Thirty-year-old crypto billionaire Sam Bankman-Fried took aim at Bitcoin, the world’s largest cryptocurrency, saying it has no future as a payments network in an interview with Financial Times today. Bankman-Fried is CEO and co-founder of FTX, the second-most popular digital asset exchange by trading volume, according to CoinMarketCap.
“The bitcoin network is not a payments network and it is not a scaling network,” Bankman-Fried said, arguing that the underlying proof-of-work system the Bitcoin network uses to verify transactions is incapable of scaling efficiently enough to keep pace with demand.
Bitcoin has come under fire from critics, including policymakers and climate advocates, for the massive amounts of energy needed to keep it running because of its proof-of-work transaction validation mechanism. It’s also slow and clunky at times — the average number of transactions per second (TPS) on Bitcoin over the past 30 days is roughly 2.58, data from Blockchain.com showed.
Bankman-Fried later tweeted in reference to his comments on Bitcoin that the cryptocurrency does have potential as a store of value. He added that the Bitcoin network itself cannot sustain millions or thousands of transactions per second, noting that Bitcoin can be transferred on layer-two networks. Layer-twos are generally used to increase the efficiency and speed of a blockchain, such as Polygon for Ethereum.
Bitcoin’s most prominent layer-two, the Lightning network, can execute hundreds of thousands of transactions per second by settling transactions off-chain in a separate ledger, Lightning Labs CEO and co-founder Elizabeth Stark told TechCrunch. Transactions settled this way still adhere to Bitcoin’s underlying protocol, Stark added.
Bitcoin isn’t likely to shift away from its proof-of-work system, though, so the concerns about its energy use are valid. Ethereum, the second-largest cryptocurrency, has been pledging for years to switch from its own proof-of-work mechanism to a less energy-intensive proof-of-stake system. While proof-of-work often relies on miners using continuously-running computing power to validate transactions, proof-of-stake involves holders of a coin depositing some of their funds to the system and earning rewards for their validation work.
The Ethereum Foundation pushed back the date of the transition this April, saying it will occur in Q3 this year rather than Q2 as originally expected.