The general understanding about bitcoin is that the bitcoin algorithm is robust. But are there holes in the algorithm?
Let’s consider two assumptions in bitcoin (1) the assumption that the total number of bitcoins that will be generated is fixed to 21 million, and (2) bitcoin encryption is unbreakable.
Let’s look at the first assumption in a little detail and look at the algorithm.
A bitcoin miner gets newly generated bitcoins as a reward for successfully validating a bitcoin block (i.e. finding the hash that meets the target difficulty). During the initial days of bitcoin, the reward was 50 bitcoins for every block validated. When the number of blocks validated reached 210,000, the reward became half, i.e. 25 bitcoins. This process continues, and for each 210,000 blocks validated, the reward becomes half (it takes several years to reach 210,000 blocks). At the 33rd such occurrence, the reward becomes (near) zero. If you do the math you will see the total bitcoins that will ever be generated will be 21 million (you can create a spreadsheet to see this – use only 8 decimals).
Pretty solid logic. Right?
But where did the 210,000 come from?
The 210,000 is just a number hard-coded within the software code. The code is publicly available and you can change that number. The only condition is that a majority of the bitcoin mining community should agree to such a change. What if a group of people or a nation acquires 50% of mining power? They can change that number to whatever they want. If you change that number to a million, how many bitcoins will that result? How will that affect bitcoin value? There is no guarantee this won’t happen.
Now, let’s look at bitcoin encryption. Bitcoin is an implementation of blockchain technology. Blockchain is created using three technologies: (1) peer-to-peer networking using TCP/IP, (2) hashing using SHA-256 algorithm, and (3) asymmetric encryption using ECDSA (elliptic curve digital signature algorithm). Hashing and encryption are cryptographic techniques. These cryptographic techniques work because, using today’s computing technology, it will take hundreds or even thousands of years to break the math behind them.
But that is going to change. A new form of computing called quantum computing is in the works. Although it is mainly in the concept stages now, many experts believe it will become a reality in the next 5-10 years. Quantum computing will come with enormous computing power rendering today’s cryptography useless.
Check out these links to get a better understanding.
https://motherboard.vice.com/en_us/arti ... apocalypse
https://motherboard.vice.com/en_us/arti ... uting-now-
https://motherboard.vice.com/en_us/arti ... ter-is-now
In order for bitcoin to survive in an era of quantum computing, you need to recreate the wheel and come up with new cryptographic techniques that will survive the power of quantum computing. But what will happen to the bitcoins you already own? The private key evidencing your bitcoin ownership will suddenly become just 64 worthless random characters. Think about that.