Justin Bons, founder and CIO of the crypto investment fund CyberCapital, argued that Bitcoin faces a risk of collapse within the next 7 to 11 years due to its current economic and security model.
According to Bons, this process will be triggered by the decrease in mining revenues with halving cycles and the gradual depletion of the budget that finances network security.
Bons stated that for Bitcoin to maintain its current level of security, it would either have to double its price every four years or generate permanently high transaction fees. Arguing that this is mathematically impossible, Bons maintained that such a price increase would exceed global GDP within a few decades, and that high fees would be unsustainable in a free and competitive market.
Bons stated that Bitcoin’s “security budget” is effectively dwindling due to the decrease in mining rewards with each halving, adding that hashrate increase alone does not represent security. According to the analyst, the truly critical metric is the total revenue paid to miners; because network security is measured by the cost of an attack, rather than the number of hashes produced.
Bons argued that with the decline in security budgets, 51% attacks and double-spend scenarios will become increasingly attractive. He noted that large cryptocurrency exchanges could be particularly vulnerable targets, suggesting that the cost of a single-day attack could fall to a few million dollars in the coming years, while the potential profit could reach hundreds of millions or even billions of dollars.
In this context, he argued that a network value theoretically exceeding $2 trillion could be severely disrupted by an investment of approximately $1 billion. Bons stated that even geopolitically rival states or large financial actors could perform such a cost-benefit analysis.
According to Bons, Bitcoin faces two bad options at this point:
- Increasing inflation to the point of exceeding the 21 million supply limit,
- Or accept that the network will become vulnerable to attacks and censorship.
Bons argued that this dilemma undermines Bitcoin’s fundamental “social contract,” noting that some core developers have also acknowledged this problem and discussed increasing the supply as a solution. He also mentioned that figures like Peter Todd have drawn attention to the security budget issue.
Bons argued that Bitcoin’s capacity of approximately 7 transactions per second (TPS) makes the system vulnerable during crises. He stated that even if only a small fraction of current users wanted to process transactions on the chain simultaneously, a transaction queue could form that lasted for months. He suggested that this could effectively create a “bank run” effect, further deepening panic as users were unable to move their funds in time.
According to Bons, a potential confidence crisis and price drop could reduce miners’ profitability, leading to a decrease in hashrate. Network slowdowns due to delayed difficulty adjustments could increase transaction backlogs, fueling panic. This creates a risk of a “death spiral” of price drop – miner exit – network slowdown.
Justin Bons argues that the current notion of Bitcoin as “immutable and eternally secure” doesn’t reflect reality, stating that the balance between security, scarcity, and use cases has been disrupted. According to Bons, these issues will become more apparent within 7-11 years due to the impact of halving cycles, and the Bitcoin community will inevitably face a confrontation.
*This is not investment advice.
