Noncounterfeitability the 4th of the 11 characteristics that make sound money and, therefore, important to understand if you're looking to buy Bitcoin or eager to learn more about Bitcoin. See the full list of the characteristics that I've found that make sound money.
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Divisibility
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Durability
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Transportability
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Noncounterfeitability
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Medium of exchange
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Store of value
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Unit of account
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Liquidity
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Stability of value
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Interchangeable
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Limited supply
[video]
I'm pretty new to Bitcoin and learning every day. I share my findings on my YouTube channel and in my latest video I share my findings on the topic of whether Bitcoin can be counterfeited.
Check it out here please: https://www.youtube.com/watch?v=mPwY4Fj72G4.
Would love to hear your thoughts!
If you prefer to read instead of watching a video I've got you covered; the full transcript of the video you find below.
[in text - transcript of video]
So, Noncounterfeitability basically means that the money cannot be duplicated into a fake one.
For instance, the government is trying to keep people from creating and using counterfeited dollars.
For one, it's illegal to use counterfeit money.
Secondly, the government does its best to use watermarks, etcetera to distinguish the fake one from the real one.
But is there a way for us as ordinary people to distinguish a fake dollar bill from a real one?
If I go to the closest supermarket and I pay with a 50 euro paper bill, they use a device to check if it's real.
It's the same thing with gold, silver, or any other precious metal.
If someone would give you a golden bar, can you tell if it's real or not? Probably not. You need an expert to tell you if it's the real deal.
So, is there a possibility of counterfeiting Bitcoin?
I've gone through the rabbit hole on the internet of finding a solid answer to this question but every video or article I find has its own spin to it.
What I keep hearing repeatedly is people talking about the so-called 51% Bitcoin attack, and I think this is what we need to look at when finding an answer to whether bitcoin can be counterfeited.
To explain what the 51% attack means, you need to understand how the blockchain works.
As I mentioned in the previous video, hundreds of thousands, if not millions of computers, are mining Bitcoin.
Mining Bitcoin is somewhat the same as playing the lottery.
They all are trying to guess the winning number. This winning number is also called a hash, and that's something to keep in mind as we dive deeper into this.
Every 10 minutes on average, the Bitcoin code creates a new winning number, or a so-called hash, that the mining machines are trying to guess.
The moment a machine guesses the correct hash, a new block is created with all its new Bitcoin transactions.
That new block will be added at the end of all the 600,000+ blocks already in existence. All those blocks in total are what they call the blockchain of Bitcoin.
You must understand that guessing the correct number or hash is as difficult if not more difficult than winning the lottery.
The big advantage mining machines have to us as buying 1 lottery ticket is that they can guess the correct number many times per second.
The number of guesses the machine can make per second is called its hash rate.
This hash rate principle is fundamental to understand when it comes to Bitcoin's security or other cryptocurrencies, for that matter.
My computer's graphic card, for instance, has a hash rate of around 52,000 Kilohash per second. It means it can make 52,000,000 guesses or hashes per second.
If you visit the website blockchain.com you see the estimated hash rate per second for Bitcoin.
Currently, the estimated hash rate per second for Bitcoin for all the computers combined is 129 E hash per second.
I don't know what E stands for, but I do know it's the third enlarging step of a billion.
In other words, 1 E hash per second is not 1 billion hashes per second.
It is also not 1 trillion hashes per second.
It's also not 1 quadrillion hashes per second.
1 E hash per second means 1 quintillion hashes per second. It's a million times a million.
https://coinsutra.com/hash-rate-or-hash-power/
Every second, all the computers combined make a million times a million guesses to win the lottery ticket.
And that times 129.
Coming back to my single graphic card, that's close to 2.5 million of my graphic cards working every single second.
Why is this hash rate so crucial for the security of Bitcoin?
Well, the more hashing power there is, the greater its security.
We now know that all the computer power is used to guess the right hash every single second. The moment the correct hash is found, a new blockchain block is created with its transactions.
Now we are circling back to the 51% attack discussed a few minutes ago.
To cheat the system and counterfeit Bitcoin, one needs to have 51% of all its computing power.
In other words, to fake Bitcoin, they need to have the computing power that can generate around 66 E hashes per second.
That's close to 1.3 million high-end graphic cards working every single second.
Many experts say it's impossible to organize such an attack due to its size in hash rate. You will need so much computing power, which will cost you billions of dollars in hardware and electricity costs.
Furthermore, if one would find 51% of all the hash rates of Bitcoin, it would be way more profitable to just choose to mine Bitcoin instead of attacking it.
There won't be a financial incentive to do such a thing, they say.
Some say governments could do such a thing when they feel threatened by Bitcoin. They don't need a financial incentive; they just want to destroy Bitcoin.
On the other hand, if governments were trying to eliminate Bitcoin, they probably would rather use laws to prevent Bitcoin from growing any further instead of organizing a 51% attack.
In short, the 51% attack means that one can create an alternate version of Bitcoin's blockchain where you could be double spending your Bitcoins.
In other words, it's somewhat the same as creating fake dollar bills.
If you want to know more about how this works precisely, I suggest you Google '51% attack Bitcoin.'
The most important thing to remember here is that when such an event would occur, it means Bitcoin isn't that safe as all Bitcoin supporters had envisioned it would be.
Some experts say Bitcoin won't fall in price when such an event happens because they know soon enough when a 51% attack took place and take appropriate actions. Not sure what those actions will be, but okay ...
While others say, Bitcoin will be worthless when a 51% attack occurs.
I don't know who's right, and I think no one knows because it hasn't happened yet with Bitcoin.
There are 51% attacks that were successful on other cryptocurrencies. Still, those are a lot smaller in hash rate than Bitcoin and, therefore, easier to attack. If you Google '51% attack cryptocurrency' for instance, you will find more information about it.
All-in-all, I can't do much else than to believe the experts on this, and again, they say it's impossible to organize such an attack on Bitcoin due to its hash rate size. Furthermore, there's no financial incentive to do so, they say.
Therefore, I give Bitcoin a 5 out of 5-star rating for the 4th characteristic of good money.
Please let me know in the comments what you think of this. Do you think Bitcoin can be counterfeited? And if so, would that mean the end of Bitcoin?
I also would like to know what you think of my attempt to explain Bitcoin as a total beginner.
Since I'm pretty new to Bitcoin and blockchain in general, there's a chance I was wrong in one or more of my conclusions. Please let me know if that is the case.
Thanks for reading/watching.
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