FTX head SBF: BTC has no chance as a payments system

The FTX CEO believes PoS cryptos are key to creating a functional crypto payments network

Sam Bankman-Fried, founder and CEO of FTX                                 
Sam Bankman-Fried, founder and CEO of FTX, testifying during a US House Financial Services Committee hearing on digital assets in 2021 – Photo: Alamy
                                

The lead crypto bitcoin (BTC) does not have a future as a payment network due to its high environmental impact and inefficiency.

This is what Sam Bankman-Fried, CEO of cryptocurrency derivatives exchange FTX, has told the Financial Times.

Bankman-Fried explained that the proof-of-work (PoW) system of validating blockchain transactions that BTC uses is not able to scale up in order to deal with the millions of transactions required to make the crypto an operational means of payment. Other cryptos that use a PoW system include litecoin (LTC), dogecoin (DOGE) and ethereum (ETH).

The process of mining cryptos using a PoW consensus mechanism is highly energy intensive. Bankman-Fried told the Financial Times: “The bitcoin network is not a payments network and it is not a scaling network.”

PoS system needed

The FTX CEO said that proof-of-stake (PoS) cryptos would be necessary to create a functional crypto payments network, which would also be more environmentally friendly.

PoS cryptos include binance coin (BNB), solana (SOL), cardano (ADA), avalanche (AVAX) and algorand (ALGO).

Ethereum is currently working on the ETH 2.0 upgrade, which will see the world’s second-largest cryptocurrency move from the energy-hungry PoW consensus to the leaner, greener PoS mechanism.

Bankman-Fried said: “Things that you’re doing millions of transactions a second with have to be extremely efficient and lightweight and lower energy cost. PoS networks are.”

This does not mean the CEO feels BTC has to go

Despite his concerns, Bankman-Fried still feels that BTC may still have a future as “an asset, a commodity and a store of value” like gold.

The FTX CEO said: “I don’t think that means bitcoin has to go.” Regarding PoW cryptos, Bankman-Fried added: “It has to be the case that we don’t scale this up to the point where we’re spending 100 times as much eventually as we are today on energy costs for mining.”

FTX uses carbon offsets to compensate for the company’s emissions, which Bankman-Fried said is a worthwhile thing to do, but is not a solution.

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