London: Only supercomputers will be able to process cryptocurrencies in neare future, and transactions can lead to an internet collapse, according to a recent report by Swiss-based Bank for International Settlements (BIS).
“To process the number of digital retail transactions currently handled by selected national retail payment systems, even under optimistic assumptions, the size of the ledger would swell well beyond the storage capacity of a typical smartphone in a matter of days, beyond that of a typical personal computer in a matter of weeks and beyond that of servers in a matter of months,” the report said.
Records of cryptocurrency transactions are kept on a digital ledger. With every money transfer, the ledger swells in size. Then, users of cryptocurrencies will face other problems with transactions, according to the report.
“Only supercomputers could keep up with verification of the incoming transactions. 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,” Bank for International Settlements (BIS) wrote.
The Bank for International Settlements (BIS) also criticized the mounting transaction fees of cryptos. When bitcoin peaked at $20,000 in December, a single operation with the digital currency cost additional $57.
"Just imagine, if you bought a $2 coffee with bitcoin, you would have had to pay $57 to make that transaction go through,” said Hyun Song Shin, the bank’s head of research. "Some people don’t hold cryptocurrencies as money, but are speculating on its price", he added.
Founded in 1930, the Bank for International Settlements is the oldest global financial institution, and is known as the bank for central banks because it is where they hold accounts. It provides gold and foreign exchange transactions for them and holds central bank reserves. The Bank for International Settlements (BIS) is also a banker and fund manager for other international financial institutions.
The Bank for International Settlements (BIS) has consistently called on central banks to clamp down on bitcoin and other cryptocurrencies to stop them “piggybacking” on mainstream institutions and becoming a “threat to financial stability.”
"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", Bank for International Settlements (BIS) said.
"Moreover, even if trust can be maintained, cryptocurrency technology comes with poor efficiency and vast energy use. Cryptocurrencies cannot scale with transaction demand, are prone to congestion and greatly fluctuate in value. Overall, the decentralised technology of cryptocurrencies, however sophisticated, is a poor substitute for the solid institutional backing of money", it said.
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