Bitcoin, crypto can break the internet, warns experts

The ever expanding cryptocurrency is a danger to the very internet it runs on, warned a report published by the Switzerland-based Bank of International Settlements (BIS).

The BIS call itself the ‘bank of central banks’ calls the latest medium of transaction “a poor substitute for the solid institutional backing of money,” in its 24-page report owing to crypto’s regulatory concerns, and its fluctuating value among host of other reasons.

The report pointed out towards the high use of energy consumed over processing crypto currency transactions. “To process the number of digital retail transactions currently handled by selected national retail payment systems, even under optimistic assumptions,” the report states, “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.”

Further, the authors of the BIS report explain that the amount of computing power to process transactions will surge -- and could spell the downfall of the internet on a global scale, the researchers warn.

“Only supercomputers could keep up with verification of the incoming transactions,” the report states. “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,” it added.

“At the time of writing, the total electricity use of bitcoin mining equalled that of mid-sized economies such as Switzerland. Put in the simplest terms, the quest for decentralised trust has quickly become an environmental disaster,” stated the report.

The value of the cryptocurrency market has plunged 53 per cent this year to US$280 billion, according to CoinMarketCap.

The BIS did say that blockchain and its so-called distributed ledger technology did provide some benefits for the global financial system, including make sending cross-border payments more efficient, for example. And trade finance, the business of exports and imports that still relies on faxes and letters of credit, was indeed ripe for the improvements offered by Blockchain-related programs.

However, the risks outweighs the benefits as its simply too risky to run the global economy on a network with no centre.

"Trust can evaporate at any time because of the fragility of the decentralised consensus through which transactions are recorded," the report concluded.