Published: Wed, June 20, 2018
IT&Software | By Alfonso Woods

Bitcoin could break the internet, says Bank of International Settlements

Bitcoin could break the internet, says Bank of International Settlements

The report will make for worrying reading for many, as the BIS are an umbrella for central banks, and are therefore likely to have these sentiments echoed to an extent.

The BIS is an worldwide financial institution owned by central banks which "fosters global monetary and financial cooperation and serves as a bank for central banks". This will result in complete loss of value, the head of BIS, Hyun Song Shin commented.

As reported by Bloomberg, the BIS yesterday released a 24-page article on cryptocurrencies as part of its annual economic report. This is based on the bank's calculation of what would be required if the digital currencies were called upon to carry out all the digital transactions now made by national systems.

Bitcoin and other cryptocurrencies have received a great deal of attention of late, especially when Bitcoin reached a value of $19,000.

"Put in the simplest terms, the quest for decentralised trust has quickly become an environmental disaster", it reads.

The report added an upsetting point that if the Bitcoin underlying technology - blockchain - is adopted by the national payment systems to handle digital retail transactions - decentralized ledger.

The report also takes shots at miners, noting that "delivering. hinges on a set of assumptions: that honest miners control the vast network of computing power, that users verify the history of all transactions and that the supply of the currency is predetermined by a protocol".

"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 report noted that regulatory challenges also need to be addressed with respect to cryptocurrencies, such as anti-money laundering and terrorism financing. It provides gold and foreign exchange transactions for them and holds central bank reserves.

The BIS also stated some of blockchain technology advantages by saying that the technology offers quick cross-border payments with more efficient way.

"In a decentralised network of cryptocurrency users, there is no central agent with the obligation or the incentives to stabilise the value of the currency: whenever demand for the cryptocurrency decreases, so does its price".

The findings of the BIS come at a time when the "currency" of digital coins has not fallen.

"In mainstream payment systems, once an individual payment makes its way through the national payment system and ultimately through the central bank books, it can not be revoked".

However, the toughest fall out of loss of trust, is not only the finality in the individual payment, but also the fact that the technology may simply stop functioning. Only, one of the two can make it, ensuring payment finality in each ledger possible.

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