A recent report from the Bank of International Settlements has cast a spotlight on the efficacy and longevity of the proof-of-work consensus and the future of Bitcoin.
With a big focus on the economics of Bitcoin, the author examines how Bitcoin creates an immutable record of payments via PoW and goes into great depth examining data tied to transaction fees and block rewards, as well as the future potential of this method.
In essence, the author suggests that a 51 percent attack by malicious miners is inherently profitable, using assumptions based on various economic considerations of Bitcoin mining.
This is due to the way in which transaction fees work in the Bitcoin protocol.
With these two considerations, the report predicts that liquidity is set to drop in the coming years, as there is less incentive for miners to actively maintain the Bitcoin blockchain.
Part of the writer's argument assumes that once Bitcoin miners can no longer earn BTC rewards for unlocking a block, they won't be able to make enough income on transaction fees alone.
The reward for doing this work comes in the form of transactions fees and a certain amount of Bitcoin, which is awarded to the miner who unlocks a block.
The Bitcoin reward for mining a block also halves every 210,000 blocks and, as it stands, miners receive a 12.5 BTC reward for unlocking a new block.
"The more FUD that is published by legacy financial institutions, the more bullish I become. Bitcoin definitely has risks and challenges ahead, but this report does not give an accurate representation of them."
The BIS report also suggests that the future of Bitcoin's success and longevity could lie in the use of some sort of centralized system.
BIS Report Questions Longevity, Efficacy of Proof-of-Work Based Cryptocurrencies
gepubliceerd op Jan 27, 2019
by Cointele | gepubliceerd op Coinage
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