Controversial Bitcoin Contract Leads To Heated Debate: Could It Kill The Cryptocurrency?

Because of Bitcoin‘s speculative nature, the asset potentially reaching prices of $1 million per BTC is just as feasible as the cryptocurrency falling to zero.

And while Bitcoin has shown resiliency in the past against all odds, a new controversial contract has lead to a heated debate on if it could lead to the untimely death of the first-ever cryptocurrency.

Is the Bitcoin Killer Finally Here?

United States politicians have come out and explicitly said, there’s effectively no way to kill Bitcoin. The decentralized nature of the asset means it exists outside of the control of third-parties.

Hundreds of obituaries have been written about the first-ever cryptocurrency, and from the ashes it regularly rises again.

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Bear markets haven’t been able to kill it. Chinese miners that may have the motivation to kill it haven’t been able to do so, either. Not even the Black Thursday crash caused by the coronavirus outbreak could put the crypto asset to its death.

But a new “leveraged, fiat-settled” contract focusing on Bitcoin hashrate futures, could be the first thing that actually has a chance to kill Bitcoin.

It’s led to a heated debate across the cryptocurrency community.

Does This Controversial New Contract Have Potential To Destroy Crypto?

A new type of futures contract that allows traders to make bets on Bitcoin‘s hashrate from the rapidly growing derivatives platform FTX, has been said to have the potential to send the cryptocurrency to its doom.

Because rising or dropping hashrates can lead to profits depending on which side of the bet the trader has made, it could potentially influence miners to pull their hashrate to make a leveraged short on the hashrate that much more profitable.

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For example, a short position on this contract from a large enough miner who pulls their hashrate would immediately profit from the hashrate drop. It could incentivize large enough miners to let greed convince them to destroy the cryptocurrency for profit.

Crypto enthusiasts are calling it a “serious vulnerability.”

The derivatives platform’s CEO who is an active member of the crypto community chimed in on the debate to clarify the economic feasibility of such a thing.

He claims that someone who controls just 1% of the hashrate would lose $7 million over three months if they shut down their machines to try and influence their positions.  Just to “break even” on a futures hedge it would require a position size of roughly $700 million. Therefore, influencing the contract is simply “not economical.”

While this likely isn’t the dangerous situation for the cryptocurrency that the community first feared, it does expose a potential vulnerability in Bitcoin that may not have been thought of before.

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Source: Newsbtc

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