The skeptics of crypto as money have another backer now. The Bank of International Settlements. It is an organization which is based in Switzerland. BIS is made of almost sixty central banks. They have released a twenty four page document which sheds some light into the mindset of the international banking class. Their report says that the crytocurrencies lack the scale to properly function as money or medium of exchange.
The report has identified three major loopholes which will facilitate this conclusion. These three loopholes are scalability, stability of values and trust in the finality of payments. The scalability point is connected with the other two points. The problem with wider expansion may percolate to include trust issues for the common masses according to them.
The trust mechanism implied by decentralization is counted as one of the major loopholes. It is not a source of strength but weakness if BIS is to be believed. The report points to the fragility of trust as the consensus through which all the transaction are being recorded can change with time.
They didn’t even stop at that. They further argued that Blockchain can only offer something akin to probabilistic transaction finality. The Blockchain with the longest chain will be privileged when conflicting transaction will be accessed.
The age old criticism of the power consumption is also mentioned. The report argue that with the expansion of the shared ledger, more power and computation processors will be needed. This will exceed the wildest demands of the electricity generating facilities all over the world.
The storage demands along with the communication volume has the potential to crash the entire internet if BIS is to be believed. The problem of overcrowding is bound to rise in the long run which will create difficulties in the transaction.
BIS has released similar report in March. At the tie, many central banks were thinking along the lines of launching their own digital currencies. The report criticized that approach and warned of the disastrous consequences if the banks proceeded. This new report is the 2.0 version of the previous report.
Of course, the thinking behind the centralization is strongly evident in this report. The critique over the trust mechanism is really interesting. The credibility of banking institutions is lowest all along the globe especially American. Don’t forget their 2008 shenanigans. They seriously have balls to talk about the trust issues.