Billionaire Sam Bankman-Fried, founder of the digital asset exchange FTX, says Bitcoin tech cannot scale to meet demands of true payments network
Sam Bankman-Fried, founder of the major digital asset exchange FTX, told the Financial Times on Monday that Bitcoin has no future as a payments network due to scaling and environmental issues with its underlying infrastructure.
Bankman-Fried, a 30-year-old billionaire, said the proof-of-work system for validating blockchain transactions that underlies Bitcoin is not capable of handling the millions of transactions necessary for a means of payment.
“The bitcoin network is not a payments network and it is not a scaling network,” he said.
He said an alternative blockchain technology called proof-of-stake, or other technological innovations, would be required to create a functioning crypto payments network.
“Things that you’re doing millions of transactions a second with have to be extremely efficient and lightweight and lower energy cost. Proof-of-stake networks are,” he told the paper.
The Ethereum cryptocurrency has been moving to a proof-of-stake system, which is intended to be less energy intensive.
Bankman-Fried said the energy-intensive nature of the Bitcoin blockchain is another factor preventing it from scaling.
“It has to be the case that we don’t scale this up to the point where we’re spending 100 times as much eventually as we are today on energy costs for mining,” he said.
FTX has used carbon offsets to compensate for its carbon emissions, but this isn’t a long-term solution “because you just run out of things to offset at some point”.
He said he does see a place for Bitcoin, but as “an asset, a commodity and a store of value” similar to gold.
“I don’t think that means Bitcoin has to go,” Bankman-Fried said.
His remarks come at a troubled time for Bitcoin, which is down more than 50 percent from its high of last year and has fallen further over the past few days after the spectacular failure of the TerraUSD “stablecoin” last week.
Bitcoin is currently down about 35 percent from January, its lowest level since late 2020.
Two European regulators Fabio Panetta, a member of the executive board of the European Central Bank, and Bank of France governor Francois Villeroy de Galhau, took the opportunity on Monday to renew their criticisms of stablecoins and cryptocurrencies in general.