Chicago Booth Review Podcast
Why Bitcoin will fail
Dec 18, 2024
Eric Budish, a Professor at Chicago Booth known for his market design expertise, delves into the vulnerabilities of Bitcoin's decentralized structure. He argues that while blockchain offers innovative data integrity, its open nature invites sabotage. The discussion highlights the high cost of securing Bitcoin at scale, limiting its potential to replace traditional currencies. Budish also weighs his critical stance amidst a crypto-celebrating landscape, exploring the economic flaws and security challenges that underpin the cryptocurrency ecosystem.
28:11
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Quick takeaways
- Bitcoin's decentralized trust model is vulnerable to sabotage, limiting its potential to replace traditional currencies at scale.
- The economic structure of Bitcoin raises concerns about its long-term viability, particularly as miner rewards decline over time.
Deep dives
The Vulnerability of Bitcoin's Trust Model
Bitcoin operates on a system where anyone can enter with immense computational power, inviting the question of what incentives a bad actor might have to attack the system. The decentralized nature of Bitcoin's blockchain should promote trust, but it simultaneously exposes vulnerabilities that risk sabotaging its potential to replace traditional currencies. The model relies on proof of work as a security guard, yet if a malicious actor can amass more computational power, they could manipulate the data and commit fraud. This highlights a critical limitation: as Bitcoin's usage scales up, the resources required to secure the network grow linearly, making it economically unfeasible to maintain robust security.
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