The Bank for International Settlements (BIS) published a report in which the financiers went through the cryptocurrencies and explained why bitcoin is technically not yet ready to become a world currency.
In the sections “Cryptocurrencies: what will happen after the HYIP?” And “Illusory promise of decentralized trust”, experts told that even now, when cryptocurrencies are in the wake of global popularity, new digital money simply can not compete with other financial instruments.
Bank experts say that bitcoin and similar coins suffer from “a number of shortcomings”, including instability, excessive energy consumption, vulnerability to manipulation and fraud.
In a report published on Sunday, the organization explains the technological aspects and analyzes whether a blockchain can really create a form of money that does not require trust. The document precedes the annual economic report of the organization, which will be published next week.
Referring to the hardforks, the concentration of mining, the emergence and rapid spread of new cryptocurrencies, market volatility and scalability issues as the main problems of today, BIS concluded that “decentralized cryptocurrency technology, no matter how sophisticated, is a bad substitute for powerful institutional support for money “.
In addition to the already well-known thesis that in order to maintain a network of bitcoins per year, the same amount of electricity as consumed by the whole of Switzerland, Ireland, Denmark, and other small states, the bank recalls the complexity of cryptocurrency transfers.
The report says that due to multi-level transaction verification, cryptocurrency, it takes a long time to wait until the money passes from wallet to another, and on a world scale such technology can completely overload the Internet servers and electronic devices of users. Moreover, according to BIS, the use of a blockchain to process retail payments on a daily basis “can lead to a stoppage of the Internet.”
“In order to handle the number of digital retail transactions currently being processed by individual national retail payment systems, even under the most optimistic assumptions, the registry size in a few days will significantly exceed the storage capacity of a typical smartphone, for several weeks – a personal computer, and for several months – the size of the servers, “- says the BIS report.
The report also states that only supercomputers have the processing power necessary to conduct each retail transaction on the blockchain and that even if there are enough supercomputers to create a decentralized network, “millions of users will exchange files the size of which will be counted by terabytes.”
It is this huge amount of information that will have a negative impact on the Internet, the authors of the report asserted. Developers of different cryptocurrencies are looking for solutions to these problems, but for now, even the most popular digital money – Bitcoin, Ethereum, Litecoin, – is losing hundreds of times in speed to such giants as Visa, Mastercard and Paypal.
Experts also criticized the miners, noting that their work depends on a number of prerequisites: honest miners must control a huge network of processing power, users should check the history of all transactions, and the currency emission is predetermined by the protocol.
Nevertheless, the bank’s experts stressed that the blockchain system and the technology of the distributed registry behind it can help the world financial system. International transfers and trade business are called as priority areas – while exporting and importing, you still need to rely on faxes and letters of credit, but the blockchain is able to fix it.
Ultimately, the report notes that research continues in other technologies to achieve the same goals as distributed registries, “and it is not clear which of the solutions will be most effective.”
Recall that in March, researchers of the Bank for International Settlements published a report that said that digital currencies issued by central banks could disrupt the stability of the global financial system.
