BIS Says Bitcoin Unstable, Has Design Flaws, High Energy Costs & Fraud Problems
The Bank of International Settlements just released their annual economic report, and the part that is getting the most attention is a 24-page article that discusses the viability and life of the crypto world. In this report, they stated that Bitcoin and similar currencies have “a range of shortcomings” that stand in the way between their ability to become an asset class in its entirety.
This institution is almost 90 years old and is in Switzerland, where they operate as the central bank of many others. Their reasoning for believing that they will never reach a class status is due to the overuse of electricity, instability, and their susceptibility to fraud. They make a fair point, considering the decentralization of the funds and the fact that the companies are entirely digital could make them more weak than strong.
One of the major findings of this report is during their analyzation of what crypto companies would have to do to process POS and retail transactions in the same way that fiat currency can. They found that the size of the ledgers alone would be overwhelming for all associated devices, from cell phones to servers. According to the report, “The associated communication volumes could bring the Internet to a halt.”
In the research, they also found that the competition between miners during processing uses an equivalent level of energy that all of Switzerland. Essentially, they’ve developed “an environmental disaster.”
This is a major moment in the crypto world, during which time the industry could go one of two different directions. While other financial exchanges are attempting to offer a renewed marketplace for investors and consumers, they also are under attack by the U.S. Securities and Exchange Commission.
The US SEC is presently working to shut down some new digital tokens being developed, which are muddled with potential fraud and theft. To make matters worse, hackers are still pushing to infiltrate wallets and steal from platforms with weak defences. Cryptocurrency and the market have plummeted dramatically in 2018 so far, bringing the entire industry down by 53% in revenue, according to reports by CoinMarketCap.
Not everything has come with threats and disadvantages. Some of the blockchain technology and other developments have made cross-border payments simpler for users, while trade finance and other companies with letters of credit have developed beneficial records with the use of blockchain.
Even with something as helpful as blockchain technology, cryptocurrency clearly has a lot of risks. With so much to lose, it’s impossible to see cryptocurrency having the financial takeover that it appears investors hope for.
The report concludes with this sentiment:
“Trust can evaporate at any time because of the fragility of the decentralized consensus through which transactions are recorded. 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.”