Bitcoin is made of software and hardware. Software comes and goes in popularity, and you can hack anything from a payphone to the US DoD servers, so why would bitcoin be any different? Could bitcoin fail, and is this a risk worth considering before you buy some?
At this point, most hypothetical scenarios you could think of have already been discussed ad-nauseam, but at the end of the day, the truth is, yes, I think bitcoin could fail. Don't get me wrong, I still hold bitcoin, and still recommend it to my friends and family. However, I think it's important to be honest about every type of investment you own, weigh the risks and potential rewards, and allocate accordingly. To say that there was no risk in bitcoin would be dishonest.
Bitcoin failing is just one of the many potential risks of owning bitcoin, but it's what we'll focus on for this article. First, I'm going to look at what bitcoin “failing” could actually mean (because it's not clear), and three potential ways I think bitcoin could actually fail, which I think may surprise you.
What Does “Bitcoin Failing” Actually Mean?
If we're going to talk about bitcoin failing, then we need to define what “failure” actually means. As far as I see it, at this point, the total and utter disappearance of bitcoin is not on the table.
That sounds like a bold statement, but think about online communities. There are niche groups of people doing everything online from dressing up as anthropomorphic animals to having weird sex parties, to more than 500,000 people on Reddit who just like to brag about not having ever broken a bone. It's just plain implausible that a technology as captivating as bitcoin would simply disintegrate from the minds of people around the globe who are currently working on it and using it. Bitcoin represents hope to too many people to just disappear.
Even in a totally catastrophic scenario where a zero day code bug is discovered or a collective banning of bitcoin amongst powerful nation states emerges, there will still be a core group of hardcore bitcoiners who will be running nodes, creating blocks, holding coins, and sending coins transactions.
People still smoke weed and 3D print guns, so I think Bitcoin will exist for the foreseeable future.
If Bitcoin is not just “going away”, what then, defines failure?
You can't ban bitcoin, you can only ban yourself from bitcoinSaifedean Ammous
Maybe laws could be introduced that would make bitcoin so difficult to use that it would be impractical and unattractive for the average person to use. With capital gains on every single transaction, you could make the case that we are already there, but imagine it got worse. Imagine that you had to verify and keep data on every single person you transacted bitcoin with. This is what they are proposing to do in the European Union.
With that comes the question of the cost enforcement. Marijuana is illegal in many countries, and yet it's still one of the most popular drugs and people openly do it. After decades of “hard bans” on marijuana, many countries have “soft ban” strategies in place, like you can smoke it but not sell it. Many countries have already or are currently moving to completely legalize it. My conclusion here is that bitcoin being burdensome to use would not be the end of the road for bitcoin adoption.
Some people speculate that if the internet was shut down that bitcoin would fail, but if the internet was shut down, so would most of the payment systems in the western world. Credit cards wouldn't work. Online payments wouldn't work. Even lots of ATMs wouldn't work. There would be total chaos. Plus, consider that “shutting off the internet” is only something we see in the most brutal of authoritarian regimes, so it's unlikely to ever happen in The West.
Maybe if the price doesn't continually go up, and has a multi-year, soul-crushing bear market, it would be enough to make most “investors” leave the space and never come back. Sure, low bitcoin prices would suck and could spook new bitcoiners for a while, but as long as bitcoin continued to function, I fail to see how bitcoiners like myself and others wouldn't just continue to buy bitcoin as the price dropped. Maybe some new people waiting on the sidelines with cash would enter the market for the first time. I mean, isn't this how things already work?
OK, what about a catastrophic bug? I used to worry about this too, and something like this could certainly damage Bitcoin's reputation in the short term. Consider though, that bitcoin is software. It can be fixed. When you rely on something and it breaks, you fix it and move on. Just yesterday Verizon had outages for 3 hours and my iPhone couldn't make calls. Imagine that! My phone was temporarily unable to perform its main function, yet I didn't throw it away or stop using a phone.
Though it's uncomfortable to think about, in the case of there being some kind of unforeseeable technical issue with bitcoin, even in the worst case scenario, people who work with and rely on bitcoin, and the people who want bitcoin to succeed, would attempt to fix the problem and move forward. We are beyond the point of just leaving it for dead.
So what are we left with? Could anything truly destroy bitcoin forever? I don't think so.
The Mainstream Media Is Wrong
If you are reading mainstream media articles about bitcoin, then you are getting bad information. In the research for this article, it was comical seeing what bloggers and journalists think about how bitcoin could fail. Ranked on page 1 of Google, here's what Listverse has to say are the “deep reasons” bitcoin cannot succeed.
- Blockchain is valuable, but Bitcoin is not.
- Bitcoin is used for crime
- Bitcoin has no leader
- Bitcoiners hate paying taxes
- Nobody accepts bitcoin
- Bitcoin takes too long to mine (totally false BTW)
- People will sell bitcoin because the price is volatile
- There are too many bitcoin hard forks
- Rich people hate Bitcoin
- Bitcoiners are just kids, not revolutionaries
It's just absolute garbage that has been debunked numerous times. Some of the ideas are just plain made up, like bitcoin being too difficult to mine because it gets more difficult over time (the difficulty adjustment increases when more miners come online).
Another article from a so-called investment website doesn't perform any better. Remember, these are page-1 search results, and the stuff that normies are getting fed to their brains.
- bitcoin has no intrinsic value
- bitcoin isn't backed by anything
- bitcoin doesn't have a stable value
- the government will ban it
- whales own all the bitcoin
- blockchain, not bitcoin (again, lol)
As a blogger myself, I can read between the lines, and very often these types of articles are outsourced to cheap writers who don't know anything about bitcoin, so they get their information from other bloggers, who just publish because they have a deadline and don't really worry about the facts so much as long as they get paid.
My point is that mainstream media predictions about how Bitcoin could fail are completely off base. If you want to know how bitcoin could fail, then you need to learn how it works and dig deeper.
3 Actual Reasons Bitcoin Could Fail
1. Apathy & Disillusionment Among Bitcoiners
The success of Bitcoin as a global, reliable, trusted store of value and medium of exchange is not guaranteed. There is still a lot of work to do to make bitcoin accessible to the average person.
There are passionate people working on it day in and day out, but what happens if those people run out of steam? What happens if they don't get the support they need? What happens if the next generation of people lose hope and just stop caring?
Though it seems far-fetched at this point, I suppose it's possible that we reach a state of total disillusionment and apathy that bitcoiners just kind of lose interest in Bitcoin. It would be like a slowly deflating balloon until one day you look up and realize, hey, this wasn't the bitcoin I knew from ten years ago.
Maybe I'm projecting here (very likely), but I find uphill battles exhausting. It seems like every month there's a new type of FUD (or recycled old FUD) that requires debunking. Every day there's some ignorant politician pushing forward anti-bitcoin policy. Every conversation I have with no-coiners about bitcoin is pretty disappointing on a personal level. Nobody is excited about bitcoin!
If this were my own battle to fight, I'm not sure I could make it to the finish line. I rely on passionate, resilient, hard-working bitcoiners to provide me with the fuel I need to keep learning, keep writing this blog, and keep buying bitcoin.
The question I ask myself is, “What happens to me if those thought leaders and entrepreneurs aren't there anymore?”
These are just visible influencers and well known voices on social media. This doesn't even scratch the surface of dedicated bitcoin developers, often working for free, who dedicate their time to making bitcoin better.
Though I think it's a pretty unlikely scenario that everyone simultaneously gives up on bitcoin at the same time, it's still something I think about. Considering that bitcoin is a global, decentralized project, it's likely there will always be someone ready to push things forward. There will always be new bitcoiners with the time and energy to build on old ideas and add fresh ones to the mix.
The question is – how large is that group going to be?
2. We Take Progress For Granted
Like a decentralized watchtower, there are always a bitcoiners somewhere sounding the alarm about potential attacks on bitcoin. Whether it's too many changes being proposed to bitcoin's base layer, or not enough, or fees are too high, or fees are too low; whether it's not enough regulation is bad for bitcoin because large institutions need regulatory clarity to invest their hundreds of billions of dollars, or too much regulation is going to stifle innovation and unnecessarily complicate investing for retail, there's always a discussion happening in the community about how to protect and grow Bitcoin.
Bitcoiners are adversarial thinkers and are always trying to stay a few steps ahead of what's coming down the pike.
But what happens if bitcoin really starts to succeed? What happens if we hit a million dollars per coin and all of our wildest dreams of global adoption come true? Will bitcoiners just kind of chill out and let someone else take the reins? Will adversarial thinking die out as early adopters retire and drink mai tais on a Caribbean beach, only to be replaced by feel-good influencers peddling affinity scams?
When you think that success is guaranteed is exactly the moment that unexpected catastrophe strikes. What could it be? That's the unexpected part. Maybe it's a threat that doesn't exist yet. Maybe it's not directly related to bitcoin. Maybe we don't see it until it hits us.
As I've mentioned elsewhere on the blog, I think that there will not be any kind of absolutely irrecoverable catastrophe that would simply nuke bitcoin out of existence. Too many people rely on it and care about it at this point. It could be possible to greatly slow bitcoin's adoption though.
This is all just hypothetical. I'm just trying to think through potential scenarios. However, Pierre Rochard made a good point on Stephan Livera's #367 Podcast that hypothetical threats deserve hypothetical solutions. Perhaps we can just leave it as: an unknown future catastrophe will be met with an unknown future solution. Bitcoiners are passionate, smart, and innovative, and will figure something out.
3. They Change The Rules
I think the most likely way that bitcoin fails is that the people in power simply change the rules, as they have been known to do. Right now, people are building bitcoin according to what is currently true, and what has been true in the past. Even those thinking about what might happen in the future are often operating under the assumption that the rules remain the same.
What if the US government or a group of governments decide to simply do something that's never been done before?
We just finished a 2-year stint where it was illegal to be outside of your house or talk with your neighbors in many places around the world. I would never have guessed in my life that so many people would have gone along with things that happened between 2020 and 2022. It left me with the feeling that literally anything could happen, and 80% of people would simply accept that this is the new reality we live in. In fact, they wouldn't just accept it, they would embrace it and help enforce it.
Could the government declare cryptocurrencies a threat to national security, a climate emergency, or a danger to public health? Probably. Could they think of a completely new dystopian double-speak euphemism and surprise everyone? Definitely. When the rules don't work in your favor, just change the rules.
I think the key thing to remember here is that this is a risk in everything you own. For example, I own a couple of rental properties, and I was freaked out when lockdowns happened and they started to say that rent was suspended in some areas. I had mortgages to pay on my properties, so how was I going to pay my mortgage without the rental income? These policies ended up not reaching my area, but the concept was seared into my brain – it's actually possible for the government to force you to allow people to stay in your home for free.
Government policy is a risk that all types of money have – even cash. Ever heard of civil asset forfeiture? It's just important to understand what the risks are, how imminent they are, and how concerned you should actually be.
Every Store of Value Has Risks
There is never just one single “store of value” existing at any moment in time. Where to store your value is a choice, whether you know it or not. At this moment, you can choose to store the value of your work in cash, stocks, bonds, precious metals, real estate, art, collectibles, or bitcoin. Each method has pros and cons you must consider, so bitcoin is not alone in having risk.
The question is, which type of risk are you willing to accept?
Could bitcoin fail? Yes, it could. Bitcoin is not a guaranteed win, and there are many forces, seen and unseen, who would love to bitcoin fade away into obscurity.
For me, I can accept that risk because I see the passion and dedication that bitcoiners have for freeing themselves from the monetary regime in which we currently live. There are and will continue to be problems with bitcoin. They will get fixed. Bitcoin is not reliant on a single brain. It's a worldwide effort, undertaken by individuals making a conscious choice. Anyone working on bitcoin is there because they want to be there, not just because they need a job.
The use case for bitcoin is undeniable, it's just that most people don't realize it yet. The potential for money that cannot be debased and exists outside of the political system is something that every individual can benefit from. The idea is still new, so the majority of normies haven't jumped on board yet, but they will. With more demand for bitcoin, more minds will come to work on bitcoin, solving more problems, making bitcoin more accessible, and bitcoin's success will continue to snowball from there.
Anyway, that's why I own bitcoin. I believe that bitcoin is currently succeeding and will continue to succeed. Failure is possible, but I understand the risks, and am confident that bitcoin can overcome those risks. That's why I hold bitcoin. If you're going to buy and hold bitcoin, understand the risks and allocate an appropriate amount based on your risk tolerance.
What Does Bitcoin Succeeding Actually Mean?
If we're asking will bitcoin fail, it's also important to think about what bitcoin succeeding would actually mean. I think this is an interesting question to ask, and I don't have a good answer. I'm interested to hear your opinion in the comments.
I think to a lot of normies, being able to spend bitcoin on regular stuff would mean bitcoin is a success. Well, Jack Mallers announced at the 2022 Bitcoin Conference that this year, you'll be able to visit millions of online and physical stores in the USA and leverage lightning to pay for stuff with lightning.
Maybe another metric of success could be that you could send bitcoin to anyone in the world and have them withdraw local currency. This would signal that bitcoin's global adoption is here. Well, in the video below you can see a CNBC anchor sending 50,000 sats to a Ukrainian refugee in Poland, where she's immediately able to change the money to Polish Zloty.
I think, in my opinion, success is not necessarily a “line in the sand” milestone that we cross at some point, but the continued existence of the 21 million bitcoin limit. One of the main benefits of bitcoin is that the bitcoin supply cannot be inflated beyond this amount and the issuance schedule cannot be changed. Is this still true? Yes, it is.
So by many metrics, bitcoin is already a success. Bitcoin is still in the early stages of growth as a global money, but that is to be expected. It's a revolutionary type of money and it's only 12 years old. How else would you imagine the path from invention to global saturation would look like?
So is bitcoin a success, or is there some other threshold that needs to be met?