The Bank for International Settlements, whose main functions are facilitating cooperation between central banks and facilitating international financial settlements, published material that questioned the ability of the cryptocurrency to justify the expectations placed on them. This is reported by CoinDesk.
In the document under the heading "Cryptocurrencies: looking beyond the hype", the history of technology and analysis of its potential as a trustworthy form of money are given. The publication of this document precedes the release of the full annual economic report of the BIS.
The decentralized technology of cryptocurrencies, however sophisticated, is a poor substitute for the solid institutional backing of money.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.
Cryptocurrencies: looking beyond the hype
As reported, beyond storage capacity, the report claims that "only supercomputers" have the proper processing power needed to conduct every retail transaction on a blockchain, and even if there were sufficient supercomputers to create a decentralized network, "millions of users [would] exchange files on the order of a magnitude of a terabyte." Bank claims that using a blockchain to process the volume of retail payments made daily "could bring the internet to a halt."
The document also mentions the miners with which, according to its authors, a number of assumptions are connected: it is assumed that honest miners control most of the computing power of the network, and the issue of coins occurs in accordance with the pre-established rules of the protocol.
Although the BIS is negative about the cryptocurrency, the blockchain technology finds a positive response in its report, as it looks "promising in other areas." A distributed ledger can be used for cross-border payments, "where the benefits of decentralized access exceed the higher operating cost of maintaining multiple copies of the ledger."