With the growing hype around cryptocurrencies and bitcoin, the importance of the risks involved has skyrocketed. Many imagine bitcoin and blockchain technology as an ultra-safe transparent fort-Knox. Few mention and perceive the risks involving this technology. Quick disclaimer, this technology is relatively new and targets a whole perspective of sectors from fintech to politics. As such, people are very aware of the possibilities blockchain and crypto open. But what exactly are the theoretical risks of bitcoin? Can Bitcoin be stopped? Is Bitcoin a massive ponzi scheme? This article will discuss the different theoretical risks available and some potential solutions to these problems.

As there are many different types of consensus mechanisms for miners, the risks will vary accordingly. Therefore, this article will have a main focus on the theoretical risks of Proof Of Work (PoW), the technology behind bitcoin. The risks we will mention are; Risks of Centralization, Risk of Digital Compromization, Computational Domination, and Connectivity Risks. Please keep in mind that the following risks discussed fall under different categories and each of these risks deserves recognition and thought. Furthermore, Bitcoin's growth and the safety thereof are highly dependent on the community's efforts. Thus, if you can come up with alternative solutions to the aforementioned problems, please be sure to drop them in the comments. Furthermore, if you find something interesting, or have thought of a different kind of risk, feel free to let us know about it in the comments below.

Risk of Centralization

The risk of centralization in bitcoin is a risk that can take on many different forms. Primarily let's discuss mining, the risk of centralization in mining can take on many forms. We should mention that all of these risks are hypothetical to the bitcoin network and most have not actually occured, thus some of these risks are not the case. Let's discuss manufacturing.

Manufacturing

There are numerous manufacturers from around the world. However, the majority of miners are manufactured in China, which does not pose a problem in most countries. Yet seen as China has recently banned cryptocurrency it's stance remains fierce. If the Chinese government were to crack down on the bitcoin miner manufacturing process, it would certainly be a big blow to the bitcoin miners as bitcoin miner prices will skyrocket and factories would have to relocate to fill the demand. This would also mean a temporary increase in the bitcoin transaction fees. Furthermore, when it comes to centralization and mining there is another risk for bitcoin.

Mining Pool Risks

Mining pool domination, if a dominant mining pool (such as Binance's mining pool) gains too much popularity (over 51% of the bitcoin network), it can theoretically take paramount decisions for the network and would have the power to modify the network to their will. Alternatively, if few mining pools collectively control more than 51% of the network, the same risk applies (similar to the phoebus cartel).

A terciary centralization risk is the means of purchase. Seen as numerous exchanges have ended up defaulting on debts, and shut down. It leaves the public with only a few feasible options to purchase and use crypto/bitcoin. As such, if these exchanges were to collaborate, they could collectively manipulate the price of bitcoin. Furthermore, if these few exchanges close down, it makes it very difficult for people to exchange their cryptos to fiat money (traditional currencies).

Risk of Digital Wallet Compromization (Bitcoin Safe Cracked)

Bitcoin is revered compared to the traditional centralized banking system in terms of technological enhancement. Primarily, the first question asked is how safe is bitcoin. Is it hackable? In terms of safety, bitcoin quickly takes the reigns with blockchain technology at its core.

The means of **hacking bitcoin **can only be done through devices and people that are unaware of these pre-existing technologies. For instance, if someone connects themself to a phishing website, it's possible that the user may send funds to the wrong address. Or that the private key gets revealed and compromised.

The compromise of a computer is unavoidable or unknown in some cases. Therefore, when the user creates a wallet, the private keys (or mnemonic phrases) are shown on the screen and intercepted by the hacker. This is by far one of the biggest risks of bitcoin. An example of this type of risk is the seizure of bitcoins by the FBI.

Computational Domination (51% attack)

With computers increasing in efficiency drastically over the years, it's impossible not to mention the risk of computational domination. The effect of quantum computing on the bitcoin network is discussed in this article. This is a complex risk for bitcoin that cannot be quickly looked over and as such merits, it's own article. The truth is quantum computing redefines the way the entire computing industries work it could break military-grade encryption, yet its effect on blockchain and in general is purely hypothetical.

Another means to take over by computational domination is the aforementioned mining pool(s) 'attack'. Furthermore, if technology allows for the manipulation of another electronic device by distance (like controlling particles from outer space and targeting them to a designated area).

Connectivity Risks of Bitcoin

Finally, the last risk of bitcoin that I see, is the heavy reliance on an active internet connection. Furthermore, seen as the internet is heavily centralized, it is feasible that these services go down completely, as such, bitcoin will no longer be useable.

There is a secondary risk that the ISP (Internet Service Providers) decide to crack down on bitcoin. Then they could theoretically manipulate the bitcoin miners and as such decide on the future of the network.

If you have any questions, additions or concerns feel free to drop a comment

Thanks for reading & Resh Out!