Patrick Shyu, a former engineer at Meta and Google, has raised alarms about two critical threats looming over Bitcoin: quantum computing and diminishing incentives for miners.
Shyu also disclosed that he has divested all his Bitcoin holdings following significant financial setbacks.
The Initial Threat Eroding Bitcoin’s Security
Shyu contends that the primary threat to Bitcoin comes from the gradual depletion of its rewards budget due to the decreasing issuance of new coins. His argument revolves around the Bitcoin halving cycle, which occurs approximately every four years, reducing the block reward to its current 3.125 BTC.
Additionally, the next halving event is anticipated in 2028, reigniting discussions about miner compensation. The critical issue is the lack of a consistent fee market.
Shyu emphasized that 95% of Bitcoin has already been mined. Furthermore, he cautioned that the expected fee revenue to supplement block rewards has not adequately filled the widening gap.
“Satoshi did not foresee the emergence of wrapped Bitcoins or that many coins would remain idle, not generating fees or gaining visibility. As fee income declines, miners may turn off their operations, leading to diminished security and potentially triggering a slow decline,” Shyu cautioned.
His assessment is stark. With declining fees causing miners to cease operations and security to diminish, he fears a gradual downward spiral that could jeopardize Bitcoin’s future.
Indicators of miner distress are evident, as hashprice—a daily metric for mining revenue relative to computational power—currently stands at approximately $30 per PH/s this month. Additionally, miners faced an 18% decline in hashprice in late June.
“The true ramifications of dwindling fees remain unknown. The idea was to create sovereign money, which sounds excellent, but it also carries a risk of being overly idealistic and naive,” the former engineer remarked.
The Quantum Countdown Against Bitcoin’s Encryption
The second significant threat is quantum computing, which, if sufficiently advanced, could compromise Bitcoin’s cryptographic security. It might apply Shor’s algorithm to extract private keys from publicly accessible keys, especially jeopardizing older addresses.
Experts have varying predictions on this front. Venture capitalist Nic Carter has estimated a potential “Q-Day” around 2035, whereas other recent analyses suggest timelines that bring this possibility closer to 2030.
“At some point, a potent quantum computer might breach the cryptographic safeguards protecting Bitcoin wallets. While it may never happen, I am surprised there hasn’t been a universal strategy or developer collaboration to tackle this,” Shyu revealed.