What are the ways in which Bitcoin can fail?


#1

People point to Bitcoin’s track record of not being hacked and its indestructible nature when they talk about how it will suceed, but that doesn’t mean that it can’t fail. Nothing is invincible.

What are the all the ways in which Bitcoin can fail?

2 potential ways that it can fail

  1. Miners cheat the system. There’s a research paper that says Bitcoin is NOT incentive-compatible. Incentive-compatibility means that the cost to be a bad actor or cheat the system is more expensive than to use the system fairly, therefore the incentives align and cheating won’t happen.
  2. Tether implodes. Tether might just seem like a digitized dollar but it’s a crypto “on-ramp” because many exchanges in the world don’t accept USD for making purchases of tokens. If people can’t park their money in Tether to buy into and out of Bitcoin, then Bitcoin could plummet.

#2

I believe the only real “failure” possible would be a severe inflation bug. Similar to the minor inflation bug we saw in October of last year that could theoretically allow for double spends to have accepted outputs on some clients in bitcoin if a bug were inserted by some future iteration of the development team that is either less scrupulous or compromised that created a severe level of inflation the value of bitcoin could through that inflation and the market reaction drop to low enough for wide-scale abandonment. I think the chance that this will occur is probably only slightly higher than 0%.

The examples given are events that would perhaps cause a temporary or even longer term market reaction but without defining failure as a specific price point I would not describe those as failure states.

Another possibility is that one of the other competitive SoV based blockchains has a system which becomes preferred for use in the future. For that reason many bitcoin investors also own a hedge into one or two other SoV projects.