Bitcoin and related cryptocurrencies are exchanged via simple technical protocols for communication between participants, as well as a publicly shared ledger of transactions known as a blockchain. This column discusses research on how cryptocurrencies verify that payments are final, that is, that they are irreversible once written into the blockchain. It points to the high
The first limitation is that proof-of-work axiomatically requires high transaction costs to ensure payment finality.
In order to prevent liquidity from ebbing away, Bitcoin and other cryptocurrencies would need to depart from using proof-of-work – a system that is not sustainable without block rewards – and embrace other methods for achieving consensus on blockchain updates
Judging based on the current technology, the overall conclusion is that in the digital age too, good money is likely to remain a social rather than a purely technological construct
The fee sum of transactions needs to be high enough, each individual transaction does not need to be high.
It is not necessary to switch from POW to POS even if fees gets smaller by introducing a tail emission that does not decrease if block rewards get to small to deter attacks and double spends.
Something like switching from POW to POS would be an example of the social mechanism instead of the technological deciding.