Published: Wed, June 20, 2018
Hi-Tech | By Grace Becker

"Banker to Banks" Says Bitcoin could Break Internet, has Shortcomings

The reason for this claim is based on how Bitcoin and other cryptocurrencies track transactions, which is that all transactions are added to a ledger.

Over the weekend, Bank of International Settlements in Switzerland released a report that stated that cryptocurrencies would never be able to take place of fiat currencies. The size of the individual record of data grows with each additional transaction. Cryptocurrencies can not scale with transaction demand, are prone to congestion and greatly fluctuate in value.

"But the issue goes well beyond storage capacity, and extends to processing capacity: only supercomputers could keep up with verification of the incoming transactions.The associated communication volumes could bring the internet to a halt", it said. At one point in December past year, fees were as high as US$57.

The report noted that regulatory challenges also need to be addressed with respect to cryptocurrencies, such as anti-money laundering and terrorism financing.

Additionally, BIS estimates that coin miners that help verify and process the transactions consume as much energy as Switzerland. "Put in the simplest terms, the quest for decentralized trust has quickly become an environmental disaster", they said. In a speech last week, an official of the US Securities and Exchange Commission said the Authority decided that Ethereum - a famous digital currency - cannot be recognized as a premium.

The Bank for International Settlements is not backing Bitcoin. The high volumes of such activity led these regulatory bodies to caution new users.

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As per a report by Coindesk, the thought that "many cryptocurrencies are ultimately get-rich-quick schemes." would be the prime focus of this upcoming report.

While the BIS was harsh on cryptocurrencies, it saw distributed ledgers more positively, writing that "the underlying technology may have promise in other fields".

In particular, the report stated that global financial transactions can become much more efficient and easier thanks to the blockchain.

Distributed ledger technology can facilitate cross-border payments, as well as help niche fields "where the benefits of decentralized access exceed the higher operating cost of maintaining multiple copies of the ledger".

The report's authors were unimpressed, detailing a range of problems with trying to adopt cryptocurrencies as a widely used form of money.

While many are hailing the use of cryptocurrencies such as bitcoin, Ether and Litecoin as the future of mainstream transactions, BIS suggests that perhaps it poses simply too many risks in order to make it a viable way to exchange money.

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