The Downfall Of Bitcoin: Part 3

This is part 3 of The Downfall of Bitcoin: The Need For Responsible Mining, if you have not read part one and part two yet, do so here: Part 1, Part 2 before proceeding to read this part of the story.

The following is a work of fiction, the events below have never happened. This article serves as a means to stress the importance of mining responsibility on both the miner’s end and the pool owners end and offers a situation in which the downfall of Bitcoin could occur. Any companies in the following article are fictional and this story does not pertain to any companies in existence today. The story will be told as a collection of events from several different perspectives on the events leading up to November 17th, 2014.

This is the final portion of the story and will include an afterword in which the events in this story will be discussed.

Disclaimer: All characters appearing in this work are fictitious. Any resemblance to real persons, living or dead, is purely coincidental. Names have been generated with a random Generator.


2:00 PM, November 16th 2014

Danny pulled his car into the driveway and quickly went to the mailbox to pickup the mail; he was anxious to read the news as the merger of Oakmine and four big exchanges was set to take place tomorrow. Reporter Cody Dennis on Cryptocoins News had written an article about some shady things going on at Oakmine including a sudden decline in hashpower from the pool despite the -5% fees, as well as a potential scandal with Hector Stephens being in China while he claimed to be in Sweden on Twitter. The article had gotten a lot of attention but was not received well by the readers, they thought that Cody Dennis had no real evidence of any shady activity and that the article was written with poor journalism practices. Danny’s Cloud mining contract was continually earning him Bitcoin, and it looked like it would break even on his investment in just twenty more days. Danny had discarded Cody’s article and did not take any of it to thought. Oakmine was a stellar company and Cody Dennis had nothing on it; the article was full of rumors at best with no hard evidence to backup any of the heavy claims. Oakmine had publicly denounced Cody’s article and assured everyone that everything was fine, and the merger was still set to take place.

Tomorrow was a very big day for the world of cryptocurrency. This merger would make Oakmine the world’s largest Bitcoin based company and help lead to further adoption of Bitcoin as a currency.

9:00 AM, November 17th 2014

Cody Dennis was anxiously awaiting any news from Oakmine. When he called tech support, he had to use a different alias because of his article. The support operators were given strict orders not to take any calls from Cody Dennis due to his stunt that could have tarnished the reputation of Oakmine. The merger was set for noon. The exchanges would be completely transferred to Oakmine with 8 confirmations on the transaction. The owner of the exchanges was happy to get the exchanges to Oakmine quickly for an extra 50 Bitcoin. Media coverage of the merger had already begun. Everything was expected to go smoothly, and many miners were prepared to begin using the new exchanges powered by Oakmine. Cody had noticed a discrepancy in the number of blocks that were signed and the hashpower that Oakmine was mining at. With his calculations, Cody noticed that Oakmine was missing close to a block an hour based on their Hashrate, this margin was slightly higher than just bad luck. On top of that, oakmine’s total hashrate had dropped slightly even though media coverage on the merger was huge. Was it possible that Oakmine was hiding their actual hashrate and signed some of their blocks under a false alias?

11:30 PM, November 17th 2014

Cody was glued to his computer, researching the hashrate of Oakmine since the launch; it had grown exponentially, then suddenly declined at the time of increased media exposure. Sure people were scared of 51% attacks but with the negative mining fees, the growth rate would have only slowed down, not completely reverse. The change was very abrupt too; it had happened in a period of only 45 minutes and had continually declined since the 10th. Cody got a sinking feeling in his gut. He suddenly knew. Oakmine’s hashrate hadn’t decreased; it had increased. The company was concealing the fact that they were hashing at a higher rate than they were advertising. They had to be paying someone to sign blocks effectively laundering them and hiding them from the public. “Oh God, this isn’t happening,” said Cody as he quickly opened a draft on Cryptocoins News. “Attack imminent: Get off Oakmine NOW” he titled the post. Cody scrambled to type up the paragraphs. He posted what he thought was happening and pictures of the hashrate not matching the blocks mined by the margin that was just slightly too high to be bad luck. It was all he could do. He clicked publish and posted the crudely constructed article to Cryptocoins News. If he were wrong, his boss would give him hell about this. Almost instantly, the negative comments began rolling in as people discarded the article as complete garbage. The Oakmine merger was scheduled to commence in less than 15 minutes now. The article had no effect on it and people saw it as a way for Cody to get back at Oakmine for denouncing his claims. Cody’s boss had the article taken down and demoted Cody’s account to contributor status, removing his ability to self publish. He would talk to him later; it was too big of a moment to waste time on discipline now.

12:00 PM, November 17th 2014

The purchase was quick, and both Oakmine and the exchange owner announced that it was complete. Cody watched the coverage on both sites and felt his heart leaping into his throat. 2 confirmations. 3 confirmations. 5 confirmations. 7 confirmations. The exchanges were now in the hands of Oakmine. Oakmine’s page displayed an array of firework’s animations as scrolling text announced the merger on the top of the page. All accounts on the exchanges were now under the control of Oakmine. All funds and users remained the same; the exchanges were just under new management. The servers had been quickly migrated and were now under the control of Oakmine. The next hour went by in the blink of an eye; the events cascaded, and mass panic spread.

The attack commenced on 9 confirmations of the transaction; Oakmine broadcasted another chain in which the massive transaction had never taken place. Later that week, it would be uncovered that Oakmine Controlled 68% of the mining network at the time of the attack. The double spend transaction was easy and took only a few minutes for Oakmine to accomplish with their staggering hashrate. The next series of events happened even faster. Oakmine froze all accounts in the exchanges they now owned and moved them into hot wallets. Oakmine then liquidated all of their Bitcoin holdings into fiat currency very quickly on several exchanges. Oakmine undersold each bitcoin by about 5% allowing buyers to instantly buy their entire stock. The total value of the stolen Bitcoins and all company assets amounted to over 900 million dollars. By the time all of these transactions were complete, the money was already successfully laundered and stored safely in a bank account which would never be confiscated by the authorities. The public was completely unaware of what had happened. A few hiccups were anticipated as the servers were migrated. After 30 minutes, people began to worry about it, there had been no announcement about the issues.

The next event caused mass panic and the crash of Bitcoin. Oakmine posted an announcement on their website which read:

“We regret to inform you that all funds have been lost, Oakmine will be permanently shutdown”

Everyone flocked to the exchanges and either tried to withdraw everything or sell everything. The price of Bitcoin was nosediving, losing at least $10 of value every minute. Several exchanges froze accounts; others were overloaded, and the servers shut down due to the massive flux of traffic. By the end of the day, one Bitcoin was worth $2.00 USD and almost every exchange had shut down. Altcoins now had no value as there was nothing to trade against. In a single day, Oakmine had destroyed 6 years of work and gotten away with over 900 million dollars worth of stolen assets. Hector Stephens had never existed; the company registered in Sweden was tied to Simon Barnes, who took the fall for the entire event, yet had none of the assets and was not involved in the global theft. Everything was gone; any remaining Bitcoins were now practically worthless and the chance of recovery was very unlikely. The events had happened so fast that the Bitcoin Foundation had no time to respond. It was the end of Bitcoin.

1:00 PM, October 8th 2021

Josh Loaded the last box onto the truck; he was moving out after graduating college as a Business major. He was ready to start his new life and had landed a job at a business firm in marketing. As he walked out to the car, the bottom of the box collapsed spilling out the contents in the front yard. Several coins, pencils and pens, and other ‘junk’ clattered to the ground with a dull thud. A small Altoids container lay on the upside down and open on the yellow grass. Josh reached and picked it up and watched as a small roll of paper fluttered to the ground. He unrolled the paper that had slightly frayed edges. It was a paper wallet, one he had made a long time ago. The front of it had a little box which he had written in .1 BTC in black ink that was fading. He looked at it with mixed emotions as if questioning its existence then threw it back in the box with the rest of his stuff and loaded it in the Truck.


This is a scenario in which Bitcoin could collapse. It is the responsibility of Miners and pool owners to maintain the network’s integrity and avoid the concentration of mining power in one location. Though it is very difficult, it is possible for a pool to hide their blocks found by having another party sign the blocks under another name. The margins of blocks found with the hashrate needs to be watched to avoid the events that happened in this story. The probability of a successful double spend transaction increases as total a party’s total hashrate percentage increases. The transactions also get harder to reverse the more confirmations they have.

The instant transfer of multiple exchanges for Bitcoin without any legal contracts is also unlikely, especially if the exchange is a registered business in a country. There would be many forms to fill out and the process would take days if not weeks. If the exchanges were owned by negligent owners such as the one in the story, a crash like this could occur.

In conclusion, the integrity of Bitcoin is up to the users. The responsibility of a stable network is the responsibility of the miners. The events of the story are very unlikely, and with an informed Bitcoin community and responsible miners, these issues should never arise. Thank you for reading my story. I hope you have enjoyed it. Special thanks to /u/PotatoBadger on reddit for helping me with my research on the probability of these events. Once again, this story is not intended to “bash” Bitcoin, I am fully invested in Bitcoin. The purpose of the story is to reiterate the need for responsible mining practices for both miners and mining pools.

Featured image by Shutterstock.

Last modified: June 8, 2014 00:27 UTC

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