According to economists at the Bank for International Settlements (BIS), the usage of public blockchains leads to fragmentation, which implies crypto will never be an acceptable form of payment.
The authors of the paper stated, “Fragmentation indicates that crypto cannot fulfil the social role of money.” According to the paper, when the number of transactions per block approaches its maximum, the cost of transactions grows, prompting consumers to seek for alternative blockchains. Because of this “fragmentation,” blockchains are unable to take use of the advantageous network effects that we associate with traditional money.
Money, the authors pointed out, is a coordination instrument designed to enable economic transaction, and this can only happen if network effects exist, in which the money becomes more appealing as more people use it. Cryptocurrencies cannot serve this role without interoperability across rival blockchains.
The BIS has been advancing its own research into central bank digital currencies (CBDCs), and recently completed project Dunbar, in which the central banks of Australia, Malaysia, Singapore, and South Africa found that cross-border CBDC efforts were viable. The BIS is no stranger to not being a fan of Bitcoin or crypto in general.