The report, which was written by BIS principal economist Raphael Auer, makes the argument that PoW creates inherent costs within the network that might hurt the Bitcoin’s long-term viability.
Auer suggests that when Bitcoin’s block rewards fall to zero in the future, transaction fees would not be able to sustain the expense associated with mining.
Once BTC can no longer be mined profitably, the Bitcoin network would become so slow that it would be almost unusable.
According to the report, “Simple calculations suggest that once block rewards are zero, it could take months before a Bitcoin payment is final, unless new technologies are deployed to speed up payment finality.”
The study further notes that while second-layer solutions like the Lightning Network might be able help.
The Lightning Network is a payment protocol that operates on top of blockchain-based cryptocurrencies, such as Bitcoin. The network allows for fast transactions between participating nodes and has been hailed as a possible solution Bitcoin’s scalability issue.
Though the Lightning Network may offer some relief in transaction speed, the report goes on to say, “the only fundamental remedy would be to depart from proof-of-work.”
The report also notes that such a change would “probably require some form of social coordination or institutionalization.”
Auer concluded that, “in the digital age too, good money is likely to remain a social construct rather than a purely technological one.”
The Switzerland-based BIS is an organization consisting of 60 central banks, which reportedly accounts for 95 percent of global GDP.
A BIS report published on January 8th found that seventy percent of central banks worldwide are conducting research regarding the issuance of central bank digital currencies.
Another report published by the BIS in September 2018 suggested a strong correlation between crypto prices and news of global regulatory intervention.
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