FTX boss Sam Bankman-Fried believes bitcoin has no future as a payments network, because its 'proof of work' system means it can't scale up
- Sam Bankman-Fried doesn't see a future for bitcoin as a payments network, per an FT interview Monday.
- The proof-of-work system that manages bitcoin can't scale to handle millions of transactions, he said.
Crypto billionaire Sam Bankman-Fried doesn't see a future for bitcoin as a payments network, because its "proof of work" system won't be able to handle millions of transactions, according to a Financial Times report.
The founder and CEO of crypto exchange FTX criticized the leading cryptocurrency for that inefficiency in verifying transactions and for its high energy costs, which have an environmental impact.
"The bitcoin network is not a payments network, and it is not a scaling network," Bankman-Fried told the FT in an interview published Monday.
"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 said.
Proof of stake and proof of work are the two main ways for crypto networks to verify transactions. The first calls for those on the network to put up currency as collateral — their "stake" — to approve a new block on the chain. The second requires high-powered computers to compete to solve puzzles to participate, which can eat up electricity.
"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," Bankman-Fried said.
Proof-of-work mechanisms have come under fire for their energy consumption. Greenpeace and other environmental campaigners have called bitcoin an outdated technology that "uses massive amounts of energy, and thus is a huge source of climate pollution."
And in Europe, a top financial markets regulator called in January for a ban on proof-of-work bitcoin mining, saying it has become a "national issue."
For bitcoin to move from proof of work to proof of stake would not be easy, going by the example of ethereum, the leading cryptocurrency's closest rival. Ethereum's shift has been seven years in the making, hit by several delays, though it is closing in on the "merge".
Bankman-Fried believes that while bitcoin may not be viable for payments, it still has a place in crypto as an asset, a commodity and a store of value like gold, he told the FT. "I don't think that means bitcoin has to go," he said.
Bitcoin was recovering somewhat Monday after the crypto market bloodbath last week that saw ether, cardano, solana, and dogecoin drop sharply. It was trading up 0.3% at $29,866, according to CoinMarketCap data, after falling below $25,500 on Wednesday.