Sam Bankman-Fried: Bitcoin Is Digital Gold, Not Payment Network

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  • FTX CEO Sam Bankman-Fried has said that Bitcoin no longer works as a payment method
  • The 30-year-old told The Financial Times that its use was limited to a store of value, such as gold
  • Bankman-Fried also stated his concern about Bitcoin’s environmental impact

Sam Bankman-Fried, the CEO of exchange FTX, has said that Bitcoin’s days as a payment method are over, given its inability to scale and its environmental challenges. Bankman-Fried told the Bitcoin-hating Financial Times that while the world’s first and biggest cryptocurrency still had a place as a form of digital gold, coins that use proof-of-stake (PoS) consensus mechanisms are much more suitable to use as methods of everyday payment.

Bankman-Fried Backs Proof-of-stake

Bitcoin’s scaling has been a topic of discussion even before it was launched in 2009, with Hal Finney convincing Satoshi Nakamoto to implement a 1MB block size cap before the green button was pressed on the Bitcoin blockchain. The hesitation to implement on-chain scaling led to the 2017 Bitcoin Cash fork and other forks that have taken place since, and apart from SegWit’s introduction in 2017, no great scaling has taken place.

Bitcoin’s environmental concerns have really hit fever pitch in the last 18 months, despite Bitcoin mining representing only 0.2% of global carbon emissions, to the point where protest groups have been set up to push Bitcoin onto a PoS consensus mechanism.

Bankman-Fried told the Financial Times that both of these things were the reasons why Bitcoin could no longer function as a payment mechanism:

“Things that you’re doing millions of transactions a second with have to be extremely efficient and lightweight and lower energy cost. Proof of stake networks are.”

Echoing the much debated theory that Bitcoin mining will become a leading source of greenhouse gases, Bankman added that, “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.” It bears mentioning here that FTX is a huge backer of PoS coin Solana.

Lightning Network is Bitcoin’s Best Scaling Option

While Bankman-Fried’s comments on the environment can be debated, given the spurious data used to drive narratives, what isn’t up for debate is Bitcoin’s ability to work as a payment network in its raw form. The Bitcoin blockchain hasn’t been able to function as a payment network for many years now, and with the desire to scale on-chain seemingly dead forever since SegWit2x failed in 2017, the only chance of continuing with this narrative is with the Lightning Network, which has grown massively in recent years.

Purists of course argue that this is not how Bitcoin was intended to work, but it is the only chance Bitcoin has to function as a payment network, and indeed it is odd that Bankman-Fried chose not to discuss it, seeing as several other exchanges have implemented Lightning Network deposits and withdrawals.