FTX CEO: Bitcoin Isn't a Payments Network
FTX CEO Sam Bankman-Fried said that Bitcoin is limited by its high environmental costs and its inability to scale.
Sam Bankman-Fried, CEO of the fast-growing crypto exchange FTX, said that Bitcoin isn’t a suitable payment network.
“The Bitcoin network is not a payments network,” he told the Financial Times on Monday. “It is not a scaling network,” he added.
This statement was qualified by Bankman-Fried, who pointed to the PoW consensus algorithm of Bitcoin, which validates transactions.
In a PoW-based network, computers run non-stop to verify transactions and create new blocks for the network, a process known as mining. This is how the network works. The number of computers doing this work has also steadily risen.
Bitcoin has surged recently, leading to concerns around the sheer amount of energy it needs to maintain itself. This has led to criticisms from environmentalists as well as lawmakers trying to achieve their climate goals.
Besides consuming a large amount of energy, the leading cryptocurrency isn’t particularly speedy either. According to data pulled from Blockchain.com, the average number of transactions per second (TPS) on Bitcoin over the past 30 days is roughly 2.58.
Bitcoin is slow when compared to traditional payment networks like Visa or Mastercard.
Although Bankman-Fried believes that Bitcoin can serve another key purpose.
To be clear I also said that it _does_ have potential as a store of value.
— SBF (@SBF_FTX) May 16, 2022
The BTC network can't sustain thousands/millions of TPS, although BTC can be xfered on lightning/L2s/etc. https://t.co/7ghQzz7eXa
Lighting Network is a scaling solution that allows for micropayments atop the Bitcoin network.
The Bitcoin network cannot sustain thousands/millions of TPS. But BTC can be transferred on lightning/L2/etc.
SBF says — "SBF" says — "It's important to remember that this is just one signal derived from similar occurrences in the past. Lot
Cryptocurrencies are still a great investment, but a better option for storing value and sending money is proof-of-stake (PoS) networks. These have the ability to process transactions quickly, and cost less than traditional blockchain systems.
“Things that you’re doing millions of transactions a second with have to be extremely efficient and lightweight and lower energy cost. Proof of stake networks are,” Bankman-Fried said.
PoS networks are much more energy efficient than traditional networks like Bitcoin. Instead of maintaining a never-off computer farm to mine Bitcoin, PoS networks rely on validators that have “staked” (or deposited) a hefty amount of the network’s native cryptocurrency. As they perform their duties correctly, these validators earn a yield; if however, they validate fraudulent transactions, they’ll be punished by losing a portion of the funds they initially staked.
Ethereum is undergoing a transition from proof of work to proof of stake. If it happens, the energy usage could drop by 95%.
The Ethereum 2.0 or merge is expected to happen in the latter half of 2022.