The Economic Limits of Bitcoin

[bosshyip]

http://faculty.chicagobooth.edu/eric.budish/research/Economic-Limits-Bitcoin-Blockchain.pdf

I will caveat this by stating that I am not a economist and have not spent time working through the formulas the author proposes to understand Bitcoin's equilibrium states.

TLDR on the article is that bitcoin does not scale because fees required to secure large value transaction, consistent with Bitcoin as a store of value, destroy it's use case for small value payments. The author claims that Bitcoin's economic limit is probably around $1.5-2.0B of value - far far less than the value of digital gold. The author's arguments rely on the potential of a 51% attack to double spend transactions, and the honest income required to offset this risk - the larger the value of the payments, the larger the income required.

At a conceptual level, it makes sense. However, there are developments in Bitcoin, such as layer 2 and sidechains that may solve these issues.

My ask is for a technical/academic person to review this and provide your thoughts so I can more fully understand this paper.