Any form of money to work in large networks requires trust in the stability of its values and to the ability to scale effectively, says the annual report of the Bank for international settlements (BIS), which brings together the Central banks of the world.
However, trust can disappear in a flash because of the fragility of decentralized networks, which depend on the cryptocurrency, according to BIS.
The larger these networks become, the more they are prone to overload, say in BIS, which notes the high fees on the network’s most popular cryptocurrency — Bitcoin, as well as a limited number of transactions per second they can process.
“Confidence can evaporate at any time because of the fragility of decentralized consensus by which a transaction is recorded.Thus questioned the final payment and threatened that the cryptocurrency can just cease to function, leading to a complete loss of values.”
The BIS head of research Hyun song Shin explained that the state money has value because they have users, but many people who own cryptocurrencies, often do so solely for speculative purposes.
“Without users, this is just a useless coin. It’s true, whether it’s a piece of paper with a face on it or a digital token”
According to BIS, the user dependence on the so-called miners is also the disadvantage of requiring huge and costly use of electricity.
Agustin Carstens, General Manager of the BIS, described Betoken as “a combination of bubble, Ponzi schemes and environmental disaster.”
The BIS said Central banks need to think about potential risks before issuing their own cryptocurrencies.
To date, no Central Bank has not released the digital currency, although the Riksbank in Sweden, studies of retail e-crown for small payments.
In its annual report, titled “Cryptocurrency: an attempt to look deeper than the superficial hype” BIS also said that effective regulation of the digital coins must be global, focusing on how regulated financial institutions and companies offering services related to cryptocurrencies.