How I Think They Will Attempt To Take Bitcoin Down

Bitcoin has been called the honey badger of money. It has certainly survived its share of attacks on its integrity and it has a very well defined protocol that has ensured that attempts to undermine it have failed. It is also distributed enough globally that there is no practical way for any single government to shut the system down using force lest that governments jurisdiction be shut out of the network and the rest of the world continues on without it.

The strength of Bitcoin's technology and its revolutionary aspect is its proof-of-work system. This system relies on a global network of miners using their computing power to solve the NP-complete problem of generating a hash value with a given number of leading zeros tied to a block of transactions to move the chain forward. To subvert the chain would involve too much work for any one miner to do.

So let's say you want to take out Bitcoin and you've got access to a lot of money. The main things you want to do is to weaken the faith in the system and screw with the parameters of the chain to make control easier. Increasing the blocksize to a very large number would make it easier to centralize the ledger. Taking over development on a forked blockchain would also allow implementing blacklisting of addresses for implementing political sanctions, or increasing the number of coins generated by miners, uncapping the max coin limit and being able to arbitrarily increase the amount of money in the system using a privileged proof of stake system to increase fiat like control of the money supply by a small group.

How do you kill the old chain though? You start a futures market in Bitcoin where the futures are settled in dollars. Thus when people receive their futures contract it does not cause a short squeeze in Bitcoin by causing the futures sellers to have to buy Bitcoin to settle the contract. You hype these futures up on the financial media and you put all your dumb money institutional clients into them.

The time to strike is right after a block difficulty adjustment. Before the difficulty adjustment you get your big mining farm and put it all into Bitcoin to drive the difficulty up to a very high number. Then you take all the futures money and use it to buy the fork. Switch over your mining fleet to the new chain and make it massively better for miners to mine the fork by bidding up the fork and selling your old chain bitcoin. Then what happens is the old fork will lock up and lose mining power. Consolidate balances on the old chain in a few addresses so you can sell big blocks without incurring high transaction fees. Then sell relentlessly and buy the fork. The old chain will lock up and slow to a crawl with the huge dive in mining power and blocks will only come out every few hours or so. Everyone will switch over to the new fork, because the old chain simply no longer works. Miners that switch will print money. Some specifically timed disruptions at a few of the old chain exchanges will further slow things down for users of the old chain.

Anyway. I predict there will be a big attempt to bribe miners to get on the 2x chain once the futures market gets going. Don't fall for it.