Photo: Sam Bankman-Fried, founder and CEO of FTX, testifies at a Congressional hearing on digital assets and the future of finance, Dec. 8, 2021. (Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images)
Sam Bankman-Fried, the 30-year-old billionaire founder of crypto exchange FTX and one of the most prominent executives in the crypto-sphere, said he believes Bitcoin does not have a future as a payment network.
Bitcoin’s proof-of-work system, which validates transactions on the world’s largest blockchain, is not capable of being scaled up to deal with millions of transactions, making it inefficient as a payment network, Bankman-Fried said, according to a Financial Times report.
Created by a process called proof-of-work, Bitcoin requires computers to “mine” the currency by solving complex puzzles. The energy-intensive process uses large amounts of electricity.
“The BTC network can’t sustain thousands/millions of TPS (transactions per second), although BTC can be transferred on lightning/L2s/etc.,” Bankman-Fried said in a Twitter reaction to the FT report.
“Things that you’re doing millions of transactions a second with (will) have to be extremely efficient and lightweight and lower energy cost. Proof of stake networks are,” he added, referreing to an alternative called the proof of stake network, where participants can buy tokens that allow them to join the network.
Bankman-Fried added that while Bitcoin’s inefficiency holds it back as a payment network, it still has a future as “an asset, a commodity and a store of value” like gold, the FT report said.
While crypto enthusiasts view Bitcoin as a hedge against inflation, an influx of more traditional investors tend to view it as a riskier asset. Gold investor and crypto critic Peter Schiff said Bitcoin is just a craze that will eventually end like a pyramid scheme.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
The price of Bitcoin went as low as $25,401.29 after the collapse of TerraUSD, a so-called stablecoin defended by Bitcoin reserves. Investors, worried that billions of dollars in Bitcoin could be dumped into the market, rushed to sell their holdings.
FTX, which Bankman-Fried co-founded in 2019, was valued at $32 billion in a February funding round, and Bankman-Fried himself is worth $21 billion, according to Forbes.
Photo: Sam Bankman-Fried, founder and CEO of FTX, testifies during the House Financial Services Committee hearing titled “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the U.S.”, Dec. 8, 2021. (Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images)
