Bitcoin Should Veer Away from PoW, Says BIS

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Bitcoin (BTC) problems are only solvable by departing from proof-of-work (PoW) system, according to research published by the Bank for International Settlement (BIS) on January 21.

bitcoin concept on top of keyboard

According to the paper, when 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 low that it would be virtually unusable.

“Simple calculations suggest that once block reward are zero, it could take months before a bitcoin payment is final, unless new technologies are deployed to speed up payment finality,” BIS said.

The study further notes that while second layer resolutions like the Lightning Network could help, “the only fundamental remedy would be to depart from proof-of-work.” Such a departure, based on the report, would “probably require some form of social coordination or institutionalization.”

The document’s overall conclusion is that, according to 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 BIS report that was published on January 8 found that 70 percent of central banks around the world are performing research into central bank digital currency issuance.

Another report from BIS in September last year found a strong correlation between crypto prices and news of regulatory intervention globally.

Meanwhile, cryptocurrencies are seeing price weakness across the board, with virtually all of the top 100 coins by market cap tipping into the red. The top ten coins have lost between 3 and 7 percent on the day, as data shows.

Bitcoin is down about 4 percent on the day, slipping from 24-hour high of $3,755 to its current price point of around $3,570.