Cryptocurrencies such as Bitcoin have started to become extremely popular because of their perceived potential to become a safe and secure market for consumers without having to rely on things such as banks. The rise of other cryptocurrencies and the desire for more businesses to adopt a similar paying pattern has led a lot to believe that cryptocurrencies may be the path of tomorrow. However, some critics aren’t exactly convinced – saying these cryptocurrencies may very well ruin the internet.
A lot of people and industry figures have begun depending more and more on cryptocurrencies as means to make transactions, but there appears to be just as many critics against the idea. Some analysts said crypto, especially bitcoin, may never ever replace traditional currencies and the dollar as “everyday” currency.
The report is courtesy of a group that represents a lot of the world’s major banks, called the Bank for International Settlements (BIS). The Switzerland-based BIS said the interest and hype generated by cryptocurrencies, especially bitcoin, prompted the institution to take a better look at cryptocurrencies and assess their primary contribution to the economy.
Long story short, it’s not exactly as good as it sounds. The authors of the report remain unimpressed, and there appears to be a whole host of problems associated with crypto and an economy’s ability to adopt them as a form of money for financial transactions. Included among the list of risks is the fact that the amount of processing power needed to even assess the payments may bring “the internet to the halt.”
It can be remembered that a huge portion of what makes crypto so attractive and appealing to supporters is the fact that they are decentralized. This means they don’t depend on middle men such as central government banks. In the case of the United States, this is the US Federal Reserve. Rather, records of all transactions are kept on digital ledgers that are regularly updated and are immutable.
However, this very “handy” nature may hold the most risk for crypto users. Since every single transaction available is added to the ledger, the report said bitcoin used for retail transactions worldwide could very easily overload the capacity of computer servers. This means nothing short of supercomputers will be required to make sure incoming payments are verified, and that there’s support for the massive amounts of information being exchanged between various users.
Unfortunately, this in itself can be extremely risky for the servers, and even the internet in itself.
This isn’t the first time analysts have made warnings about the possibility of crypto such as bitcoin to require huge amounts of energy – especially if it wants to be expanded significantly.
The Bank for International Settlements did point out that there are other concerns about crypto being used for financial transactions, including price volatility. For instance, previous bitcoin prices have surged to around as much as $19,000, but now it’s plunged to below $7,000.
Some cryptocurrencies, such as bitcoin, also require users to pay transactions fees to have their transactions be added to the associated digital ledger. Unfortunately, this also means that transaction fees also increase when demand is high. In fact, for instance, December 2017’s bitcoin trading had fees surge to as high as $57 for every transaction.
Hyun Song Shin, the head of research for BIS, said this can be ridiculous for some. For instance, buying $2 coffee with a cryptocurrency like bitcoin might need having to pay as much as $57 to make the transaction.
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