The bug found in Bitcoin Core client is even worse than everyone thought. As it came out, in addition to the possibility to crash all nodes, anyone could have mined an infinite amount of Bitcoins, devaluating the biggest cryptocurrency.
Could it have been the end of Bitcoin, if someone would have found this exploit earlier and used it? Let’s take a deeper look together.
What were the possible consequences of using this bug?
- Any miner could have crashed 90% of all nodes by generating a bad block that would be incompatible with the current software.
- Any miner could have generated additional supply of Bitcoins, so the total supply of BTC would have been bigger than 21 million.
First of all, everyone who knows anything about crypto, is 100% sure that it’s impossible to create more than 21 million of Bitcoins in any case, except for 51% attack, which is highly improbable, given that the current hashrate of the network is over 50 million TH/s. It gives a certain confidence in Bitcoin's value to all crypto investors. What happens, if this confidence fades? Of course, a few thousands of new Bitcoins wouldn't cause a tremendous inflation, but the damage done to the crypto space would be beyond our imagination. The limited supply is one of Bitcoin's fundamental characteristics and one of its selling points. Scarcity plays a big part in this, as everyone who thinks that Bitcoin will become a global currency, knows that there isn’t enough BTC for everyone. There are more millionaires in the world than available Bitcoins, so every millionaire can’t get even 1 Bitcoin for himself. That’s the rhetoric of Bitcoin supporters. So creating even 1,000 more Bitcoins would shake the confidence of retail investors and, more importantly, of institutional investors. Why? Because everyone would understand then that their money depends on a few lines of code. Thus it’s crucial that Bitcoin would remain as stable as possible.
What could have happened if the exploit was executed? It could have created more Bitcoins, the price would have dropped tremendously, it would have required a hard fork to mitigate the damage, but it would have been too late. It wouldn’t have given BTC any extra points in the eyes of SEC, and all of us could have said 'bye-bye' to the possibility of ETF approval for a very long time. Also, it would have required upgrading all institutional services that prepare the framework for integrating BTC in global institutional trade. Maybe some of them could have even canceled their plans to build reliable platforms for the unreliable cryptocurrency. It can be compared with the DAO hack, only with a good outcome.