The Bank for International Settlements (BIS), a global “bank for central banks” based in Basel, Switzerland, has once more declared that cryptocurrencies are not only “not ready for prime time,” but could also “bring the Internet to a halt.”
[Note: This is an op-ed]
BIS: Bitcoin, You Scary
On Sunday, BIS released a new 24-page document outlining why it believes cryptocurrencies like Bitcoin cannot become a bona fide financial instrument for the global economy.
The latest report cites a “range of shortcoming,” including the usual concerns over high volatility and electricity consumption, as well as inability to scale. The BIS extrapolates that if Bitcoin was to process all global payments in its current state, the decentralized network would overload everything from mobile devices to servers around the globe and effectively break the internet. The report notes:
The associated communication volumes could bring the internet to a halt, as millions of users exchanged files on the order of magnitude of a terabyte.
The environmental impact would also be significant, according to the report, which estimates that the total electricity consumption of Bitcoin mining equals to that of mid-sized economies like Switzerland.
“Put in the simplest terms, the quest for decentralised trust has quickly become an environmental disaster,” it reads.
The paper also cites 5-year old data to demonstrate volatility, while being completely oblivious to layered scaling solutions, like the Lightning network, currently being rolled out, which have the potential to process millions of transactions per second — more than Visa and Mastercard combined.
Transactions per second:
Visa: 24,000 tx/s
Ethereum: 10 tx/s
Ethereum Classic: 25 tx/s
Bitcoin: 7 tx/s
Bitcoin + Segwit: 14 tx/s
#Bitcoin + Lightning: 3.5+ Million tx/s
— Blockchainlife (@Blockchainlife) June 13, 2018
FUD: Reuse, Recycle, Repeat
For the third time this year, the BIS appears to be bent on scaring the public into believing that Bitcoin, in particular, is merely hype — but can the first and foremost cryptocurrency really bring down the internet?
Earlier this year, the same global bank stated that cryptocurrencies could also “destabilize the global economy” — but in an effort to appear open-minded and innovative, the BIS delivered the Blockchain-not-Bitcoin cliche in declaring that Distributed Ledger Technology (DLT) is the real deal.
Of course, the BIS omits that DLT is the harmless, none-disruptive component of Bitcoin that poses no threat to the central banking system. It’s essentially a distributed database that central banks can re-centralize and keep under wraps. What’s more, they can even issue their own “central bank digital currency” (CBDC).
“Such a CBDC might be exchanged between private sector participants bilaterally using distributed ledgers without requiring the central bank to keep track and adjust balances,” the report states, continuing:
It would be based on a permissioned distributed ledger with the central bank determining who acts as a trusted node.
Conversely, the former (Bitcoin technology) does pose a serious threat in disrupting the entire global central banking system by eliminating the need to trust third-parties and centralized financial entities (like BIS), in particular — making them effectively obsolete.
This view is not only shared among Bitcoin supporters but was also supported by The World Gold Council, which admitted that Bitcoin — often referred to as “digital gold” — could “undermine the tools used by the Fed and other central banks to influence the economy.”
Meanwhile, author of the Bitcoin Standard, Saifedean Ammous, slammed the report, calling it “nocoiner propaganda.” He wrote on Twitter:
Are you looking for a comprehensive summary of the most idiotic nocoiner propaganda against Bitcoin? The Bank Of International Settlement’s Concern Troll Division has published a compendium just for you.
To which, Bitcoin investor and entrepreneur Alistair Milne responded by saying:
I don’t know about you, but I find this [BIS report] reassuring … i.e. it either demonstrates a complete lack of understanding/knowledge … or they’re scared enough to write this nonsense in an effort to misinform!
Is the BIS report “nocoiner propaganda” or does its report have merit? Share your thoughts below!
Images courtesy of Shutterstock, Twitter/@Blockchainlife.