Ethereum Foundation researcher cautions that Bitcoin’s fee model could jeopardize its long-term security.

Justin Drake, a researcher affiliated with the Ethereum Foundation, has expressed concerns regarding the long-term security of Bitcoin (BTC).

In a comprehensive post dated May 29, Drake contended that consistently low transaction fees on the Bitcoin network could render it more susceptible to a 51% attack, a situation where a single entity acquires majority control over the blockchain’s computational power.

Decline in Bitcoin fees

Drake indicated that Bitcoin’s fee structure has not adapted in tandem with its halving schedule.

He pointed out that although the three recent halving events have diminished block rewards over the last eight years, transaction fees have not increased sufficiently to compensate for this decline.

He stated that fees currently account for merely 1% of total miner revenue, a decrease from previous levels, and are nearing a 13-year low of approximately 6.5 BTC per day.

Bitcoin Network Transaction Fees (Source: Alphractal)

In light of this, Drake remarked:

“Bitcoin’s security model is broken. If Bitcoin gets taken over, the fallout could take the entire crypto ecosystem with it. The systemic risks can’t be ignored.”

Drake also questioned the long-standing belief that fees would naturally rise and eventually substitute block rewards.

Conversely, he asserted that fees are diminishing, and if miners were to depend solely on fees, their revenue could decrease by a factor of 100. This would reduce Bitcoin’s hash power to merely 1% of its current capacity.

According to Drake:

“That’s the trajectory we’re on. The 21M cap breaks security, it’s self-destructive. It should be clear now Satoshi made an ooopsie.”

Price increases won’t resolve Bitcoin’s issues

Drake rejected the notion that rising Bitcoin prices could alleviate the problem.

He described a scenario where Bitcoin reaches $1 million per coin, yet still only covers 10% of the current security costs if fee levels remain static.

He observed:

“Today, Bitcoin is secured by 20 GW — the equivalent of 10M space heaters. A 90% cut in miner revenue would bring that down to 2 GW of security — 1M space heaters. For context, Texas alone produces 80 GW. There’s no way a $20T asset can be secured by 2 GW.”

Even if Bitcoin were to reach $10 million per coin, resulting in a $200 trillion network, Drake argued that the expense to execute a 51% attack would still be minimal in comparison to its market capitalization.

He estimated that establishing 20 GW of hashing infrastructure would require only $20 billion, which is merely 0.01% of Bitcoin’s hypothetical $200 trillion valuation.

Potential solutions?

Drake concluded that Bitcoin’s existing Proof-of-Work model may not be sustainable in the long run without significant modifications.

He proposed several potential solutions, including revising the fee market or implementing tail issuance. The latter would entail raising Bitcoin’s 21 million coin supply cap to sustain ongoing incentives for miners.

Additionally, he suggested transitioning to a Proof-of-Stake (PoS) system, which is already utilized by Ethereum to secure its network.

Nonetheless, Drake recognized that his proposals encounter substantial opposition within Bitcoin’s cultural and ideological landscape.

At the same time, he noted that some community members have put forth vague ideas that BTC could adopt Proof-of-Authority through a consortium of mining pools, but he emphasized that there are few specifics regarding this approach.

In light of this, Drake concluded:

“Bitcoin is meant to be antifragile. Yet the elephant in the room is not being addressed. We can bury our heads in the sand. But the fundamentals are getting louder.”

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