In a 24-page detailed article released by Bank for International Settlements, as part of its annual economic report, has said Bitcoin and other cryptocurrencies suffered from “a range of shortcomings” and will never be able to take place of fiat currencies. Anecdotally it also called cryptocurrency as “A new petal in the money flower”
Soon breaking the internet
The report, while assessing the economic limitations of permissionless cryptocurrencies, has put forward that the current infrastructure of internet is inadequate for cryptocurrency to become everyday means of payment the report states that cryptocurrencies simply do not scale like sovereign money as every transaction user to download and verify the history of all transactions ever made, including amount paid, payer, payee and other details. With every transaction adding a few hundred bytes, the ledger grows substantially over time. For example, at the time of writing, the Bitcoin blockchain was growing at around 50 GB per year and stood at roughly 170 GB.
To process the number of digital retail transactions currently handled by selected national retail payment systems, even under optimistic assumptions, the size of the ledger would swell well beyond the storage capacity of a typical smartphone in a matter of days, beyond that of a typical personal computer in a matter of weeks and beyond that of servers in a matter of months and with these volumes the internet could come to a halt. Below are the energy consumption charts that tell the story
Blockchain interests where cryptocurrencies fail
In the section “Beyond the bubble: making use of distributed ledger technology” of the report, the BIS clearly recognizes the blockchain technology. It says while cryptocurrencies do not work as money, the underlying technology may have promise in other fields. The software can make sending cross-border payments more efficient, for example. And trade finance, the business of exports and imports that still relies on faxes and letters of credit, was indeed ripe for the improvements offered by Blockchain-related programs.
Still, the institution concluded that Bitcoin’s great breakthrough, the ability of one person to send something of value to someone else over an email or an electronic mode could to quote from the report it says “Trust can evaporate at any time because of the fragility of the decentralized consensus through which transactions are recorded,” the report concluded.
“Not only does this call into question the finality of individual payments, it also means that a cryptocurrency can simply stop functioning, resulting in a complete loss of value.”
Will this report dampen the interest of institutions in cryptocurrencies? Do let us know your views on the same.