1. Legal Attacks
When authorities pass and enforce legislation against Bitcoin, the ultimate effect is the punishment of users. The list correctly notes that Bitcoin has survived several outright bans by small countries (namely Afghanistan, Algeria, Bangladesh, Bolivia, Ecuador, Morocco, Macedonia, Vanuatu, and Vietnam). In fact, such bans have gone largely unnoticed outside of these places.
However, any prohibition by large, systemically important countries or major powers (the United States, the European Union, China) has yet to occur. The closest example of a ban by a major nation would be Russia, where Bitcoin’s legal status appears to be in a constant state of flux.
Numerous false reports of bans by large countries, notably China and South Korea, have been known to cause price drops, sometimes significantly. However, a low “bargain” price may spur adoption in other countries, so compensatory forces likely exist across the market. Low prices may hurt holders, but it’s possible they spur adoption too. It should also be remembered that even at a suppressed price, Bitcoin still works.
2. Can Bitcoin be Banned?
While nations may discourage the use of Bitcoin by prosecuting known users, any ban on citizen interaction with the network would be technically unenforceable. Blockstream satellites currently broadcast the blockchain to the Americas, Africa, and Western Europe and will soon cover the entire globe, so a fairly inexpensive satellite setup can still receive blockchain data even if it’s scrubbed from a nation’s internet (as part of a country-wide filtering of Bitcoin traffic).
As for sending transactions to the blockchain, multiple stealthy methods exist: over Tor, via SMS, within an encrypted email or other text message, or even using steganography to encode transactions within seemingly-innocuous digital files.
According to Andreas Antonopoulos, this image of cute kittens hides a 550,000 BTC transaction.
Thus, banning Bitcoin would be a losing game of whack-a-mole for authorities. Code can be (re)written a lot faster than legislation, so authorities will always lag development. Even an internationally-coordinated UN/WTO-level legal attack would likely only have the effect of forcing Bitcoin underground, incentivizing the development of privacy features, and perhaps raising its value as a contraband item (as occurred with narcotics).
As for the persecution of Bitcoin merchants or figures, this has certainly occurred. Examples include the incarceration of Ross Ulbricht, accused of being the mastermind behind the Silk Road darknet marketplace, and Charlie Shrem, charged with acting as an unlicensed money transmitter. As darknet markets and decentralized exchanges have proliferated and evolved since such harsh examples were made of Ulbricht and Shrem, it appears that such legal risks fail to discourage user involvement, instead encouraging increasing technical sophistication.
Cyberwarfare is hacking and social media manipulation conducted by state-level actors. We’ll take it to mean general hacking by any person, group, or agency. Bitcoin itself has so far proven resilient to hackers despite the massive multibillion-dollar reward it represents. Bitcoin is a hard target mostly due to its decentralized nature and proof-of-work system.
If hackers alter their version of Bitcoin’s code to attempt such exploits, transactions that break the established rules are immediately rejected by the network at large. The more independent full nodes in the network, the less likely such an attack is to work (currently there are over 12,000 that we know of).
If hackers attempt to rewrite the blockchain in their favor, they can only succeed by controlling more hash rate than all honest miners. Even then, the proof-of-work algorithm may be changed in response, neutralizing the massive hardware investment required to pull it off.
Unfortunately, Bitcoin users and services are far more vulnerable to hacking…
4. Cyber Attacks Slowing Adoption
Numerous hacks of major Bitcoin merchants (particularly exchanges, such as Mt. Gox and Bitfinex) have occurred over the years. Over 1 million BTC have been stolen in this way. Such hacks certainly slow adoption; users who lose funds may be unwilling to buy back into Bitcoin.
Mainstream media frequently amplifies the PR damage of such hacks, spreading FUD (Fear Uncertainty and Doubt) about Bitcoin in the media by failing to draw a clear distinction between the hacking of a crypto-related company and a “Bitcoin hack.” This certainly increases skepticism regarding Bitcoin’s safety among the non-technical public.
5. State-Mandated Privacy Attacks
Mass digital surveillance to steal private keys/deanonymize users is advanced and ongoing due to the anti-money laundering and know your customer regulations imposed on all clients of fiat exchanges and, in some cases, services. It’s hard to say whether ID verification requirements have had a chilling effect on adoption, as anonymous trading methods still exist.
However, by sharing their details, users are placed at greater risk. If a merchant’s site is compromised, client data is exposed to identity thieves in a large-scale leak of user information from a major Bitcoin merchant. This could, in turn, easily lead to a potential large-scale attack (online or offline) targeting Bitcoin users. Furthermore, tax agencies may demand client information from merchants (as recently happened with Coinbase), exposing users to all kinds of unexpected payment demands.
6. PR Attacks
Influencing public opinion to associate Bitcoin with crime is so common. Both the mainstream press and politicians play this card frequently. A 2017 study revealed that more people believed that Bitcoin was being used for illegal rather than legal purchases, although the reverse is likely true by a large margin.
Any thinking person soon realizes that fiat currencies are involved in far more—and worse—crimes. Research suggests that most darknet purchases were of soft drugs, such as cannabis and ecstasy. A recent Europol reported no confirmed evidence of Bitcoin terror financing.
7. Financial Attacks
The creation of a competing state-supported crypto occurred with the advent of Venezuela’s Petro, although the “competing” part is arguable. The Petro has so far failed to gain traction and had minor real-world economic impact. Should a more powerful country bring out an official crypto and support it financially and with propaganda, the results could be quite different. Such a state-controlled crypto would likely be fully centralized and not really comparable to Bitcoin, although it could nevertheless absorb some of Bitcoin’s market share.
8. Stealing Bitcoin’s Thunder
As for creating a similarly-named altcoin to confuse users also known as a Bitcoin fork (or forkcoin), the prime example of this is Bitcoin Cash, aka Bcash. The Bcash attack is the most persistent and well-financed attack so far. It includes the following elements:
- Pumping funds into a competing centralized (Bcash is mined almost entirely by Bitmain) crypto to make it the biggest — See the failed Operation Dragonslayer.
- Large-scale market manipulation to spread FUD (Fear Uncertainty and Doubt) about Bitcoin — See the high volume of anti-Bitcoin articles on r/btc.
- Astroturfing social and political opposition to Bitcoin — See above. A common claim is that Bcash is the “real Bitcoin” despite its forking off from Bitcoin because it meets some twisted interpretation of Satoshi’s white paper. Also common is the reference to Bitcoin as “Bitcoin Core.”
- Splitting up a major Bitcoin community — r/btc split off from r/bitcoin, citing “censorship” when prevented from promoting various fork attempts.
- Gaining control over a major Bitcoin “community” — Unfortunately, Bcash advocates control the #Bitcoin Twitter account as well as the Bitcoin.com domain. These official-seeming outlets are used to spread Bcash misinformation, amplifying newcomer confusion.
While some new users have certainly been deceived by this “evil doppelganger” attack, it’s probable that Bitcoin’s relative technical and economic merits will soon become so obvious (with the introduction of the Lightning Network) that no more newcomers will be deceived.
Is Bitcoin Indestructible?
While it seems that Bitcoin keeps coming back from the dead, let’s not get too cocky. Anything can be destroyed—even Bitcoin. Fortunately, the way Bitcoin was built, the trials it has already endured, and the current macroeconomic state of the world make it very robust and hard to eliminate. The real stress test will probably come during the next financial crisis. Until then, I’ll leave you with this Green Beret’s take on how he would take down Bitcoin.