified the current data: today, the cost of carrying out a 51 percent attack on the Bitcoin network within an hour will cost the equivalent of 716 thousand dollars. However, it is important to understand here that an hour of attack will not harm the blockchain in any way, which means that more resources will have to be spent. In the case of the governments of different countries, this will be taxpayers’ money, and hardly anyone will take such a step to burn funds.
In addition, one should take into account the slowness of the BTC network in the current conditions of its congestion. For example, on Monday it took 122 minutes to create block number 679 786 instead of the usual 10 minutes. Accordingly, in this case, even two hours of 51 percent attack would be useless, because during this time a block simply did not form in the blockchain.
There is another major flaw in Spencer’s statement. Even with the most extreme scenario – that is, disconnecting most of the miners from the network – the difficulty of mining Bitcoin will decrease after the next recalculation, which occurs every 2016 blocks. This means that after that, blocks will be created at a normal speed, and transactions will be carried out. Accordingly, an attack on miners will also lead nowhere. We wrote more about this mechanism in our article.
So what happens in the end in the event of a massive power outage for miners? Disconnecting miners from the light will lead to an increased period of time for blocks to stay in the network, because fewer miners will solve a problem with complexity, designed for a larger number of them. Transactions, accordingly, will take much longer, and the overall activity of cryptocurrency users will decrease.
However, all this will last until the next recalculation of complexity. In theory, Bitcoin is able to survive even if at least one miner supports the cryptocurrency. In this case, in addition, he will not need a huge amount of equipment, because due to the decrease in complexity, BTC will again begin to be mined on ordinary computers.
We believe that the analyst’s arguments fell apart due to his lack of knowledge of how the Bitcoin network and blockchain work in general. Obviously, he is not familiar with the peculiarities of the complexity of mining, therefore he believes in the collapse of the network due to the possible shutdown of a large number of BTC mining lovers. As we found out earlier, nothing like this will happen. It’s just that cryptocurrency users will have to wait for the recalculation of the complexity and continue using it as if nothing had happened.