Bitcoin Could ‘Bring the Internet to a Halt,’ Says Banking Oversight Firm. Here’s Why
After a rough week for Bitcoin and its cryptocurrency cohorts, the bank for central banks is giving investors another reason to feel dour.
If the Bitcoin blockchain were to be used in processing all non-cash retail transactions in the U.S. today, the volume of transactions could “bring the internet to a halt,” the Bank for International Settlements (BIS) wrote in an scathing economic report on the topic Sunday.
The organization notes that while the technology underlying bitcoin the, blockchain, is considered promising, it still requires a large amount of time, computing power, and space to operate. The blockchain effectively operates by distributing several copies of the same, constantly updating ledger of transactions to many parties.
In doing so, it becomes impossible to alter the ledger without inconsistencies between one copy of the ledger and its siblings. As a result, cryptocurrency proponents have touted the technology’s potential to upend existing payments and banking systems.
But the BIS says that as it stands now, if the Bitcoin blockchain were used to facilitate all existing non-cash U.S. retail transactions: “Only supercomputers could keep up with verification of the incoming transactions,” the BIS report read. “The associated communication volumes could bring the internet to a halt, as millions of users exchanged files on the order of magnitude of a terabyte.”
While the Bitcoin blockchain currently grows at a pace of about 50 gigabytes annually, for a total of about 170 GB today, the BIS estimates that the size of the ledger would grow to over 100 terabytes — a jump of 588 times — by the end of 2020, if it were to accommodate all non-cash retail payments in the U.S.
“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,” the report continued.
Notably, the BIS’s analysis is based on the Bitcoin blockchain, versus say a private chain or the growing number of other blockchain projects out there. And on the flip side, some cryptocurrency advocates argue that as cryptocurrency and blockchain adoption grows, the infrastructure and technology used to support the payments system may also keep pace.