A Bank of Canada report reveals that crypto mass payments is the best of option for retailers. The report dubbed “The Economics of Cryptocurrencies—Bitcoin and Beyond” was recently posted unveiled by the Bank of Canada.
The report features the Bitcoin (BTC) cryptocurrency and contains an explanation about the toughness and security of the blockchain network and how they manage to attain these characteristics.
It is more difficult to attack larger blockchain networks as the process becomes more expensive; thus, sizeable networks make cryptocurrencies less susceptible to the danger of an attack.
Why are crypto mass payments the best?
The report suggests that more expensive means of mining the cryptocurrencies dissuade attackers to double-spend on transactions, regardless of the number of transactions. While the volume of mining grows with net rewards, this makes funding rewards a lot easier to ensure a secure system.
Although, it is quite different for smaller cryptocurrencies as they do not result in bigger rewards, which puts them at the risk of attacks, in which the individual double-spends on transactions.
Crypto mass payments will prove to be more efficient for systems that are based on a large number of payments that have smaller values, while they will prove to be ineffective and expensive for fewer transactions that have more value.
Bitcoin (BTC) is very expensive and inefficient when it comes to the long-term mining of the cryptocurrency. This can be changed by reducing the transaction fees, making the rate of coin creation efficient and optimized, or even altering its consensus protocol. These changes will allow BTC to compete with common financial systems.
The report explains that the cryptocurrency wasted a lot of its resources to prevent double-spending attacks. The loss generated by BTC is nearly five hundred (500) times larger than the loss generated by the traditional economy, with two percent (2%) inflation.
Similar to the long-run structure of BTC, if the growth rate is reduced to zero (0) and the system relies on hefty transaction charges, these expenses should be decreased, but the cryptocurrency’s favorable design will imply bigger losses.
The very design of Bitcoin will result in a loss of under one percent (0.19%) for its best allocation. If compared to financial systems, this would be equal to a loss that resulted from an inflation rate of nearly forty-five percent (45%).
The authors of the report, Jonathan Chiu and Thorsten V. Koeppl explained that the report is based on their personal views, and the views may support or go against the Canadian bank’s policy.