Claim 5: The bitcoin system will make traditional
payment services obsolete
The bitcoin community proudly points out that bitcoin transactions take only ten
minutes, compared to traditional bank transfers. Bitcoin transactions may be an
interesting alternative, particularly for transfers to developing countries, which
may take several days and are quite expensive under the traditional system.
However, the ten-minute interval is only a theoretical average set out in the
bitcoin protocol. In practice, a transaction may take longer. Moreover, traditional
payment services will probably accelerate their procedures in the future. For
example, the ECB plans to introduce its “TARGET instant payment settlement
(TIPS)”, which will offer transfers within seconds, by November 2018. Multi-
signature transactions are another advantage of bitcoin. Under this option,
bitcoin is not transferred until after several decisionmakers have approved. So
far, a similar option does not exist in traditional payment services.
No consumer protection for bitcoin However, the current bitcoin protocol has a number of disadvantages, too. At
the moment, the system can handle seven transactions per second at most. A
changeover to “lightning network”, which appears currently attractive and allows
micropayments without mining, will probably take some time.
This means that
the performance of traditional payment systems is several hundred or thousand
times better than that of bitcoin at the moment. Moreover, the banks’ systems
have proven their reliability and stress resilience time and again over the past
In contrast, the bitcoin infrastructure is still in its infancy. Let us
take a look at the hardware of the miners at the core of the bitcoin infrastructure.
The bitcoin community itself speculates that a massive security breach might
put 2/3 of the mining hardware out of order. If that happened, a transaction would
take considerably more than ten minutes. In fact, the system might even be
down for an indefinite amount of time. Bearing this in mind, who would want to
entrust large amounts of money to this system? Remember that, moreover, the
system operates outside the regular legal environment. There is also a second
question: Whom should users sue in case of a loss? The miners around the
world or the producers of the mining hardware? Neither appears very attractive.
Hackers who successfully invade the system might remain anonymous forever.
There is no consumer protection for bitcoin. Bank clients can contact their bank
and ask why a transfer was not processed and thus avoid future complications.
However, bitcoin users are left alone with any potential problems.
Traditional banking and bitcoin can Ultimately, bitcoin is an alternative means of payment which has advantages
coexist and disadvantages in comparison to traditional banking. Bitcoin will probably fill
a niche, at least in the short term. Traditional banking and bitcoin can coexist. At
the same time banks are massively investing in blockchain technologies in order
to exploit the advantages of cryptocurrencies for themselves.