Bitcoin has no future as a payment network, says FTX boss

According to one of crypto's most influential executives, Bitcoin has no future as a payment network due to its inefficiency and high environmental costs.

Sam Bankman-Fried, founder of digital asset exchange FTX, said the proof-of-work system for validating blockchain transactions that underlies Bitcoin is unable to handle the millions of transactions that would be required to make the crypto token an effective means of payment.

“The Bitcoin network is not a payments network and it is not a scaling network,” Bankman-Fried said.

His comments came as the fast-growing cryptocurrency market was hit by a punishing sell-off that has sent Bitcoin down more than 35 percent since January to its lowest level since late 2020.

Bitcoin is still seen by some crypto enthusiasts as a way to conduct everyday transactions.

Countries such as El Salvador and the Central African Republic have adopted Bitcoin as legal tender. However, recent research by American academics found that Bitcoin was barely used for daily payments in El Salvador, despite the introduction of Bitcoin ATMs and other measures to promote its use.

The 30-year-old billionaire, who has built FTX into one of the world's largest virtual asset exchanges, said an alternative type of blockchain, known as proof of stake, or other technological innovations will be needed to create a functioning crypto payments network.

Ethereum has been working to move to a proof-of-stake system that is intended to be less energy intensive.

"Things that allow you to do millions of transactions per second need to be extremely efficient, lightweight, and reduce energy costs. Proof-of-stake networks are," Bankman-Fried said.

His criticism of Bitcoin highlights serious environmental concerns about the amount of energy needed to run proof-of-work cryptosystems. Some European regulators have called for the systems to be banned due to their CO2 emissions.

Mining According to the University of Cambridge's Bitcoin Electricity Consumption Index, Bitcoin uses more energy than many countries, including Norway and Sweden.

“It has to be that we don't scale this to the point where we end up spending 100 times as much on energy costs for mining as we do today,” Bankman-Fried said.

FTX has used carbon offsets to offset the company's emissions, which Bankman-Fried said is worthwhile but not a complete solution "because at some point you run out of things to offset."

But despite his views on Bitcoin, Bankman-Fried said he still believes the world's largest digital asset has a place in the crypto market.

“I don’t think that means Bitcoin has to go,” he said, adding that the token may still have a future as “an asset, a commodity and a store of value,” similar to gold.