Further reflections on Bitcoin risks.
20241117
In my last post I wrote about three options for storing Bitcoin: using the original Bitcoin Core C++ language software, keeping the coins in a brokerage such as Coinbase, and using a hardware wallet such as Trezor.
Bitcoin depends on the secrecy of the owner’s keys. The vulnerabilities of each method of storage have to do with compromising the keys. If somebody get your keys, they have your Bitcoins. Bitcoin Core is vulnerable to malware such as viruses, password stealing software and so on. Keeping your Bitcoin with a broker requires that you trust the broker’s honesty and their technical prowess at keeping people from stealing their own codes. The hardware wallet of course requires that you trust that the people who made the hardware know what they’re doing.
About gold and silver, I wrote that watching the markets will give an investor clues of fraud. In answer to streamfortyseven, I said that if and when the value of paper gold falls measurably below that of real gold, it is probably a sign that short-sellers have determined that the real gold behind the vouchers may not be there.
This set me to thinking about what could happen to Bitcoin. Quantum computing is the threat that has been under discussion since its inception in 2009. A quantum computer theoretically has the ability to try an entire universe of combinations in parallel and quickly figure out your crypto keys, with which they could steal your money.
If somebody figured out how to steal Bitcoin, how would they derive maximum financial benefit from the discovery? If they crudely stole everybody’s Bitcoin, there would be no buyer to take it off their hands. The 1.8 trillion dollars worth of coin would simply disappear. A lot of people would laugh, but nobody would get rich. Whoever discovered the paradigm would have to be sneaky to maximize his profit.
My proposal would be to look at the 3 to 4 million Bitcoins that seem to be lost forever. These would seem to be quite easy to identify. They would be blocks of coins that had not been traded since the first few years of Bitcoin’s existence and do not have historical transactions associated with known Bitcoin holders.
The discoverer of the algorithm could quietly, slowly transfer orphaned Bitcoins to his own account, being careful not to draw attention to what was happening. He would be very attentive to people claiming that their Bitcoin had been stolen, perhaps even figuring a way to put stolen Bitcoin back in the chain as if they had never been gone in order to keep things quiet. He would want to keep the game going as long as possible.
An investor should keep his ears open and his feelers out, looking for and investigating signs of this kind of activity. If and when it looks like something untoward is going on, he should quietly convert his own Bitcoin into cash or gold. A braver soul would go so far as to use the Bitcoin derivatives market to go short.
At any rate, the conclusion for an ordinary investor such as you readers or me should draw from this observation would be that we should pay close attention to any financial press reporting of such shenanigans and be ready to cut and run, being early to the exits if the problem looks real.
That’s my thought for the day. Encouraged by your comments here, this strong man is taking time to write down my reflections as a straight white man, from being king of the hill at the time of my birth to being scum of the earth in today’s society.
Another possibility is that an interested party - say a central bank like the Federal Reserve, or a group like WEF - or whoever is behind that, or the US Government seeking to defend the dollar, could simply get all of the keys and collapse Bitcoin (and all other crypto currencies which might be seen as competitors to the one which they favor) without consideration for profit. They would do this on the sly, and do the financial equivalent of a "time on target" strike, in which warheads fired at targets all land at the same time. Of course, that's no longer possible with conventional weaponry - but it would certainly be possible in the cyber world. The information horizon could be made sufficiently short - on the order of hundreds of milliseconds - so that there could be no advance warning. Perhaps certain holders of Bitcoin could be favored, and the rest simply wiped out. The intention would not be profit, it would instead be a projection of force to achieve policy goals.
I've never felt like the King of the Hill or the Scum of the Earth. That's your choice. I am me today the same way I was me 50 years ago. No different.