• 93 days Could Crypto Overtake Traditional Investment?
  • 98 days Americans Still Quitting Jobs At Record Pace
  • 100 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 103 days Is The Dollar Too Strong?
  • 103 days Big Tech Disappoints Investors on Earnings Calls
  • 104 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 106 days China Is Quietly Trying To Distance Itself From Russia
  • 106 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 110 days Crypto Investors Won Big In 2021
  • 110 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 111 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 113 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 114 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 117 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 118 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 118 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 120 days Are NFTs About To Take Over Gaming?
  • 121 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 124 days What’s Causing Inflation In The United States?
  • 125 days Intel Joins Russian Exodus as Chip Shortage Digs In
China Has Set Out To Crush Crypto...Again

China Has Set Out To Crush Crypto...Again

The People’s Bank of China,…

Are NFTs About To Take Over Gaming?

Are NFTs About To Take Over Gaming?

Gamers are spending billions on…

Jan Bauer

Jan Bauer

Staff Writer, Safehaven.com

Jan is a writer for Safehaven.com She has 15+ years experience in FX trading and focuses on crypto currencies, FX, gold and silver investments

Contact Author

  1. Home
  2. Cryptocurrencies
  3. Other

Could Bitcoin Break The Internet?

No Internet

There’s one big reason that Bitcoin can’t replace fiat currencies any time soon: They would take down the entire internet, according to a Swiss-based group that represents global central banks.

Switzerland’s Bank for International Settlements (BIS) said in a report released Sunday that any attempt to process all payments in Bitcoin as a new currency replacing traditional currencies “could bring the internet to a halt”.

Furthermore, suggests BIS, it’s definitely not time to give up on central banks because the promise of decentralized trust is a crypto illusion.

While cryptocurrencies promise trust that bypasses the whims and agendas of banks and sovereign nations, there are some gaping holes, according to the report.

“Cryptocurrencies such as Bitcoin promise to deliver not only a convenient payment means based on digital technology, but also a novel model of trust. Yet delivering on this promise hinges on a set of assumptions: that honest miners control the vast majority of computing power, that users verify the history of all transactions and that the supply of the currency is predetermined by a protocol,” BIS writes, suggesting that this onerous process may not always be efficient, and trust may be more elusive than we think.

BIS also lashed out at the massive energy use for mining cryptocurrencies.

“At the time of writing, the total electricity use of bitcoin mining equaled that of mid-sized economies such as Switzerland […] Put in the simplest terms, the quest for decentralized trust has quickly become an environmental disaster.” Related: Crypto Heists Are On The Rise

But while even the mention of the “environment” or “energy” can put the average die-hard bitcoin bull to sleep, the underlying economics might garner a response.

And it comes down a cost: "Just imagine, if you bought a $2 coffee with bitcoin, you would have had to pay $57 to make that transaction go through," BIS head of research Hyun Song Shin said.

According to BIS, bitcoin as a form of currency has three key shortcomings: scalability, stability of value and trust in the finality of payments.

And in order to process our current level of digital retail transactions with bitcoin alone would see the size of the ledger “swell well beyond the storage capacity of a typical smartphone in a matter of days”. From there, it gets worse—fast.

It would fill up a PC in a matter of weeks, and servers in a matter of months. After that, it would be a game that only supercomputers could handle. Nothing else could come close to keeping up with the verification process for all the transactions. And then, we lose the internet, brought down by communications overload “as millions of users exchanged files on the order of magnitude of a terabyte”.

But while cryptocurrencies may have no real future in terms of replacing fiat currencies, the underlying blockchain technology that makes them possible holds great promise, the bank said.

More specifically, BIS sees promise in the overall idea of Distributed Ledger Technology (DLT), pointing to lower-volume cross-border payment services that can be more efficient than mainstream centralized solutions and make operating costs cheaper.  

By Jan Bauer for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment