Samuel Bankman-Fried believes that bitcoin will struggle to become a means of payment because it is not capable of processing millions of transactions per second.
One of the most influential personalities in the cryptocurrency world has made a statement that may annoy many bitcoiners.
“The bitcoin network is not a payment network and it is not a scalable network,” said Samuel Bankman-Fried, the boss of cryptocurrency exchange platform FTX, in an interview with the FinancialTimes.
For the latter, bitcoin will not be able to become a means of payment for the simple reason that it is not capable, today, of processing millions of transactions per second.
According to real-time data from Blockchain.com, the average number of bitcoin transactions per second over the past 30 days is around 3.23. For comparison, transactions on payment networks like Visa and Mastercard are counted in the thousands per second.
Potential as a store of value
Faced with the many reactions caused by the article, the latter wanted to be clearer, saying this Monday morning on Twitter that bitcoin had potential as a “store of value”.
In his tweet, the latter notably highlighted the Lightning Network system, whose “white paper” (white paper) dates from 2015, which wants to allow the use of bitcoin as a means of payment, for low-value transactions. , and with reduced fees.
According to a recent report from Arcane Research, this system has been gaining momentum for several months, in particular due to the growing interest of individuals and investors in cryptocurrencies. It was used by more than 80 million users last March. Its payment volume has also increased by 400% between 2021 and 2022, reaching 500,000 payments in the first quarter of 2022.
In addition, Bankman-Fried criticizes bitcoin for its impact on the environment, and in particular its method of creation through a mining process using a “proof of work” or “proof of work” (PoW) method. Indeed, each new bitcoin put into circulation on the blockchain has an additional impact on the planet. Bitcoins are created in places called “mining farms” using the computing power of many machines and computers. However, running all these machines requires a lot of electricity… According to figures from the Cambridge Bitcoin Electricity Network, bitcoin would represent 23% of the electricity consumption of data centers, or about 153 terawatt-hours per year.
Switch to “Proof of Stake”
“We don’t need to increase this to the point where we end up spending 100 times more than we do today on energy costs for mining,” Bankman-Fried said.
In particular, he put forward a method of creating cryptocurrencies that is much less energy-intensive to date, the so-called “poor stake” or PoS (“Proof of Stake”) method. This system aims to secure many blockchains and is considered an alternative to PoW. A holder of a cryptocurrency is selected at random and must in particular prove that he owns a certain amount of cryptocurrency to obtain the right to validate blocks in the network in order to guarantee his security.
To date, the Ethereum blockchain, which has its own currency Ether, is seeking to switch from a PoW to PoS method. Initially, the change was expected towards the end of June, but it should happen later in the year. Such a change would have been experienced as a revolution for the cryptocurrency ecosystem.
“Things that you do millions of transactions with per second need to be extremely efficient and lightweight and consume less power. Proof of Stake networks are,” he said.
“I don’t think that means bitcoin has to go away,” Samuel Bankman-Fried finally revealed, adding that bitcoin may still have a future as an “asset, a commodity, and a store of value.”