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Sam Bankman-Fried: Bitcoin Isn’t A Viable Payment Network

Bitcoinist

Bitcoin News / Bitcoinist 159 Views

Sam Bankman-Fried, the Billionaire founder and CEO of crypto exchange FTX, believes that Bitcoin has no future as a payment network.

Sam Bankman-Fried Thinks Bitcoin Isn’t A Payment Network

He attacked the proof-of-work algorithm’s high energy consumption, arguing it couldn’t handle millions of transactions per second. However, he believes it has potential as a store of value.

On Monday, he told the Financial Times that he doesn’t view Bitcoin as a payments network, but that doesn’t rule out the possibility.

The thirty-year-old billionaire questioned Bitcoin’s underlying proof-of-work technology for its huge environmental costs and inefficiencies in verifying transactions. He said the network could not handle millions of transactions per second. Users can, however, transfer Bitcoin to layer two payment systems like Lightning, according to him. Proof-of-stake networks, he added, solve these problems.

Bitcoin uses a Proof-of-Work consensus model, which means that verifying cryptocurrency transactions takes a lot of computational power. A number of industry analysts have expressed concern about the amount of energy needed when mining Bitcoin and other proof-of-work cryptocurrencies.

It would be difficult to convert Bitcoin to a proof-of-stake algorithm. As a reminder, Ethereum developers have been considering a switch to PoS for several years, despite several setbacks.

While Bankman-Fried does not consider Bitcoin to be a viable payment method, he does feel it has promise as an asset, a commodity, and a store of value, similar to gold.

Related reading | Robinhood Shares Rally 20% After FTX Founder Sam Bankman-Fried Acquires 7.6% Stake

Is Lightning An Option?

He told Fortune that Bitcoin might be used as money in the future, and that its blockchain could serve as a payment network. He did, however, mention some conditions. Bankman-Fried said in an email:

“I think that BTC could have a future as money [or] payments [network] *as long as it’s moving on Lightning, an L2, or another blockchain.”

Tesla Inc. reversed its decision to accept Bitcoin as payment last year, citing “environmental concerns” about the digital currency.

Bankman-Fried joins a growing chorus of opponents who believe proof-of-stake cryptocurrencies are the way to go for payments in the future.

Because Lightning is already being used to clear transactions, Bitcoiners would claim that the blockchain is already a viable payment network. “And you didn’t bring up Lightning because…” tweeted Jack Dorsey in response to Bankman-Fried’s statements to the FT.

A few hours later, Bankman-Fried issued a response to Dorsey: “Honestly? It’s a big mouthful” to repeat every way Bitcoin can be transferred when he’s asked, “and I’m asked it a lot.”

Lightning is an “L2,” or layer 2, technology that’s built atop Bitcoin’s blockchain. It improves network speed by moving Bitcoin transactions off of its main blockchain and across the L2 instead.

Sam Bankman-fried

BTC/USD trades at $30k. Source: TradingView

Lightning is a “layer 2” technology that sits on top of the Bitcoin blockchain. It speeds up the network by shifting Bitcoin transactions away from the main blockchain and onto the L2.

Aside from the topics of Lightning and L2, Sam Bankman-Fried has another concern regarding Bitcoin’s ability to manage large amounts of transactions.

He told the FT that proof-of-work is “not capable of scaling up to cope with the millions of transactions that would be needed to make the cryptocurrency an effective means of payment.”

Related reading | What Matters For Crypto In 2022 And Beyond, Says Sam Bankman-Fried

Featured image from Getty Images, chart from TradingView.com

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