Borderless Bitcoin: A Dangerous Myth

Tl;dr Bitcoin maximalists argue that the energy consumption of Proof-of-Work provides the network with a security moat. In reality, it introduces political risk because of the highly centralized nature of energy infrastructure and markets. Evidence points to Bitcoin being susceptible to sovereign censorship in the future as its network growth continues along existing geopolitical fault lines. Alternatives to completely miner-driven blockchains, like Lightning Network or Proof-of-Stake, reduce or avoid this issue by relying on endogenous factors (i.e. the native currency) for transaction validation.

Bitcoin has redefined what money means in the digital age. But as the “censorship-resistant” cryptocurrency enters its second decade, its advocates must reconsider the narrative that has fueled its rise. Bitcoiners will roll their eyes at that last sentence: they have spent ten years successfully weathering concerns over block size, transaction throughput, and energy consumption, after all. Why should this alarm sound any different?

• In a word: asymmetry.
• In a phrase: the different profiles of bitcoin miners and holders.
• In a sentence: the geographical distribution of Bitcoin’s hashrate creates an attack surface for sovereign censorship that scales with network value.

Bitcoin might not depend on any nation-state, but it does not exist in a political vacuum. The network addressed the aforementioned issues through the market dynamics enshrined by Nakamoto…