F39 - International Finance: OtherReturn

The research and investment community seems to ignore the long-term sustainability of Bitcoin, which is reflected in four flaws: transaction fees, miners' revenue, concentration and electricity consumption. While most of the authors have aimed to examine one topic at a time, with a particular interest in electricity consumption and carbon footprint, the aim of this paper is to examine all these issues simultaneously to provide a more comprehensive view on long-term sustainability of Bitcoin. This paper looks at these flaws and reveals why Bitcoin is not sustainable in the long run, how decentralization is being lost, how the design is putting artificial and unrealistic pressure on the ecosystem, while all being powered by an unjustifiable amount of dirty electricity sources. Our main findings are as follows. Firstly, transaction fees are already high and set to increase in time, further discriminating small transactions against big ones. Secondly, miners' revenue comes mostly from the block reward. The block reward is the main income source for miners, but is set to be cut on a regular basis, making miners' revenue not sustainable in the long run. Thirdly, miner concentration is already an issue, with a possibility of deepening even more and diminishing the idea of decentralization. Fourthly, the high electricity demand and the associated carbon footprint thus cannot be justified by any means. We deem our results useful for overall policy and regulatory implications.

Real convergence is the key economic challenge for the new EU Member Countries. The main growth area today is the "new" entrepreneurial economy of creativity and innovation. But such an economy needs a financial structure capable of coping with the higher risk inherent in the "new" economy. To provide such a financial structure, the financial markets must be broad, deep and liquid, i.e. financial markets must be large enough to provide this financial structure. Hence, the financial integration became an imperative for the new Member Countries. But this integration process possesses both economic and political challenges and dilemmas. Answers to those challenges and dilemmas will then determine the degree of real convergence - and hence the degree of economic success - for each new Member State.