New Bank for International Settlement (BIS) Research: Bitcoin and Proof of Work Won’t Survive Together
Bitcoin (BTC) has been facing a lot of problems that they soon will need to take action against to keep moving. The digital asset already has a limited supply, as determined when it was originally created. In a report from Bank for International Settlement (BIS), the researchers suggest that the imminent problems with the network would only be solved by departing from the current proof-of-work systems.
According to the paper, the problems should come when the block rewards come to zero since the transaction fees would not be able to cover the expenses associated with mining. Their argument is that the lack of speed on the network would end up having such a significant impact that it would end up being unusable.
Elaborating, the researchers wrote,
“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 also says that there is a chance that using the Lightning Network and other second-layer solutions would help. However,
“the only fundamental remedy would be to depart from proof-of-work.”
To do so, the process would
“probably require some form of social coordination or institutionalization.”
The document’s writers conclude,
“In the digital age too, good money is likely to remain a social construct rather than a purely technological one.”
BIS is a collaborative organization that connects 60 central banks, who essentially control 95% of GDP around the world.
Another report from BIS only two weeks ago found that the majority of central banks around the world are researching the idea of issuing digital currency from their institutions. The bank also published a report in September, suggesting a connection between the reporting of regulatory interventions in various jurisdictions and the changing crypto prices.