Is Bitcoin Going to Crash the Internet? These Experts Think So. The amount of computing power the cryptocurrency requires is just one concern the Bank of International Settlements raises in a new report.

By Lydia Belanger

Opinions expressed by Entrepreneur contributors are their own.

Peshkova | Getty Images

Bitcoin mining, the process of creating new units of the cryptocurrency, is notoriously a huge energy-suck. One estimate puts its carbon footprint on par with the electricity consumption of more than 159 countries combined.

But the inefficiency of minting new units of the blockchain-based digital currency is only one complaint that skeptics of its utility have flagged. In a new report, the Switzerland-based Bank of International Settlements (BIS), a self-described "bank for central banks," calls the technology "a poor substitute for the solid institutional backing of money" due to regulatory concerns, its fluctuating value and other reasons.

Among the critiques that the BIS explores is the sheer computing power it takes not only to mine cryptocurrencies, but also to process transactions with them. Because records of all cryptocurrency transactions are stored on a decentralized ledger rather than by central bank, that ledger could become unsustainably large very quickly, the BIS hypothesizes.

Related: New Research Shows Bitcoin's Meteoric Rise Was a Scam

"To process the number of digital retail transactions currently handled by selected national retail payment systems, even under optimistic assumptions," the report states, "the size of the ledger would swell well beyond the storage capacity of a typical smartphone in a matter of days, beyond that of a typical personal computer in a matter of weeks and beyond that of servers in a matter of months."

Further, the authors of the BIS report explain that the amount of computing power to process transactions will surge -- and could spell the downfall of the internet on a global scale, the researchers warn.

"Only supercomputers could keep up with verification of the incoming transactions," the report states. "The associated communication volumes could bring the internet to a halt, as millions of users exchanged files on the order of magnitude of a terabyte."

Then there's the issue of "congestion," as the BIS describes. For one, new blocks on the blockchain (groups of transaction records) "can only be added at pre-specified intervals," the way the technology is set up and based on computing limitations. So, when the system gets maxed out, they form a queue and transaction fees mount.

In a video released alongside the report, Hyun Song Shin, the BIS' head of research, explained that someone buying a $2 coffee with bitcoin hypothetically could get hit with a $57 transaction fee (which was bitcoin's transaction fee during the high-demand period of December 2017).

In other words, the more that people use bitcoin as money, the more difficult it will be to use. This is a catch-22 compared to how a centralized currency functions, according to the BIS: "the more people use it, the stronger the incentive to use it."

Related: 15 Crazy and Surprising Ways People Are Using Blockchain

All of this should be read with the understanding that the BIS, being an organization that represents central banks, has a vested interest in the centralized banking system remaining the status quo.

It's not all doom and gloom, though: The BIS report doesn't rule out the potential for the "underlying technology" of cryptocurrencies (read: blockchain), just the currencies themselves. The report proposes that the tech might come in handy for the "simplification of administrative processes related to complex financial transactions, such as trade finance."

Lydia Belanger is a former associate editor at Entrepreneur. Follow her on Twitter: @LydiaBelanger.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Business News

JPMorgan Shuts Down Internal Message Board Comments After Employees React to Return-to-Office Mandate

Employees were given the option to leave comments about the RTO mandate with their first and last names on display — and they did not hold back.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Business News

'More Soul-Crushing Than Ever': Popular Hiring Platform Finds Around 20% of Its Postings Were 'Ghost Jobs'

Is that job listing too good to be true? There's a one-in-five chance that it might be.

Business News

'Masculine Energy Is Good': Mark Zuckerberg Tells Joe Rogan He Thinks Companies Need More Aggression

On the most recent episode of "The Joe Rogan Experience," Meta CEO Mark Zuckerberg said corporate culture has become "neutered."

Growing a Business

5 Risk-Taking Lessons From Founders Who Bet Big and Won

Discover the bold moves and strategic risks that catapulted these entrepreneurs to success. Learn how their fearless decisions can inspire your own path to growth.

Business Models

I Transformed My Company With Employee Ownership — Here's Why You Should Too

As a business leader who recently decided to transition to an employee-owned business model, I'm sharing insights into the vast benefits for both the business and employees based on first-hand experience.