As Bitcoin has risen in value throughout 2017, there’s been an increase in calls for regulation of the digital currency space. Various governments around the world have moved to change laws and regulations to provide some level of control over the industry. According to a group of economists at the Bank of Finland, however, those regulations might be unnecessary.
In a recently-released paper examining Bitcoin’s economic system, those economists describe how Bitcoin differs from the kind of monopolies that typically require government regulation to prevent abuse:
“Bitcoin is a monopoly run by a protocol, not by a managing organization. Familiar monopolies are run by managing organizations with discretion to determine and then change prices, offerings and rules. Monopolies are often regulated to prevent or at least mitigate their abuse of power.
Bitcoin is not regulated. It cannot be regulated. There is no need to regulate it because as a system it is committed to the protocol as is and the transaction fees it charges the users are determined by the users independently of the miners' efforts.”
The paper offers an interesting look at Bitcoin as an economic model, examining things like miner and user behavior, social cost, waste, and the system’s stability. It even delves into the congestion issue and explores how various solutions might impact the overall system. Ultimately, the authors conclude that the world’s most well-known digital currency is a “revolutionary” economic system that economists should be encouraged to study.