Bank for International Settlements Says Bitcoin’s Fatal Flaws Will Doom It
Bitcoin Has A Flaw That Has Doomed It
Bitcoin has been experiencing an important expansion during the last year, its price skyrocketed and everyone wanted to be owner of an entire Bitcoin. But the Bank for International Settlements, also known as the central bank for central banks, compared the famous virtual currency to shells and beads traded in the earliest societies.
About it the bank said that history has seen an important number of currencies and that a lot of them have been buried, and Bitcoin could follow very soon. But the bank showed that there are some issues that would damage the future of this digital currency.
The first one is related to its scalability. Bitcoin has been suffering from scalability problems that have not been fully addressed by the moment, and that may cause several problems to the network in the future.
At the same time, the bank explains that the currency needs an important amount of energy in order to work. For example, Bitcoin nodes that want to be part of the system need to download the whole history of Bitcoin, and the ledger is now 150 gigabytes in size, and in the future that number will be bigger.
Bitcoin is called decentralized because every single node in the system needs to register every transaction that happens in the network, ever. And in this way, it is possible to send and receive Bitcoin without trusting a middleman.
For example, if most retail stores in the United States would start to use Bitcoin, nodes would have to download 100,000 gigabytes of ledger. And if the intention is to add the Euro Area and China, this number can be bigger than 200,000 gigabytes.
“Only supercomputers could keep up with verification of the incoming transactions,” says the BIS. “The associated communication volumes could bring the internet to a halt, as millions of users exchanged files on the order of magnitude of a terabyte.”
In order to scale up, Bitcoin needs important upgrades. And this is what developers are doing with the so called Lightning Network, that would allow Bitcoin to scale up to millions of transactions per second with almost no fees.
How To Maintain Trust
Another important point to mention about Bitcoin is that currencies around the world, in order to survive, need to be trustworthy. It is sometimes hard for business to trust Bitcoin because its price fluctuates at all times. It is possible to have 20% less or more in just some hours or days, which is not good for the overall ecosystem.
In addition to it, the BIS explains that in order to live for 100 years, the technology needs to be resilient. And a surprise failure in the system is still possible.
The question is, why is Bitcoin so popular then? Well, miners get paid every time they confirm transactions and people that own important amounts of cryptocurrencies have an important incentive to believe that it is possible to transform it into the future of money.
It seems that Bitcoin supporters will have to convince the rest of the world that this is the future of money. Some reports believe that if Bitcoin falls it can really hurt the real economy. At the moment, it will have to keep growing and expanding to be tested and used by more individuals and companies.