Henrik Wallin: Bitcoin is more vulnerable than ever

Henrik Wallin: Bitcoin is more vulnerable than ever.

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Trijo News
info@trijo.co

OPINION. Proof of work and cheap ACIS miners in combination make bitcoin more vulnerable than ever, crypto enthusiast Henrik Wallin writes.

ANNONS

All bitcoin experts are confident that the bitcoin price will go up in the long run. But why? There are modern cryptocurrencies that are better and safer, while fiat (regular money) increasingly replaces bitcoin in the trading pairs at crypto exchanges.

Even worse, a temporary dip in the bitcoin price may be fatal, especially for bitcoin cash. Bitcoin gold has recently been subjected to a so-called “51 percent attack”, which in short means that someone with much mining power can spend a smaller cryptocurrency like bitcoin gold twice.

What does a 51 percent attack cost? Not much at all.

Bitcoin gold is extremely sensitive to such attacks because it is possible to rent mining equipment. But in the case of bitcoin and bitcoin cash, those who want to mine must first invest in ASIC (more expensive and efficient mining equipment). The problem is that the level of difficulty when it comes to mining has gone up even though the value of the reward that miners get has fallen sharply.

“The bitcoin system vulnerable in a completely new way”

In the end, it will not be worth having an ASIC, except for those who have extremely cheap electricity. Then someone can buy a lot of ASIC’s cheap and then just start them to complete a 51 percent attack. The easiest target is, of course, bitcoin cash where the hash rate (the network’s computing power) is much lower.

Also, note how the bitcoin gold price did not go down after the 51 percent attack. This is because the attackers shorted bitcoin gold to make money on the decline, in addition to making money on spending double amounts. Today, it is easy to sell crypto assets that you do not have on, for example, Bitfinex and many other trading venues, or on the US stock exchange Chicago mercantile exchange (CME).

So the combination of “proof of work” with ASICs, falling prices and a well-developed financial infrastructure make the bitcoin system vulnerable in a completely new way. For the first time, there is both sufficient financial incentives and tools to make the attack profitable.

“Difficult to justify the need for bitcoin”

The idea that bitcoin maximalists have had is that bitcoin should be used to secure other blockchains, but this has not happened and that is fortunate if I’m right.

On the other hand, there is, for example, Stellar that uses “proof of stake”, which means that it does not pay off to carry out attacks. This summer, both eos and iota are also starting to become “ready”, and they promise free, immediate and probably also private transactions, even in the form of stable coins that correspond to US dollars, euros or gold. Then it becomes very difficult to justify the need for bitcoin to free ourselves from the banks.

Miners of bitcoin, bitcoin cash, ethereum and the other “proof of work” currencies sell new coins for around $30 million a day. If they are abandoned, there might be a bull market for the rest of the crypto market because the investment money that is now paying the miners can instead increase the price of other crypto assets or start new development projects.

Henrik Wallin,
Crypto enthusiast

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MicroStrategy Posts Q1 Profit, Reaffirms Commitment to Bitcoin Investment Strategy

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MicroStrategy, a business intelligence platform, has reported a profit of $94 million in the first quarter of 2023, marking its first quarterly profit since 2020. The company's financial turnaround was largely due to a one-time income tax benefit of $453.2 million. Additionally, MicroStrategy's revenue increased by 2.2% to $121.9 million compared to the same period last year.

Bitcoin Conviction Remains Strong Amid Market Fluctuations

Phong Lee, MicroStrategy’s CEO, emphasized that the company’s “conviction” in its Bitcoin investment strategy remains “strong” as the digital asset environment continues to evolve. Lee also noted that short-term price fluctuations in BTC do not impact the firm’s core business. MicroStrategy’s chairman, Michael Saylor, echoed these sentiments, attributing the successful quarter to the company’s core business model and Bitcoin investment thesis, which he described as the “right strategy.”

Investors Expected to Shift from Crypto Assets to Bitcoin

Saylor predicted that investors will soon exit their positions in crypto assets that are under regulatory scrutiny, which will lead to an increase in funds flowing into Bitcoin. MicroStrategy’s CFO, Andrew Kang, announced that the company had reduced its leverage by repaying a $161 million Bitcoin-backed loan from the now-defunct Silverage Bank, releasing all pledged Bitcoin as collateral.

MicroStrategy’s Bitcoin Holdings and Stock Performance

In Q1, MicroStrategy purchased 7,500 BTC for a total of $179 million. The company now holds 140,000 BTC, collectively acquired at an average cost of about $29,803. With the current price of BTC at $28,100, MicroStrategy’s Bitcoin investment is down by 5.7%. However, the company experienced a brief period in the green when BTC reached its recent high of $30,980 on April 15. MicroStrategy’s stock price has more than doubled in 2023, in line with Bitcoin’s performance.

Embracing Bitcoin Technology and Innovations

The company began investing its cash reserves in BTC on March 5, 2021, when it acquired 91,064 BTC, accounting for 65% of its total holdings today. Saylor recently revealed that MicroStrategy integrated Bitcoin Lightning into his corporate email address. Furthermore, the company is developing a Bitcoin layer-2 Lightning Network-based Software as a Service tool for corporations, showcasing its commitment to both Bitcoin investment and technological innovation.

Bitcoin and Gold: An Unlikely Duo in Turbulent Times

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In times of economic uncertainty and market volatility, Bitcoin has gained recognition as a safe haven asset. Its ability to provide investors with a reliable and secure store of value makes it an attractive option for those looking to diversify their portfolios and safeguard their wealth from external threats.

Bitcoin Gains Traction in the Face of Banking Crisis

As the banking crisis continues to shake the financial world, investors are increasingly turning to Bitcoin as a safe haven. Many are even opting for the cryptocurrency over the traditional safe haven asset, gold, due to its higher returns and enhanced stability. Currently trading near the $30,000 psychological level at $28,936, Bitcoin has recorded an impressive 3% rally in the last 24 hours. This surge in demand is primarily attributed to its rising correlation with gold, which has surpassed the 50% level and now stands at 57%, according to data from market analytics firm Kaiko.

The Steady Rise of Crypto as a Safe Haven Asset

Long considered a risky investment due to its volatile price fluctuations and lack of regulatory oversight, Bitcoin has gradually emerged as a safe haven asset for investors seeking protection against traditional market risks. Operating independently from central banks, Bitcoin is less vulnerable to inflation and government interference compared to fiat currencies and other traditional assets.

Decentralization: A Key Advantage for Investors

Bitcoin’s decentralized nature offers investors greater control over their assets and reduces their exposure to systemic risks. The ability to store and transfer wealth across borders without intermediaries gives Bitcoin a level of financial freedom and security unmatched by traditional assets. Its finite supply and digital scarcity also make it a hedge against inflation, as its value is not subject to government policies or macroeconomic factors.

 

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