Bitcoin too slow to be long-term currency option

Featuring David Cieslak, CPA/CITP, CGMA, executive vice president and chief cloud officer, RKL eSolutions

Video transcript:

Bitcoin started back in 2008, really as kind of a proof of concept on blockchain. So, many people kind of almost think of blockchain and bitcoin as synonymous, but it’s important to understand that bitcoin runs on top of blockchain. And I would say that as a proof of concept, there was some good thinking there, but really, we’ve learned a lot in the process, and so we’ve uncovered a number of shortfalls. A few things to keep in mind about bitcoin. There’s a total of 21 million total bitcoins that would ever be in circulation. It’s still going to be a great while before we get that all kind of in circulation and mined out, but really the limitations kind of come down to performance. It operates on what’s called a proof of work. As such, you have miners out there that are trying to solve these, for lack of a better way to put it, trying to solve puzzles in order to commit the next bitcoin block to the blockchain.

On average, every bitcoin transaction today takes about 10 minutes to actually submit to the blockchain. That’s actually a combination of transactions. The total transaction throughput is about seven transactions per second. So if you think about scaling a cryptocurrency in something that only supports seven transactions per second, it’s got some pretty notable limitations. Today, there’s over 1,600 cryptocurrencies. So there’s a lot of opportunities for others that are more efficient, more effective to potentially jump in and take center stage — ethereum being one of them. That’s about 20 transactions per second. Not a heck of a lot more, but it adds something called smart contract, so there’s some extra utility in ethereum.

We are taking note of a few others. One of them is called credits, and that’s actually capable of handling a half a million transactions per second. When you think about cryptocurrencies, and you say bitcoin at seven transactions or credits at a half a million, you start to get a sense of scale and capability. We really think bitcoin was a good science experiment, good proof of concept, but really not going to be the long-term option.

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