The Deputy General Director for financial innovations and market infrastructure of the Bank of Spain (BDE), Carlos Colesa said recently that Bitcoin is not an alternative to the traditional payment system. Colesa mentioned this while comparing Bitcoin and the traditional payment system in a recent report.
Bitcoin Unable To Solve Problems Of Traditional Payment System
Colesa, in his statement, said that Bitcoin in still unable to solve the problems of the traditional payment system and as well isn’t an alternative based on the transaction capacity of the two systems.
He also mentioned that Bitcoin’s blockchain could only process 250,000 transactions daily. This he considers very small if it’s going to serve a global audience like the traditional financial system. In contrast, he cited the capacity of the major Spanish retail system, the Sistema Nacional de Compensación Electrónica (SNCE), reportedly handles about 7.2 million payments daily, as of 2017.
Also, Colesa went further by emphasising that Bitcoin requires ‘miners’ to approve transactions. This is considers to be a sluggish process because the time that each transaction requires is purportedly unpredictable. This shows that the Proof-of-Work algorithm even limits the capacity of the whole system instead of yielding benefits according to him.
Colesa added that the combination of the private and the public key on the blockchain system makes it very unreliable. This makes it vulnerable to various forms of fraud and scams, and the loss of the private key means that the user’s fund can never be restored.
Based on his argument Colesa concluded that; “it is unlikely that Bitcoin in its current modification will have any significant impact on the finance sector as an alternative to traditional payment systems.”
The Sceptics View Of Bitcoin
According to some enthusiasts, Bitcoin and cryptocurrencies in general are dubbed as the future of the financial world. And there are projections that Bitcoin will replace the traditional financial system. However, the thoughts of Colesa contradicts the view of most enthusiasts, and a similar view is shared by other crypto sceptics such as Nouriel Roubini among others.
Roubini believes that Bitcoin is centralised against its decentralised purview. He buttressed this with the argument that Bitcoin has commission for transactions and the payment speed is dependent on the rate. The average rate is controlled by the mining pools and could be set to get more reward.