Sam Bankman-Fried, the CEO of FTX, believes the Bitcoin network is not a payments network, nor a scaling network. He highlighted the network’s proof-of-work (PoW) consensus algorithm, which validates Bitcoin transactions.
Computers, in a PoW-based network, run non-stop to verify transactions and create new blocks for the network. This process is called mining. Over the years, Bitcoin mining has industralized – steadily pushing up the number of computers used for this work. This has led to concerns around the sheer amount of energy Bitcoin needs to maintain itself. However, it has drawn flak from environmentalists and lawmakers, who are trying to achieve their climate goals.
Besides consuming huge amounts of energy, Bitcoin is not speedy. The average number of transactions, as per data from Blockchain.com, per second on BTC over the past 30 days is about 2.58. Basically, it is by far a magnitude slower than traditional payment networks like Mastercard or Visa.
Bankman-Fried says Bitcoin can serve other key purposes, such as a “store of value”. He highlighted that the Bitcoin network can’t sustain thousands or millions of TPS, but can be transferred on lightning. The Lightning Network allows micropayments atop the Bitcoin network. The FTX CEO pointed out that proof-of-stake (PoS) crypto networks offer the low costs and high transaction speeds needed for a payments system. He said it has to be extremely efficient, lightweight, and lower energy cost – which PoS networks are.
These networks are much less energy-intensive as PoS relies on validators that have staked a huge amount of the network’s native token.