Debunking BIS “Cryptocurrencies: Beyond the Hype” report

Cryptocurrencies have no intrinsic worth and are useless as a form of exchange. They entail exorbitant transaction costs. They are very slow. Together they have turned into an ecological nightmare.

They are not backed by the assets and revenues stream of an established state. Most can be rendered worthless by fraud or digital manipulation. They are essentially ponzi schemes that masquerade as citizen currencies beyond government control.

Cryptos are not in fact safe. They are vulnerable to a breakdown in confidence or an attack by those with computing firepower. “Trust can evaporate at any time because of the fragility of the decentralised consensus through which transactions are recorded. A cryptocurrency can simply stop functioning, resulting in a complete loss of value,” said the report, a chapter in the BIS’s forthcoming annual report.

…Bitcoin and others fail the basic test of a working currency. “The more people use a cryptocurrency, the more cumbersome payments become. This negates an essential property of present-day money,” said the report.

There is a speed limit on the number of transactions added to the ledger at any given point in time. New blocks are rationed by intervals. If the ceiling is hit, the system backs up. “With capacity capped, fees soar.

This could bring the internet to a halt.

Nor does the system guarantee “finality of payment”. You can lose your money. “Although users can verify that a specific transaction is included in a ledger, unbeknownst to them there can be rival versions of the ledger. This can result in transaction rollbacks. Cryptocurrencies can be manipulated by miners controlling substantial computing power. One cannot tell if a strategic attack is under way because an attacker would reveal the (forged) ledger only once they were sure of success,” it said.

That bubble has now definitively burst. Bitcoin has crashed from $19,187 to $6,474 since peaking in December. Most of the leading cryptos have dropped by two-thirds or more, slashing their notional value by at least half a trillion dollars. There is no obvious floor. These currencies are not redeemable. Nothing stands behind most of them.

The BIS report is the final authoritative nail in the coffin.

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