The crypto hype-machine has taken another body blow this month, this time in the form of a scathing report by London-based research firm GlobalData, who have called the revolutionary claims made by crypto and blockchain proponents, “fantasy,” ITP reports.
Such talk is sacrilege among enthusiasts of the tech, who envision token issuance and speculation as one of the best ways to “incentivize” social good, and see blockchain as a panacea that will automate and render incorruptible payment and other data systems rotted out by rotten middlemen.
On the contrary, says Gary Barnett, Chief Analyst for Thematic Research at GlobalData:
“Many of the most basic claims made by proponents of cryptocurrencies simply are not true. We are told that cryptocurrencies speed transfers up, that they help to eliminate middlemen and that they are free of cost, but none of this is true…(Crypto and blockchain networks) fail to meet the basic technical standards necessary for them to function effectively as currencies.”
The report, alledgedly, sees some potential for DLT (distributed ledger technology- often confused with blockchain) to supply some of the necessary data infrastructure to support “modernization” of data systems, but calls claims that DLT or blockchain will reduce costs to banks and other financial institutions by up to 80%, “Absurd.”
High costs and inefficiencies are not all emanating from dinosaur data systems, says a sober Barnett. “The costs associated with financial systems are as much a result of poor, dated, or simply inefficient processes rather than any underlying problem with the technologies that are used to process transactions.”
GlobalData adds its voice to a growing number of public figures and institutions willing to argue against the marvellous claims of, largely, marketers, conscious and unconscious, many of whom have had their pockets lined handsomely by proceeds from the issuing of unlicensed, unregistered securities in the form of ICO’s (initial coin offerings).
Fundraises by ICO typically impart no investor protections and often happen before a company has any prototype, assets or revenue streams.
A recent report said 56% of companies issuing ICOs vanish within a month.
The one area in which most people agree that blockchains have some potential is in the area of payments. But even then, blockchain databases like Bitcoin have traditionally settled and encrypted every single transaction on every single computer in the network. This means that, so far, payment networks like have not scaled to resemble the more familiar SWIFT or Visa networks, the report states.
Unusual demand on public blockchain systems has caused fees to rise and networks to clog every time this occurs.
“Furthermore,” writes Barnett, “no cryptocurrency is widely accepted and transacted. The number of retailers and businesses that accept cryptocurrencies as payment for goods and services is vanishingly small, and those that do typically report very low volumes of cryptocurrency transactions by comparison to other means of payment.”
The truth of poor utility in these networks logically points to a state of overvaluation of each network’s associated token or currency, says Barnett:
“The valuations currently applied to cryptocurrencies have no basis in fact; cryptocurrencies represent a classic bubble, in which valuations are purely the result of speculation on the likely behavior of the market rather than a clear-eyed assessment of underlying value.”
You can buy the full report, for $3995.