Bitcoin: A solution for payment systems or a problem?
Spain’s Central Bank, Banco de España (BDE), has published a report stating that Bitcoin is inefficient as a payment system. It may, however, have slightly missed the boat, as it does ignore second layer protocols such as Lightning Network.
Spain’s Reserve bank, Banco de España (BDE), has released a report mentioning that Bitcoin is inefficient as a payment system. It may, however, have actually missed the boat, as it does overlook second layer protocols such as the Lightning Network.
Titled ‘Bitcoin: A solution for payment systems or a solution in search of a problem?’, the report analyses whether Bitcoin suffices in its present state to be utilized as a payment mechanism. The author of the report, BDE’s Deputy General Director of Financial Innovation and Market Infrastructures, Carlos Conesa, started well. He plainly deliberated for a long time over the title, lastly settling on the above.
Then in the report, follows the required (for Central Bank Bitcoin analyses) 10 pages discussing what Bitcoin is and how it works. The second part of the report takes a look at whether Bitcoin makes a good payment system (spoiler alert: it doesn’t). Unfortunately, Conesa’s title rather sets the agenda for the whole report.
Accurate Analysis… Misses The Point
The report takes the following form; analyze an essential attribute of Bitcoin; then explain why this becomes an over-complicated payment system. For example, attributes such as decentralization and a lack of intermediaries are noted as a limitation to mass value exchange.
Decentralization, suggests the report, requires a “process of intensive validation in the consumption of resources, which reduces system efficiency.” In contrast, “centralized systems with an intermediary trusted by the parties, allow the design of much simpler and cheaper systems.”
Well yes, but then you have a centralized system and a need to trust an intermediary.
According to Conesa, payment systems should facilitate the sending of money between two parties simply, economically, quickly and safely. In his opinion, the design of Bitcoin does not pursue these objectives, but that of a system without censorship.
Or perhaps even a system which combines the two?
One of the primary arguments Conesa makes against using Bitcoin as a payment system is the capability to process transactions. He specifies that Bitcoin’s potential 600,000 day-to-day transactions are “irrelevant” compared to worldwide retail payment systems.
True, but with the development of Lightning Network, this figure ends up being “insignificant”.
It feels very much like BDE needed to file a report criticizing Bitcoin and puffing up the status quo. In order to do so, it had to willfully disregard the real state of Bitcoin today and hope no one realized. Disingenuous to state the least.
Numerous innovations included planned obsolescence. This report was already outdated, years before it was released.
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