Bank for International Settlements Says Bitcoin Must Drop Proof of Work

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The Bank for International Settlements (BIS) has published a report in which it has suggested Bitcoin’s issues can be resolved with it moving away from its current Proof of Work (PoW) system.

The publication is based on the opinion on that as block rewards fall, there will come a time when the generation of new Bitcoins will be so low in number that miners will not be able to earn enough to run their computers. Transaction fees will not be feasible too, according to the organization: “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 organization, though, accepts that the Bitcoin network has solutions like the Lightning Network, which it says is “the only fundamental remedy would be to depart from proof-of-work” and this would “probably require some form of social coordination or institutionalization”.

The Swiss-based organization has been taking keen interest in Bitcoin lately. It is not only looking at the adoption and development of the cryptocurrency globally but with this latest report, claims to understand it too.

Bitcoin PoW, although energy intensive, is unlikely to be its death, however. The BIS conclusion does not account for the limited issuance model of the currency. Simple economics dictate that a lowering supply against the demand will only raise the price of Bitcoin, countering the lower block rewards.

Additionally, institutionalization by the world’s largest cryptocurrency would mean turning Bitcoin towards centralization, which goes against the fundamental building block of the currency of no single entity or a group holding authority over it.

 

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