On Sunday, a 24-page publication produced by the Bank for International Settlements (BIS) expressed the institutions findings on the effectiveness of blockchain technology-based currencies. The report, which takes a harsh stance against the ability of digital assets to be used as currency, has since been rebuked by proponents and investment platforms like eToro.
While the BIS titled its report looking beyond the hype, eToro believes that the central bank-owned institution needs to look at the bigger picture.
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Notably, the BIS report drew issues with factors regarding the unstable valuations of digital assets as well as the inability of permissionless cryptocurrencies to guarantee the finality of individual payments. Further contributing to unstable valuations is the speed at which new cryptocurrencies all tending to be very closely substitutable with one another come into existence, the BIS wrote. At the time of writing, several thousand existed, though proliferation makes reliable estimates of the number of outstanding cryptocurrencies impossible. Recalling the private banking experiences of the past, the outcome of such liberal issuance of new moneys is rarely stability. In a statement made available to Coinsquare News, eToro analyst and senior account manager Matthew Newton commented on the BIS report.Cryptocurrencies remain an emerging technology, albeit one that is moving towards the right infrastructure for everyday use, he said. Theres little benefit naysaying about what is currently wrong. We need to look at the bigger picture in order to fully understand the situation; when we do that, the future looks exciting.
The BIS publication further took issue with the numerous technological obstacles, such as scaling, that stand in the way of digital currency adoption. Developers are working on Layer 2 solutions to hasten progress for cryptocurrencies as we speak, for example the Lightning Network on Bitcoin, Newton responded. While it is far from guaranteed that these developers will troubleshoot all of the problems, the fact of the matter is that the work of these talented developers is coming on in leaps and bounds, and we have to be patient to see how things develop over time.In his response to the BIS publication, Newton is referring to the Lightning Network, one of many solutions currently in development to address how digital currencies handle increased network usage.
While the BIS is not wrong to explore what specific economic problems, if any, currentcryptocurrencies [can] solve many take issue with how the institution presented its findings. While it is difficult to argue against the BIS statements about the scaling issues that currently challenge the digital currency industrys greatest minds, many share eToros sentiment that it is far too early to underestimate the disruptive nature of decentralized currencies. Previously, the BIS warned countries to slow down on plans to launch government-backed digital currencies, amidst a wave of global discourse on the topic. At the time, the BIS emphasized that the true ramifications of digital currencies are not yet known, and should be properly considered before being implemented on a national or international scale.Image credit: eToro logo
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