7 possible scenarios the collapse of bitcoin

Financial consultant Sebastian Meunier (Meunier Sebastien) suggested seven possible (and unlikely) scenarios of the collapse of bitcoin that can be realized in the next few years.

Before we move on to assumptions, let’s start with the facts — bitcoin has been declared dead more than 200 times. Despite the fact that the first cryptocurrency in the world more than 9 years working almost flawlessly, still it is fashionable to predict its demise. Many experts known that continue to predict the death of bitcoin, despite the fact that every day the network refutes their assumptions.

But if we assume that these people all have some level of intelligence, the only explanation for failed predictions and emotional statements was that they did not take enough time to study the work of the network.

From a technical point of view, bitcoin will work as long as at least several computers will keep a client that runs a network of Bitcoin. Only an extreme scenario could lead to the complete destruction of the blockchain. It is likely that in the coming years, bitcoin will still be the most popular cryptocurrency, if the community does not destroy itself because of greed, negligence, or become a victim to external political pressure.

Scenario 1: Armageddon

The probability of realization in the next 5 years: close to zero

Potential impact: Complete destruction

If all sources of electricity, Internet and data transfer would be disabled on the planet, Bitcoin nodes could not contact each other. Then the system will be useless. A temporary shutdown of the Internet around the world, of course, would have created confusion in the Bitcoin community, but it is important to note that the system when connection is restored, will be able to start again, albeit with a certain loss in synchronization of network segments.

If the majority of the community will suddenly lose interest in Bitcoin, even run the client in museums or on the computers of fans of obsolete equipment will be enough for the network to continue working.

Scenario 2: a Critical error in code or concept

The probability of realization in the next 5 years: Low

Potential impact: a Temporary problem

In this case, the upgrade Bitcoin may have a problem like the one that occurred at the infamous DAO project (based on the blockchain Ethereum), which compromises the integrity of the system. Even if the community accepted (not guaranteed) fix the code, install the new version and restart the system, it will certainly lead to the collapse of prices and the fork network. The bitcoin community is aware of this risk: any code modification validated by the experts in accordance with the recommendations.

More devastating can be detected error in the concept of the functioning of the blockchain and Protocol. However, the bitcoin of all existing crypto-currencies is subjected to the strongest stress and has overcome (or is overcome) most of the possible «illnesses of growth». Therefore, every year the probability of this scenario is reduced.

Scenario 3: Multiple simultaneous forks

The probability of realization in the next 5 years: Low

Potential impact: the Gradual disappearance of the

Bitcoin might branch many times, if in the community there is disagreement on the ways of development of the network. Theoretically there might be several forks at the same time that the split network can reduce its capacity. If this happens, then bitcoin can finally get rid of dominance and begin to fade. Only as a community not allow this to happen.

Judging by the number of past direct forks of the blockchain, this scenario is more a theoretical assumption, because of all just forks of the Bitcoin Cash by consolidating around this project all opposition to the policy of Bitcoin Core has been able to occupy a prominent place in the industry, but it really became a serious rival to Bitcoin.

Scenario 4: Association of regulators against bitcoin

The probability of realization in the next 5 years: Medium to high

Potential impact: a Temporary problem

The government can’t destroy bitcoin itself because of its decentralized nature. However, they can control and limit its use in their jurisdiction. For example, they can close the Bank account of the cryptocurrency companies and to prohibit the operation of business related to cryptocurrency. If only a few countries have banned the use of cryptocurrencies, the influence of regulators will be limited as companies will simply move to more friendly jurisdictions.

It happened once in the past year, China banned the cryptocurrency exchanges work and ICO. Although the probability that one or more governments will declare war on bitcoin is very high, a global ban is almost impossible.

In addition, bitcoin is already legal in Japan. However, if the US, EU, UK and China jointly banned capabality, it can cause serious problems for the community. Although it is more likely that they will be regulating the cryptocurrency market for tax collection, while protecting individual investors.

Scenario 5: a Major hacking or attack on the network

The probability of realization in the next 5 years: Medium

Potential impacts: Temporary failure

This scenario can be realized in several ways.

In the first case, called the attack 51%, attackers can try to slow down or suspend the operation of the network. This is theoretically possible but the probability is very low. The attacker in this case had destroyed his own source of income. In addition, such a scenario will now require a huge investment in mining equipment and electricity and can be solved by alternative methods, for example, the change of the hashing algorithm.

More likely hacking exchanges or wallets that work on top of the Protocol. When exchange MtGox in 2014 went bankrupt, she was sent to network 70% of all bitcoin transactions. This crash led to the stagnation of the course, which lasted more than a year. Today the infrastructure of bitcoin has become much more decentralized, and operates globally, many cryptocurrency exchanges and wallets. If one of them will be hacked and a large number of stolen bitcoins, the price will fall temporarily, but bitcoin will survive.

For example, recently with exchange Coincheck has been kidnapped by NEM on 530 million dollars. The price of NEM has declined by 15-20% and recovered in one day.

Scenario 6: More powerful opponent

The probability of realization in the next 5 years: medium to high

Potential impact: the Gradual disappearance of the

Is it possible that the «best» replaced the cryptocurrency bitcoin? («Best» is more favorable for mining, and with lower transaction costs for users, ceteris paribus). Let’s see the truth: it is more about Economics and less about convenience. This crypto currency should be much stronger to overcome the network effect and brand value of bitcoin.

The fact that it still has not happened speaks for itself. In addition, political and economic reasons (and not due to technical problems) «universal» cryptocurrency is unlikely to emerge in the next five years. At least, none of the existing crypto-currencies does not have significant technical and economic superiority over bitcoin and have not yet passed through the «load testing» that bitcoin can withstand for several years.

There is another way, where its role could play economy: if the price of electricity soared up, then mining would become unprofitable. There are only large data centers that can afford to continue working. Such a scenario will lead to a gradual decline in the complexity of mining that would be an unfortunate development from the point of view of network security. However, this problem can be resolved quickly if there is consensus in the bitcoin community.

Scenario 7: the Fatigue market

The probability of realization in the next 5 years: Low

Potential impact: the Gradual disappearance of the

If cryptocurrency startups will not be able to prove their tangible value in the real world, people can gradually begin to lose faith in crypto-currencies and tokens. In this case, the market growth could slow and ultimately stabiliziruemost. The stock market will lose its attractiveness from the investment point of view that will lead to a further decrease in the future occurrence of an avalanche fall.

However, still every year the spread of cryptocurrencies and their adoption in the economy is only growing. Especially indicative is the example of Japan, where after the legalization of cryptocurrencies already taking tens of thousands of retail outlets including the major stores. In any case, the stock market is still in its infancy, and we still have time. In addition, as history teaches us, the market is almost always able to transform and to redeem, if he saved the potential to grow and support enthusiasts.

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