According to research conducted by the Bank for International Settlements, Bitcoin’s problems are only solvable by departing from proof-of-work.
According to the paper, when in the future Bitcoin’s block rewards fall to zero — given that only a limited number of new Bitcoin will ever be created — transaction fees alone will not be able to sustain mining expenses. The argument implies that the Bitcoin network would become so slow that it would be virtually unusable, stating:
“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 could help, “the only fundamental remedy would be to depart from proof-of-work.” Such a departure, according to the report, would “probably require some form of social coordination or institutionalisation.”
The document’s overall conclusion is that, according to the researchers, “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 account for 95 percent of global GDP.
Another report published by the BIS in September last year found a strong correlation between crypto prices and news of regulatory intervention globally.