Avalanche founder Emin Gün Sirer has predicted that Bitcoin, the flagship cryptocurrency, could face a looming crisis.
The computer scientist is convinced that Bitcoin’s economic design is flawed, and it will suffer in the long term due to insufficient mining rewards.
This, according to Sirer, poses a much bigger threat to the leading cryptocurrency than the much-dreaded quantum computing threat or competing tokens.
The CZ clickbait
On Saturday, Kalshi Crypto, the crypto-focused account of the popular betting platform, posted a rather sensationalized headline about Binance founder Changpeng Zhao predicting how Bitcoin would eventually get replaced.
However, as it often happens with hype-driven cryptocurrency accounts on the X social media network, the headline was taken out of context. During a May 9 interview with Ran Neuner on Crypto Banter, CZ stated that there was only a theoretical possibility of Bitcoin being replaced in the future by some superior technology, but he has acknowledged that BTC is essentially “global money” as of now.
Zhao has also noted that Bitcoin’s four-year cycle is no longer as important as it used to be due to the influx of institutional capital.
Insufficient rewards
Bitcoin is secured by Proof-of-Work (PoW) miners who expend enormous amounts of electricity and computational power to validate blocks and protect the network. In exchange, these miners are compensated with block rewards and transaction fees.
However, Bitcoin rewards are shrinking dramatically with each halving event.
Hence, naysayers claim that block rewards can no longer cover the immense energy and hardware costs of the miners. The network’s security budget must be funded almost entirely by transaction fees. Miners will be forced to operate at a loss (unless fees become extremely high).
Sirer is proposing a solution utilizing the technology he helped create. Bitcoin could theoretically offload the heavy lifting of transaction validation with a pre-consensus layer. However, such a proposal will certainly not sit well with conservative members of the community.
