Sam Bankman-Fried, founder of crypto exchange startup FTX, says bitcoin has no future as a payments network
Sam Bankman-Fried, the Founder and CEO of cryptocurrency exchange startup FTX, said on Monday that bitcoin has no future as a payments network as the volatility of the digital currency continues unabated. In an interview with the Financial Times, Bankman-Fried criticized the world’s most popular cryptocurrency for its inefficiency and high environmental costs.
Bitcoin uses a concept called proof of work to validate transactions. Unlike Bitcoin, Ethereum has been working to move to this energy-intensive network. Bankman-Fried told the Financial Times that “proof of stake” networks would be required to evolve crypto as a payments network as they are cheaper and less power-hungry.
Bankman-Fried said that he didn’t believe bitcoin had to go as a cryptocurrency. Instead, he suggested that Bitcoin may still have a future as “an asset, a commodity and a store of value” like gold.
Bitcoin (BTC) was designed as a medium of value exchange on a peer-to-peer (P2P) basis. To understand the inner works of the Bitcoin network, one could draw some parallels by thinking of it as a “digital notary”, achieved through a theoretically tamper-proof, verifiable public ledger system where transactions are executed and recorded in a string of blocks.
In the Bitcoin system, the ledger contains all the transactions that have ever existed and it is in constant auto-update mode as new blocks are created in what’s called the mining process. Miners, through the use of computing power aimed at resolving complex mathematical formulas based on Hashcash PoW (Proof Of Work), keep the network alive by creating new blocks in exchange for an incentive in the form of Bitcoins (currently at 12.5 BTC but halving every 210,000 blocks formed). In simple terms, PoW is a piece of data that is sufficiently costly and difficult to be produced and validated yet easily verifiable. Proof of work serves the purpose of preventing malicious use of the network such as spamming or denial of service attacks.
Bankman-Fried and his co-founder Gary Wang co-founded FTX in 2019 after graduating from MIT. The Bahamas-based crypto exchange FTX offers derivatives products like futures and options as well as spot trading. Once an unknown startup, FTX has become a key player in the crypto space, rivaling the likes of Coinbase and Binance.
Bankman-Fried, who currently resides in Hong Kong, is now worth at least $25 billion making him the richest person in crypto, according to Forbes. Sam graduated from the Massachusetts Institute of Technology in 2013 at the age of 21. He was skilled in math and loved to solve problems and give back to society.
In 2020, Bankman-Fried made headlines after he donated a whopping $5.2 million to Joe Biden’s campaign, making him the second-biggest donor. Today, Sam is a celebrity in crypto circles. FTX specializes in derivatives and trading on leverage, the use of borrowed funds to amplify trades.