On Bitcoin’s Fee-Based Security Model — Part 1: Beware The Turkey Fallacy

10,000 and 1 days in the life of a proof-of-work cryptocurrency

Joe Kelly
3 min readNov 12, 2021


Is Bitcoin the most secure and durable money ever? They say it is.

They say it has operated securely for 12 years now — an immutable and uncheatable ledger¹ has been chunking forwards without a hitch for more than a decade — and from this we know it will continue to operate securely in future. The longer it goes without collapsing, the lower the risk. The system has clearly proven itself… it works and there can no longer be any question about that.

Or can there?

Of course there can. You can’t listen to what they say, they’ll say anything. And what they generally don’t say is that Bitcoin massively front-loaded its security assumptions, and its first 12 years of operation don’t really tell us much about the possibility of failure in future, because the system’s economics are set to change dramatically over time.

No-one knows what’s going to happen, but if Bitcoin is going to survive, and remain an immutable and uncheatable ledger, it will have to be operating under radically different conditions in future, inside and out:

  1. Internally, the system must go from paying miners via the issuance of new coins to paying them via transaction fees only (issuance of new coins currently makes up 99% of the security budget and it always has), and this must happen much sooner than most think
  2. Externally, the market around the protocol must undergo a major transformation too: the number of people using Bitcoin, the way they’re using it, why it’s being used, the kind of transactions that are taking place, etc… all of these will have to change unrecognisably from today

Both of these factors, as we’ll see later, have important implications for system security, not just #1. If everything doesn’t work out as needed on both fronts — the way it must — then Bitcoin’s life may be like that of the proverbial thanksgiving turkey, with all the visible signs of its wellbeing trending nicely up and to the right until they’re not.

A Tale of Two Talebisms

‘Antifragile’ is a word that gets thrown around a lot when it comes to Bitcoin, a word introduced to the popular lexicon by Nassim Nicholas Taleb to describe when a complex system benefits from disorder and adversity (e.g. so attacking it only makes it grow stronger).

But perhaps another concept popularised by Taleb — The Black Swan — is more appropriate here. Could Bitcoin suddenly collapse as the result of a disproportionately impactful, hard-to-predict event, hiding out at the edges of what we know about it and expect based on its history?

This series of articles will seek to answer that question, and explore how Bitcoin, despite what they say, and what we’ve seen so far in its brief existence, may yet prove to be an economically unstable object (i.e. not that durable after all).

The first thing we need to get straight from the outset, something that’s almost always missing from discussions about the soundness of Bitcoin’s fee-based security in future, even though it’s crucial, is what actually goes wrong if you don’t have enough security.

So let’s start with that.

Part 2: Security vs. What? →

[1] h/t Allen Farrington



Joe Kelly