The report takes a deep dive into the economics of Bitcoin. Implications for altcoins, by extension, are drawn. While the future of Bitcoin is considered highly uncertain, it has paved the way for innovation in efficient payment systems more fitting for a technologically advanced world.
Other key points:
– Some of the features built into Bitcoin’s design have hampered its ability to function as fiat money.
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– Theories of financial intermediation can be used to explain how bitcoin processing has evolved and how it will evolve in the future.
– Mining operations can be considered highly inefficient and may one day prove unaffordable.
– Pooled mining is more efficient and operations naturally gravitate toward fewer “coalitions”. This form of “centralization” may be problematic to the network’s integrity down the road.
The paper does make the disclaimer that the views expressed are those of the authors and do not necessarily concur with those of the Federal Reserve and related bodies.
In April, the St. Louis Fed also weighed in on Bitcoin, concluding that it and gold make lousy money.