Many financial analysts, experts, economists, and institutions are investing in cryptocurrency. However, the Bank of International Settlements (BIS) just released a report indicating its reservations on the matter. This might be putting its stance mildly, as well. The report basically concludes that cryptocurrency is doomed to failure in its current form in terms of scaling.
Released on Friday, the report emphasizes how cryptocurrency is simply not built to scale well. For starters, the decentralized network is supposedly too fragile to withstand a loss in trust, Reuters reports. This makes cryptocurrencies look like a house of cards in the middle of a storm.
“Trust can evaporate at any time because of the fragility of the decentralised consensus through which transactions are recorded,” the report reads.
“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.”
The report also cites the tendency of networks becoming congested as a particular cryptocurrency grows in value. This results in things like the high transactions fees of Bitcoin, along with the low transaction-per-second rate that it can handle.
In the report, the BIS concluded that cryptocurrency simply can’t grow to the point that its founders and followers hope that it would. Pushing the issue could even have the potential to result in the collapse of the internet, Bloomberg reports.
For example, researchers that dug into the data to compile the report looked into Bitcoin’s ability to handle volume-based payment. They found that the cryptocurrency simply will not be able to withstand handling the digital payment systems of entire countries. There are simply too many ledgers involved, which would then lead to an overload of individual devices.
“The associated communication volumes could bring the Internet to a halt,” the report concluded.