Is Bitcoin worth the hype? According to new reports from the Bank of International Settlements (BIS), Bitcoin and other cryptocurrencies are doomed to fail. The BIS study, aptly named “Looking Beyond The Hype,” investigated whether or not cryptocurrencies can sustain their role as money.
Based on their findings, the BIS has ultimately concluded that cryptocurrencies (also called “digital currency” or “virtual currency”) are not a sustainable form of money. Scaling issues plague these virtual currencies, and the BIS posits that the larger a crypto gets, the more likely it is to fail: Trust and efficiency will falter as more people use a given currency, the organization reports.
Energy consumption is another major issue for leading currencies like Bitcoin, as you can see in the graph below:
As sources explain, there are many issues that digital currency must contend with in order to be a viable form of money. The BIS says that in order for cryptocurrency (or any kind of money, really) to work, there must be a solid foundation of trust in the stability of its value and in its ability to scale efficiently.
But because digital currencies depend on decentralized networks, they are more fragile and trust can be lost easily. In the report, BIS wrote, “Trust can evaporate at any time because of the fragility of the decentralised consensus through which transactions are recorded.”
“Not only does this call into question the finality of individual payments, it also means that a cryptocurrency can simply stop functioning, resulting in a complete loss of value,” they stated. Digital currencies are known for offering anonymity, but that comes with some drawbacks. As the BIS states, the value of virtual money could, essentially, disappear.
BIS head researcher Hyun Song Shin compared digital currencies to trends of times past, like Tamagotchis or baseball cards. “Without users, it would simply be a worthless token. That’s true whether it’s a piece of paper with a face on it, or a digital token,” he explained.
These issues are further compounded by the limited number of transactions these networks can handle per second. As seen in the chart above, Bitcoin can handle just over 3 transactions per second, a fraction of what its competitors are doing. With the high cost and large amounts of energy use associated with “mining” and verifying cryptocurrencies, sustainability is a huge problem.
The BIS, which is an “umbrella group” for central banks from all over the globe, should probably be taken with a grain of salt; as a group that represents banks which deal with traditional currency, it could be seen as in their best interest to discourage the use of cryptocurrencies. But its not just the BIS warning the public about the pitfalls of popular digital currencies.
Mike Adams, founder of Natural News and publisher of RISK.news, has spoken out about the many flaws with Bitcoin many times. Last year, the Health Ranger explained:
Bitcoin would be far better off experiencing slow, steady growth in value that reflects stability. Instead, Bitcoin has become, once again, a speculative bubble rooted in irrational exuberance. Now, the only way to prevent Bitcoin from plunging in price is to find new people to keep buying into Bitcoin, thereby increasing demand for the limited supply of Bitcoins currently in circulation. When ONE person buys one Bitcoin at a new high price, ALL Bitcoin holders immediately believe that all their existing Bitcoins are automatically worth the “new high” price.
Adams contended further, “All systems that rely on new buy-ins to support existing holders of the speculative asset eventually end in catastrophic collapse, without exception.”
Essentially, the rapid growth seen with Bitcoin, in particular, is unsustainable for the long-term, and a collapse in value could be disastrous for Bitcoin holders. Keep up-to-date with the latest news on digital currency at BitcoinCrash.news.