Many people ask “what backs bitcoin?” and it confused me. Some people still think our fiat currency is still backed by gold or silver. Rather it is backed by trust in government. In any case, the main argument here is that although there are a limited number of bitcoins, there can be an infinite number of identical altcoins and effectively you can subvert the rarity. And here Proof of Work coins prevent this. Every transaction requires to spent energy to confirm and be mined into the blockchain. That is energy which very fundamentally is scarce.
This security model used and in this way, bitcoin is backed by energy. What this means for many different PoW coins is that although an infinite number of coins can exist, they cannot have the same security. If a miner has X amount of energy to mine, they can mine bitcoin or another coin, but not both.
- Bitcoin has ~99% of the hashrate for the hardware available globally that can efficiently do SHA-256 (SHA-256 ASICs)
- Litecoin has ~90% of the hashrate for the hardware available globally that can efficiently do Scrypt (Scrypt ASICs)
- Ethereum has ~25% (educated guesstimate) of the hashrate for the hardware used in crypto mining that can do Ethash (GPUs)
- ZCash has ~40% to ~55% (educated guesstimate) of the hashrate for the hardware used in crypto mining that can do Equihash (GPUs).
Bitcoin network is protected by 2,500,000 Th/s, of which to be able to attack for the purpose of double spending against is something that requires another 2,500,000 Th/s, which would be the equivalent of 180,000 Antminer S9s.
So simply, this would mean Bitcoin is backed by the friction involved in acquiring control of $360M worth of mining hardware. You need control of ~51% for use on mining a private chain to attack, … so that’s $360M. The problem is, there just isn’t $360M of Antminer S9s (or equivalents) available for sale, even if you had $360M.
