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The Bank of International Settlements (BIS), released a detailed report on cryptocurrency and associated modes of transaction recordings. The report claims that “a range of shortcomings” prevents cryptocurrency’s practical functionality. That a centralized banking institute catering to central banks takes issue with decentralized modes of financial exchange is no surprise

Succinctly summarized by Agustin Carstens, BIS’s general manager, bitcoin is “a combination of a bubble, a Ponzi scheme and an environmental disaster”

Promises of these ‘would-be’ assets are held in the report as somehow thwarted by their own inherent limitations. Failure to potentially replace by copying old-world instruments has always been, by definition, self-evident. Yet associated risks of cryptocurrencies ostensibly rise in tandem with frequency of use

Sentiment aside, what should be deliberated is a limiting of utility by mainstream partial implementation irrespective of development potential

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Possibilities rather than present use are what we prefer to concentrate on. In other words it is not how cryptocurrency’s are currently being used which deserves our focused attention, it is how they could be

BIS’s three point attribute summation of maintainable monetary tools are these acting as a unit of account, medium of exchange and store of value. In one way or another all are presented as, in consideration of sustainability, practically inadvisable from forms of centralized authority

Upon detailed reflection, many conclusions drawn are indeed valid. Yet when taking the underpinning of trust as a genuine universal requirement irrespective of a currency's format, BIS overlooks perhaps the most crucial factor

Namely that decentralization as a methodology and functional approach within technological structures has already been proved through implementation and indeed presently transpires between participants, absent standard centralized oversight

In predicting sustainability of any format's methodology, a main crux of contention, it is appropriate to shelve the report's allusions of attempts to discredit cryptocurrency through comparisons with such items as stones and shells in museum “graveyard” displays of antiquated, short lived modes of exchange. Individually enacted today the marked capacity for trust allocation exists on a global scale, like access to the technology itself

The trick is that use cases typically focus on the unit, medium and store of value all of which presuppose public rather than private valuation. They need not

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Temporarily picturing this as a representation rather than traditionally defined store of value, implementing cryptocurrency permits two individuals to be in a private and legal exchange again absent centrally imposed limitation as it pertains to conversion. The private capacity for trusted exchange exists, the recognition of worth assigned to those other than participants may not

With an immutable globally accessible ledger of worth ascribed, those same stones or shells may have absolutely retained the three principle features of lasting financial implements. Similar to the ways that statues and jewellery still do due to the culturally bolstered and wider recognition of worth or value attribution

Now value or worth ascribed may remain set with conversion to decentralized or “sovereign” backed fiat formats themselves then being subject to contention. This is following an autonomously executed desire for conversion

The trick again is questioning who this ascribed and immutable recording of worth or value pertains to. With decentralized technologies private inter-party exchange as opposed to public open valuation allows for more choice within existing structures than is perhaps commonly perceived

what

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Highlights from BIS’s report include rationales of spreading distributed ledger technology’s being of broader detriment rather than benefit, analysis of current transactional volumes shutting down the internet when enacted on current blockchains and other indicting conclusions of greedy rushes to action by miners drawing as much combined electrical power requirements as cities

Propositions that for cryptocurrency “...trust can evaporate at any time because of the fragility of decentralized consensus through which transactions are recorded” may be less likely than within historically evidenced and repeated collapses or mismanagement of centralized institutions. Commendably BIS notes a handful of such centralized failure events

Likewise in comparisons of cryptocurrency to any range of trend inspired, possibly worthless collectables such as baseball cards, the head of BIS research Hyun Song Shin seems to conveniently omit the physical substance and process by which centralized fiat currencies are created and recorded. However these are approached and whomever is issuing or holding them, debates of implementation and sustainability are around the forms of assets (i.e. physical substances or structures used in value representation and exchange), and ledgers (i.e. the recording of their movements), are essentially identical

Meaning like a baseball card someone else still has to accept and recognize the value in a centralized form of currency. The question of where these values are marked down and then the group size of other party’s likewise attributing validity to such marked down value is the difference

when

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Innovation is often spurred by need, from a noted necessity for improvement. A 1908 analysis of the automobile’s future, arising environmental impacts, congestion, safety as well as practical implementation if considering the entire population will be driving Ford’s Model T would have reached some dire conclusions. In 1969 predictions of humankind’s space exploration ability as extrapolated from the Apollo 11 mission would arguably significantly differ from today’s reality. And to those living decades ago a compact, multi-terabyte solid state hard drive may have seemed like science fiction. In short, predictions are predicated and constrained by the investigating level of understanding

Writing off cryptocurrency as entirely untenable is at best an incentivized reaction drawn by participants profiting within a status-quo. Equally in implementation any one methodology should not be solely purported as solving every conceivable use case

No argument is being made that present mainstream forms of cryptocurrency innately allow decentralized improvements to financial institutions with tangible trust reallocation identically shifted. A philosophical variation of existing operations may achieve this though. And we are facing a refining of technologies which facilitate such even if these are performed in ways rarely imagined today

how

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Banking institution’s utility is without question. From credit cards, wire transfers to almost imperceptibly broad arrays of centralized financial services, existence evidences their persistent and irrefutable demand

Constraining new technologies within or to old world functions is however a cause for concern. As it is today cryptocurrency does not answer questions of utility, scope and practical implementation which centralized institutions have had centuries to solve. DLT does however provide a window into alternative structures as to how participants, still physical and within geographically constrained locales, may shortly come to describe, assign, exchange and then convert value

Just as with the movements and valuations of say the Euro as it affects conversions into US Dollars, the sovereign backing and implementation of either is not mutually exclusive

Today we have the possibility for the implementation of decentralized currency, private ownership and immutable decentralized ledger technologies recording value ascription. The wisest course of action would be continual improvement and development of the supporting technologies

Rather than a refusal of service type expansion, continued necessity for centralized support and conversion structures may indeed be bolstered through cryptocurrency adoption and done so to the actual, self-determined benefit of all participants. One enactment being the RWSC®

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