Bank For International Settlements Claims Bitcoin Can Break The Internet
The Bank for International Settlements (BIS) which is the financial oversight firm operated by central banks from all over the world recently released a report in which it pointed out that Bitcoin might break the internet at some point.
The financial oversight organization released the 24-page report as part of its economic report which it releases on annual basis. This time there was a particular focus on the cryptocurrency market and its impact on the financial market. The report says that cryptocurrencies are not ready to go mainstream due to numerous weaknesses that prevent them from reaching the promises that made them popular in the first place.
According to the report, Bitcoin (BTC) might cause the internet to crash if it were to be used to process all non-cash retail transactions taking place in the U.S. This is due to one of the underlying flaws of Bitcoin’s blockchain which is the lack of scalability. Processing Bitcoin transactions requires a lot of computing power the scalability problem also manifests in the limited number of Bitcoin transactions that the blockchain can handle per second.
BIS argues that the more adoption of Bitcoin as a means of payments would eventually overwhelm the blockchain system and the limit on the number of transactions would eventually slow down the network. This means that the efficiency of the system would be compromised.
The Switzerland-based organization reported that it also carried out an evaluation of what would happen if Bitcoin’s blockchain software was to handle all the retail transactions in the national payment systems. The researchers found that things would eventually reach a critical point where everything handling such transactions including servers and smartphones would be overwhelmed, bringing the internet to a halt.
According to BIS researchers, the cryptocurrency mining situation has also been stressing resources. According to the BIS report, cryptocurrency mining consumes the same amount of electricity as Switzerland’s electricity consumption. This means resources end up getting stretched, thus risking an environmental disaster unless miners start using renewable energy.
The BIS does not believe that cryptocurrencies are an ideal substitute for fiat currencies and it even cited some other major reasons such as volatility in its report. The financial organization also believes that decentralization is one of the biggest reasons why cryptocurrencies will not succeed in the mainstream. It argues that currencies need to be centrally controlled in order for them to work efficiently.