For years, the cryptocurrency market has been buffeted with projections and predictions of doom. We are constantly told that any day now, bitcoin and all its progeny will collapse into the nothingness from whence they came, or something to that effect. These statements and pronouncements have even been famously compiled into a live timeline of obituaries written by commentators who range from strongly skeptical to completely clueless.
The latest attack, however, is not from an ignorant journalist or a hubristic economist, but rather from the Bank for International Settlements (BIS), an 89-year-old institution owned by 60 of the world’s most important central banks. Readers will remember BIS General Manager Agustín Carstens giving his best impression of a cartoon supervillain, urging young people to “Stop trying to create money!” when speaking about cryptocurrencies last year.
In a new report titled “Beyond the doomsday economics of ‘proof-of-work’ in cryptocurrencies,” BIS Principal Economist Raphael Auer has upped the ante even further on bitcoin and cryptocurrencies. The report claims that proof-of-work cryptocurrencies are inherently doomed because the cost of transaction confirmation is prohibitively expensive and miners will leave the market once block rewards are phased out. While on the surface, these may seem like technical critiques that could be debated, a detailed look at them reveals several cracks.