Vitalik Buterin Explains Why He Is ‘Worried’ About Bitcoin’s Security
In a recent interview with former Bloomberg Opinion columnist Noah Smith, Vitalik Buterin, Co-Founder of Ethereum Foundation, gave two reasons for his concern about Bitcoin’s security.
During this interview, Vitalik had this to say about Bitcoin’s security:
“Efficiency and security are not separate problems. The question is always: how much security can you buy for every dollar per year that you spend on paying for it? If a system has too little security, you can add security at the cost of printing more coins, and at that point you’ve regained security by sacrificing on efficiency.
“In the case of Bitcoin, I’m worried for two reasons. First, in the long term, Bitcoin security is going to come entirely from fees, and Bitcoin is just not succeeding at getting the level of fee revenue required to secure what could be a multi-trillion-dollar system. Bitcoin fees are about $300,000 per day and haven’t really grown that much over the last five years. Ethereum is much more successful at this, because the Ethereum blockchain is much more designed to support usage and applications.
“Second, proof of work provides much less security per dollar spent on transaction fees than proof of stake, and Bitcoin migrating away from proof of work seems to be politically infeasible. What would a future look like when there’s $5 trillion of Bitcoin, but it only takes $5 billion to attack the chain? Of course, if Bitcoin actually gets attacked, I do expect that the political will to switch to at least hybrid proof of stake will quickly appear, but I expect that to be a painful transition.“
On 15 May 2019, crypto influencer Dan Held published a blog post titled “Bitcoin’s Security is Fine”, in which he addressed “concerns around Bitcoin’s security model which is funded by the block subsidy and transaction fees.”
“The larger the Bitcoin network grows, the more secure it becomes. Over the long term, an organic security tradeoff will occur between the block subsidy and transaction fees. As network effect becomes larger, demand for block space increases, thus decreasing the need for a block subsidy. We have empirical evidence that this is occurring, and future projections look optimistic.
“Bitcoin’s block space is a scarce and unique commodity. It will continue to accrue demand. The bull market of 2017 wasn’t millions of consumers suddenly using blockchains to transfer money around the world and seeking to minimize transaction, exchange, volatility, and coordination fees. The price elasticity of a Bitcoin transactor is high. Even in significantly higher fee environments Bitcoin block space demand will grow.“
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