A new study by the Bank for International Settlements (BIS) says that virtual money is not ready to become a global currency due to poor scalability, high volatility, and will also lead to an environmental disaster and may even stop the Internet..
The organization is known to be skeptical about cryptocurrencies and is forcing major players to question the adoption of the virtual currency. In the latest report, BIS simulated a situation in which all settlements would be carried out using virtual currencies..
Many popular cryptocurrencies use proof of work to close blocks and build consensus, but right now the Bitcoin network alone uses about the same amount of electricity as Switzerland. Therefore, the bank believes that such a desire for decentralization will soon lead to an environmental disaster..
fragment of the BIS report
Another problem with cryptocurrencies is poor scalability. It should be noted, however, that BIS was keeping track of outdated data as of 2017. In addition, second-tier solutions such as the Lightning Network will enable several million transactions per second..
The report says that the global use of virtual currencies will significantly increase the amount of information in their blockchain and transactions. With a massive transition to cryptocurrencies with existing technology in just a few days, the databases will not be able to be stored in the phones, in a couple of weeks — on a PC, and the servers will no longer cope after a few months. Moreover, the bank believes that only supercomputers will be able to process transfers, and the regular exchange of files of more than a terabyte between users can lead to a stop of the Internet..
In addition to the technical side, BIS indicated that virtual currencies are too volatile, as they are not controlled by a regulator that could stabilize the exchange rate. The organization believes that no protocol improvements and financial engineering will help address this issue..
As a reminder, JPMorgan believes cryptocurrency will flourish.
text: Ivan Malichenko, photo: Visual Hunt, BIS
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