# Is Bitcoin’s Design Compatible with its Goal?

1 Research Highlights May 2, 2022 ![headshot of professor kose john](/sites/default/files/styles/246w/public/assets/images/kose%20john%20headshot%20230x260.png?itok=Eq9Isi1C)> Bitcoin’s design is incompatible with its goal, thereby ensuring that limited adoption is an inevitable outcome of this particular payment system in its current state.

**Overview**: In “[Bitcoin’s Limited Adoption Problem](https://www.sciencedirect.com/science/article/pii/S0304405X22000198),” NYU Stern Professor [Kose John](https://www.stern.nyu.edu/faculty/bio/kose-john) and PhD student Franz Hinzen along with co-author Professor Fahad Saleh (Wake Forest University) investigate why Bitcoin has thus far fallen short of its goal to be a widely-used decentralized payment system.

**Why study this now**: While the significance of blockchain has grown dramatically in recent years, there remains a question regarding whether the most prominent blockchain, Bitcoin, can achieve its initial vision. Bitcoin was introduced with the goal of becoming a widely-adopted and decentralized payment system, but user adoption of Bitcoin as a payment system remains limited even a decade after its birth. These researchers examine the reasons behind the limited usage.

**What the researchers found**: - Increases in Bitcoin usage imply increases in congestion among transactions competing for space on the Bitcoin blockchain.
- Those increases in congestion induce higher transaction fees and longer wait times.
- Bitcoin fails to achieve widespread adoption because the fees and wait times that would arise under such adoption are not competitive with traditional payment systems.
- Traditional payment systems can alleviate congestion by speeding up transaction processing, but Bitcoin’s decentralized design precludes speeding up its transaction processing sufficiently to make it competitive with traditional payment systems.

**Key insight**: Bitcoin’s design is incompatible with its goal, thereby ensuring that limited adoption is an inevitable outcome of this particular payment system in its current state.

**What does this *change***: Since Bitcoin is not effective as a payment system, its native asset BTC should not be viewed as a currency. Rather, BTC is best viewed as a speculative asset that may have some diversification value to investors. As it pertains to Bitcoin's initial vision, there are a variety of more modern blockchains that are better suited to processing transactions expediently. Of particular note are blockchains that replace Bitcoin’s energy intensive Proof-of-Work with a design known as Proof-of-Stake.

**Final takeaways**: “As a practical matter, our findings establish that Bitcoin is unlikely to become widely adopted as a payment system across the world, as initially hoped,” state the researchers.

This research has been published in the *Journal of Financial Economics*.