The future of bitcoin is anyone’s guess, but one academic has warned that the world’s most popular cryptocurrency could fade out in the near future.
Eswar Prasad, senior professor of international trade policy at Cornell University, told CNBC’s “Squawk Box Europe” earlier this month: “Bitcoin itself may not last that much longer.”
Bitcoin’s price has been highly volatile over the last few years and in the last month the price of one coin has fallen from around $58,000 to less than $48,000.
While there used to be just a few cryptocurrencies, today there are hundreds and some of them are more useful and more environmentally-friendly than bitcoin.
Blockchain is the underlying technology behind most cryptocurrencies. It’s essentially a digital ledger of virtual currency transactions which is distributed across a global network of computers.
“Bitcoin’s use of the blockchain technology is not very efficient,” said Prasad, who is the author of ‘”The Future of Money: How the Digital Revolution is Transforming Currencies and Finance.”
The cryptocurrency “uses a validation mechanism for transactions that is environmentally destructive” and “doesn’t scale up very well,” he explained. Indeed, bitcoin’s carbon footprint is bigger than the whole of New Zealand.
Prasad said some of the newer cryptocurrencies use blockchain technology far more efficiently than bitcoin does.
He believes blockchain technology will be “fundamentally transformative” in the way that finance is done and in the way we conduct our day-to-day transactions, like buying a house or buying a car.
“Given that bitcoin is not serving well as a medium of exchange, I don’t think it’s going to have any fundamental value other than whatever investor’s faith leads it to have,” Prasad said.
More generally, cryptocurrencies have “lit a fire under central banks to start thinking about issuing digital versions of their own currencies,” Prasad said.
He added that such digital currencies could be beneficial as they may provide a low-cost payment option that everyone has access to, thereby increasing financial inclusion and potentially financial stability.
“Much as you might not like bitcoin, it has really set off a revolution that ultimately might benefit all of us either directly or indirectly,” Prasad said.