Bitcoin faces the possibility of collapse in 7 to 11 years, warns the founder of Cyber ​​Capital

Cyber​​​​​​Capital founder and chief investment officer Justin Pons has predicted that Bitcoin (BTC) may collapse in 7 to 11 years from now.

He pointed to the low security budget, the high risk of attacks of 51%, and what he calls impossible network choices. Bones warned that these fundamental vulnerabilities could undermine trust and potentially lead to chain splits.

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Bitcoin’s economic security model under the microscope

Over the years, experts have issued warnings about many risks facing Bitcoin, esp Quantum computingwhich may undermine current cryptographic standards.

However, Bones explained in a detailed post another kind of concern. He argued that the long-term threat to Bitcoin lies in its economic model of security.

Bones said that Bitcoin will collapse in 7 to 11 years from now! First, the mining sector will fall as the security budget shrinks. Then the attacks begin; Supervision and double spending,

The center of his argument lies in Bitcoin’s security budget. later Every halve, miners’ rewards decrease In half, which reduces the incentive to secure the network.

He attended the most recent halving In April 2024 More are expected every four years. Pons explained that to maintain its current level of security, Bitcoin would need sustained price growth or perpetually high transaction fees, both of which he finds unrealistic.

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Lower income for miners and higher risk of attacks

According to Bones, Miners’ income Hash power is not only the most important measure of network security. He said that with the development of the efficiency of the devices, Hash power can also increase The cost of producing hashes is low, making it a misleading indicator of resistance to attacks.

It is believed that the decrease in the income of miners leads directly to a reduction in the cost of attacking the network. When the cost of carrying out an attack is 51% less than the potential profits from double spending or sabotage, such attacks make economic sense.

The post stated that the economic game theory in crypto is based on punishments and rewards, carrots and sticks. Therefore, the income of the miners determines the cost of the attack. As for the reward side of the equation: double spending with 51% of attacks targeting platforms is a very realistic attack vector due to the massive potential rewards.

Note that currently, transaction fees make up only a small part of miners’ income. As block support approaches zero in the coming decades, Bitcoin will need to rely almost entirely on fees to secure the network. However, the limited block size of Bitcoin limits the rate at which transactions are completed and thus the total fee income.

Bones also emphasized that sustained high fees are unlikely, as users tend to leave the network at the time of high fees, preventing fees from being an effective alternative to long-term support blocks.

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Congestion, the dynamics of bank panics, and the potential for a death spiral

Aside from security budget issues, Bones warned of the potential for “run on the bank” scenarios. According to him,

Bones said that even according to the most conservative estimates, if every current BTC user made a single transaction, the queue would be 1.82 months!

He explained that during times of panic, the network may not be able to process withdrawals fast enough, effectively shutting down users due to congestion and high fees. This creates conditions similar to a bank attack.

Bones also pointed out that Bitcoin’s bi-weekly difficulty adjustment mechanism represents an additional risk. In the event of a sharp drop in price, unprofitable miners can shut down, slowing down the production of blocks until the next adjustment.

Bones said that the panic could cause the price to collapse, causing more miners to stop, thus slowing down the network more, so the panic increases, the price rises, more miners stop, and so on ad infinitum… This is known in game theory as a vicious circle, a negative feedback loop, or a cycle of death.

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He also added that these risks of congestion make collective self-storage unsafe during times of stress, warning that users may not be able to exit the network when demand increases.

An unavoidable dilemma for Bitcoin

Bones concluded that Bitcoin faces a fundamental dilemma. One option is to increase the total supply above the limit of 21 million coins to maintain miner incentives and network security. But he noted that this undermines the strength of Bitcoin’s core and could lead to a split in the network.

The alternative option, he said, is to live with an increasingly weak security model, which increases the network’s exposure to attacks and censorship.

The most likely result, Pons wrote, is that 7-11 years from now, both and more of the options he mentioned will occur simultaneously.

He also linked the problem with the legacy of block size wars, and showed that regulatory limitations in Bitcoin Core make significant changes to the protocol politically unlikely until a crisis prompts action. Then, he warned, it may already be too late.