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posted: November 25, 2024
tl;dr: A wrinkle in the fabric of spacetime landed this article in my inbox...
Dateline: March 17, 2027, Washington, D.C.
It’s been two weeks since what is being called the “Great Bitcoin Hack”, and United States intelligence is still unable to identify the responsible party. “It’s clear that it was a national actor with the resources to pull off a 51% attack,” stated Director of National Intelligence Tulsi Gabbard. “The top candidates are China, Russia, and North Korea, possibly acting together. None of those countries ever put any significant national wealth on the Bitcoin blockchain. They are the ones who benefit from the destruction of the value of Bitcoin held by Western countries and institutions.”
The Bitcoin network had long been known to be vulnerable to a 51% attack, in which the perpetrator brings on line enough Bitcoin miners to overwhelm the legitimate miners and pervert the blockchain with false transactions. Modern day Bitcoin mining gear is effectively special-purpose computers with dedicated semiconductor chips that execute the Bitcoin protocol at tremendous speed, much faster than general-purpose computers can. China, being the world’s largest computer manufacturer, certainly has the capacity and technical expertise to build large quantities of its own Bitcoin mining equipment, and then run nefarious software on them that can inject false transactions.
The Bitcoin network had operated for 17 years without experiencing a 51% attack. The attack is effectively a scorched-earth strategy which destroys the value of all Bitcoin, which is why it was never in the interests of legitimate miners to launch one. But once Western nations such as the United States created Strategic Bitcoin Reserves (SBR) and put hundreds of billions of dollars of value on the Bitcoin blockchain, the incentive for an adversary or enemy nation-state to attack the Bitcoin network arose.
The attack was both subtle and ultimately obvious. The hash rate of the Bitcoin network rose dramatically on March 3, and then gradually subsided. None of the Bitcoin wallets of nations with SBRs were attacked, and none of the coins were moved to wallets associated with other nations. It is impossible to separate the false from the legitimate transactions during the timeframe of the attack. But a key focus of the attack was the approximately one million Bitcoins originally mined by legendary Bitcoin founder Satoshi Nakamoto. Satoshi disappeared from public view many years ago, and is not even confirmed to be alive at this point in time. Somehow the attackers must also have stolen Satoshi's private keys.
For all the current hype about Bitcoin, you might think it has more than doubled since April 22, 2021, but it hasn't - see this post
Many of Satoshi’s coins were first distributed to two wallets, then four, then eight. Eight may be a clue as to the perpetrator, as eight is a lucky number in Chinese culture. Then the coins were sent on a seemingly random journey through a variety of wallets, with the largest share ending up in wallets controlled by Michael Saylor’s Microstrategy, a Bitcoin holding company. This has led some to suspect Saylor, although the resulting massive decline in the value of Bitcoin argues strongly against this.
Saylor proclaimed his innocence. But the fact that Satoshi’s Bitcoins could be moved under someone else’s control demonstrated the flaw in the Bitcoin network. Legitimate Bitcoin users complained vigorously, but since there was no way to identify all the false transactions, and no central authority to do so, the damage was done. The fact that it could happen again also caused most Bitcoin proponents to give up hope of ever resurrecting the network. The value of Bitcoin plummeted, erasing nearly all the value of the wealth stored on the Bitcoin blockchain.
Bitcoin HODLers with all of their net worth in Bitcoin were wiped out. The national SBRs are now all but worthless. The largest Bitcoin mining companies have declared bankruptcy and ceased operations. Microstrategy, while technically bankrupt, continues to operate as a meme stock. Michael Saylor has been able to sell enough new shares to keep remnants of the company going.
Saylor remains a true believer in Bitcoin, stating: “Bitcoin is perfect money. It is pure mathematics, and like addition and subtraction it can never be destroyed. This is the ultimate buy-the-dip opportunity for those who truly understand the incredible power of Bitcoin. If you ever wished you had been able to buy Bitcoin for under one dollar back in 2010, you now have a golden opportunity to do so again.” A few people have listened, and a small number of Bitcoin mining nodes remain in operation.
Recriminations are flying in D.C. The Department of Defense (DoD) blames the Trump administration for bypassing a DoD security audit before establishing the U.S. SBR, which DoD claims the Bitcoin network never would have passed. “Rule number one in computer security is to never connect critical national assets to the Internet, whether those assets be nuclear weapons, power stations, or the nation’s reserve wealth,” stated DoD spokesperson Major General John Smith.
Democrats also blame the Trump administration. “The SBR was a grift, nothing more than a payout to the crypto community for supporting Trump in the 2024 election,” declared leading presidential candidate Gavin Newsom. “The claim that it would somehow fight inflation was a farce. It ended up increasing inflation, because we spent dollars into the economy to buy something which is now worthless. It was helicopter money for the crypto bros.”
The fallout, both financial and political, continues. Polling suggests that it could have a significant impact on the upcoming 2028 elections in Newsom's favor, who is widely acknowleged to be more pro-China than J.D. Vance. Meanwhile, the U.S. is now poorer than it was before the Great Bitcoin Hack, with fewer resources to fend off the advances of hostile nations. China’s long-expected and perhaps imminent conquest of Taiwan is another clue that may point to the perpetrator.
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