< Series are a group of articles that explore a particilar domain. This series is on:
‟#blockchain is as much a social innovation as a technical one.
-- via Twitter
Bitcoin is a remarkable assembly of technologies. It's also a unique social phenomenon.
For me, the happy path for Bitcoin looks apparent. We basically continue as we are. Perhaps with some minor bumps in the road as minor limitations are worked around.
What is less clear is how Bitcoin could stumble. And by stumble I mean crash. Either in price, technically or in confidence. Perhaps in all three at once.
This isn't to say that Bitcoin must or will fail. The potential in Bitcoin is clear. This potential makes having an eye on these failure modes all the more important.
To start, let's look at the top of the chain. The mining network keeps the blockchain stable and secure. By design, the network behaves for overall fairness in exchange for a reward.
Rewards imply a gain. In my first article, I ask if the mining network is exposed via leverage. Speculation in Bitcoin expands the mining network. This, in turn, can drive speculation via the mining infrastructure itself. This exposes this vital piece of the blockchain puzzle.
Rewards are competitive. In a Hard Fork, the Bitcoin chain splits. In this scenario, it's possible for each chain (and subsequent forks) to compete for mining infrastructure ("hashpower"). Hard forks should resolve due to consensus, but it's possible for a fork to cause a death-spiral or crisis of confidence. Fortunately, we don't need to guess in this case, as Bitcoin Core and Bitcoin Cash have already forked. In this article, I discuss some of the key differences between Core and Cash. And how those different philosophies can (or cannot) be robust.