Bitcoin has no future as a payment network due to its inefficiency and high environmental costs, according to one of crypto’s most influential CEOs.
Sam Bankman-Fried, founder of digital asset exchange FTX, said the blockchain transaction validation proof-of-work system, which underpins Bitcoin, is not capable of scaling to cope with the millions of transactions that would be required to manufacture the crypto token. an efficient means of payment.
“The Bitcoin network is not a payment network and it is not a scalable network,” Bankman-Fried said.
His comments came as the fast-growing cryptocurrency market was hit by a punishing selloff that left Bitcoin down more than 35% since January, to its lowest level since late 2020.
Bitcoin is still seen by some crypto enthusiasts as a way to conduct day-to-day transactions.
Countries like El Salvador and the Central African Republic have adopted Bitcoin as legal tender. But recent research by American academics found that bitcoin has seen little use for day-to-day payments in El Salvador, despite the deployment of bitcoin ATMs and other measures to encourage its use.
The 30-year-old billionaire, who expanded FTX into one of the world’s largest virtual asset exchanges, said an alternative type of blockchain known as proof-of-stake, or other technological innovations, will be needed to create a functioning crypto payment network.
Ethereum has been working to move to a proof-of-stake system, which is supposed to be less energy intensive.
“The objects with which you perform millions of transactions per second must be extremely efficient, light and at a lower energy cost. Proof-of-stake networks are,” Bankman-Fried said.
His criticisms of Bitcoin point to serious environmental concerns about the amount of energy needed to run proof-of-work cryptosystems. Some European regulators have called for the systems to be banned because of their carbon emissions.
Bitcoin mining consumes more energy than many countries, including Norway and Sweden, according to Cambridge University’s Bitcoin Electricity Consumption Index.
“We need to not increase this to the point where we end up spending 100 times more than today on energy costs for mining,” Bankman-Fried said.
FTX used carbon offsets to offset the company’s emissions, which Bankman-Fried said was worth it but not a complete solution “because you run out of things to offset at some point.” .
But despite his views on Bitcoin, Bankman-Fried said he still believes the world’s biggest digital asset has a place in the crypto market.
“I don’t think that means Bitcoin has to go away,” he said, adding that the token could still have a future as an “asset, commodity and store of value” similar to gold.