- Bank for International Settlements (BIS) released a new paper, which argues that Satoshi’s updating process has two limitations: high transaction costs to ensure payment finality and that the system cannot generate transaction fees in line with the goal of guaranteeing payment security
- BIS says that proof-of-work can only achieve payment security if mining income is high, but the transaction market cannot generate an adequate level of income
- BIS says that the users are free riding on the security provided by the transaction fees of other transactions in the chain, which makes the transaction market unable to generate an adequate level of “mining” income
Raphael Auer, Principal Economist of Monetary and Economic Department at the Bank for International Settlements (BIS), wrote a paper titled “Beyond the doomsday economics of “proof-of-work” in cryptocurrencies.”
BIS, an international financial institution owned by central banks, has traditionally been quite critical of Bitcoin and cryptocurrencies in general. Agustín Carstens, General Manager of the BIS, gave a speech in July titled: “My message to young people: stop trying to create money.”
The paper starts with showing how the popularity of Bitcoin and other cryptocurrencies soared in late 2017, outstripping interest in sovereign currencies, or even gold.