Bank of England senior economist: speculation disrupts cryptocurrency prices and effects

Peter Zimmerman, senior economist at the Bank of England, said speculation disrupted the price and role of cryptocurrencies.

According to Coindesk, Zimmerman stated in a paper that speculation undermines the effectiveness of cryptocurrencies as a means of payment. Due to the limited processing power of the blockchain, excessive speculative use can make transactions slower and more expensive. Assume that the value of cryptocurrencies stems from their utility as a payment instrument, which reduces their use and therefore their value to holders.

Zimmerman said, "Limited settlement space creates competition among currency users, so speculation will crowd out the use of money. Speculation crowds the blockchain, reduces the currency value of cryptocurrencies, and affects their prices."

He also believes that speculative activities will hinder the mainstream application of cryptocurrencies, and the "digital gold" effect will cause some users to hoard cryptocurrencies that were originally used as payment methods.

In this regard, he suggested that if speculative activities can be implemented using two-tier protocols such as cash-settled crypto derivatives or Lightning Network, then this may have a "deep impact" on the nature of cryptocurrencies, making them more similar to other asset classes .

Zimmerman believes that the main value driver of cryptocurrencies is their function as a means of payment, and any speculative activity will "make it difficult to use the token for its intended purpose." For example, the popular Ethereum trading game CryptoKitties "occupies the blockchain and makes it more difficult for people to use dApps or execute smart contracts."

Image source: Pixabay

By Liang CHE

This article is from bitpush.news. Please reprint the source.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!

Share:

Was this article helpful?

93 out of 132 found this helpful

Discover more

Views

In-depth Analysis of Base Standing on the shoulders of giants, emerging in the fiercely competitive Layer2 race.

This article will conduct a comprehensive analysis of Base from multiple aspects including project overview, competit...

Market

ETH soared 20%, leading the public chain to skyrocket, the big bull market started?

The above chart shows the historical chart of ETH, rising from less than 1 US dollar to the high of 1,200 US dollars,...

Market

Litecoin's LTC20 protocol: the next speculative market with hundredfold or thousandfold growth?

With the wealth effect brought about by BRC20 and the halving narrative, LTC20 is poised to become a reservoir for ca...

News

Is Ethereum Ethscriptions going backwards? Will Eths replicate the Ordibehesht myth a thousand times?

Ordinals Community and Ordinals World believe that eths is not only expanding the ordinals consensus but also creatin...

News

Ethereum 2023 Q2 Data Research: Gross Profit of $700 million, ETH Burn Rate Accelerated to 0.8%

Crypto Clarity researcher Sam Andrew has released an unofficial Ethereum Q2 2023 data report, analyzing Ethereum's op...

News

Viewpoint | Departure at the End: Ethereum EIP and Upgrade Process Improvement Proposals

This article is a rough transcript of a conversation between Danno Ferrin and me at DevconV (the 6th Ethereum Develop...