Cryptocurrency Not Scalable Enough to Replace Fiat, Claims BIS Report
The BIS (Bank of International Settlements), a financial institution run by world’s central banks, questioned the scalability of cryptocurrency in its newly published document yesterday.
The article titled “Cryptocurrencies: Looking Beyond the Hype” explains the history behind the blockchain technology and analyzes its future prospects. The release of this document precedes the institution’s annual economic report scheduled for next week.
The bank’s report points out some issues with cryptocurrencies, which include volatility, scalability, hard forks, mining concentration, and proliferation of new cryptocurrencies. With this, the report concludes that the underpinning technology of cryptocurrencies is a poor substitute for the solid backing of central bank money.
The bank also claims that using a blockchain to process a large number of retail payments every day “could bring the internet to a halt”.
The report further explains:
“To process the number of digital retail transactions currently handled by selected national retail payment systems, even under optimistic assumptions, the size of the ledger would swell well beyond the storage capacity of a typical smartphone in a matter of days, beyond that of a typical personal computer in a matter of weeks and beyond that of servers in a matter of months.”
While the organization was a bit harsh on cryptocurrencies, it viewed the underlying blockchain technology in a positive light and wrote that the tech may have a promising future in other fields.
Distributed ledger tech can help facilitate cross-border payments, and also help a variety of niches where its benefits exceed a much higher operating cost of maintaining several copies of the ledger.
However, the BIS report noted that a research on various other technologies to achieve the same goals as the blockchain is ongoing, and it is not clear which one would emerge as the most efficient one.
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