Blockchain Basics

What are the key concerns of using Bitcoin as a currency? 

It does not qualify as a store of value due to its historical levels of volatility. There are concerns about users hoarding for speculative interests and low levels of acceptance in the real economy mean that it is not currently commonly used as a means of exchange. 

Some argue that Bitcoin (one of the leading cryptocurrencies) cannot be trusted, for a lack of accountability, oversight, and anonymity. The latency and lack of scalability limits crypto’s potential for facilitating meaningful volumes of settlement. The consensus protocol places extravagant energy demands, leading to substantial environmental impact during the ‘mining process’. There is a deflationist risk due to the hard-coded ceiling of Bitcoin mining.

What is the difference between a central ledger and a decentralised ledger? 

Centralised ledger 

• Access to the ledger is strictly limited to authorised parties
• The bank’s ledger is the single source of truth for the status of any account
• Commercial banks keep central ledgers to record all transactions

Decentralised ledger 

• The ledger is shared with all members of the community, synchronised across the network with the same information
• The Blockchain can be public (such as Bitcoin) or private, with a central body restricting access to verified members
• All members can view all transactions in a public Blockchain such as Bitcoin. Restrictions can be applied to private Blockchains 

Why is blockchain seen as inappropriate for handling payments?

• In the case of a public Blockchain, the validation of transactions requires the use of complex computing processing and its associated power requirements
• Transaction mining does not compete with the performance of established payment providers, incurring longer delays for settlement
• The extent and complexity of the technology means it is not scalable to meet general payment needs