Moreover, J. Christina Wang, a senior economist in the Boston Federal research department, and Stephanie Lo, a Harvard University economist, via the report, note that the cryptocurrency’s decentralized technology could disrupt a current bank-centric payment system which has shortcomings.
Additionally, the report also highlights that despite extreme volatility in its exchange rate, data show that people engaging in Bitcoin transactions, on average, save money over traditional payment methods by avoiding the bigger transaction fees imposed by banks.
The report describes the competition mechanism that has produced a concentration of mining power as one of Bitcoin’s “serious design flaws,” raising concern that reduced profitability for small miners will further concentrate power and could undermine the integrity of the system.
The authors even raise the prospect of regulation to manage the mining network against the likelihood of collusion or other noncompetitive behavior. Otherwise, the report states, Bitcoin design would ultimately fail because of high volumes of data stored on a disproportionate number of mining computer centres.
David Andalfatto, St. Louis Fed Chief Economist has also issued a similar report acknowledging Ripple, a Bitcoin-like crypto-currency, as having embedded a protocol which virtually enables disparate systems to communicate in order to transfer funds and make payments. The report also notes that the protocol does not have enough justification as to claim status for currency, but rather help actual payment methods being integrated into a single channel.
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