Credit Suisse: Bitcoin's Decentralization Biggest Drawback

Credit Suisse, the Switzerland-based financial services conglomerate, has once again offered its insights on Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term.

Earlier this year, co-head of Global Software Investment Banking James Disney indicated that emerging payment technologies like Apple Pay and Bitcoin hold much future potential.

In a recent report titled, "Bitcoins – Money Without Physical Form", Credit Suisse reiterated this sentiment, saying that bitcoins "could have cost advantages over credit cards or providers such as Western Union when used as a transaction system."

However, when it comes to its use as a currency, the report is far more pessimistic. While Bitcoin's decentralized structure is novel, it is also its undoing vis-à-vis its potential to function as a stable currency:

"Do bitcoins have the potential to become commonplace and to dislodge the money monopoly from the central banks? The outlook is not good. Even if distribution as a means of payment continues to increase, the system's advantage – decentralization – is also its biggest drawback."

It goes on to contrast bitcoin with legal tender, which has an authority to guarantee its value. "In the end, this confidence is crucial for any currency whose usage extends beyond the Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term of goods."

This point feeds into a key subject of debate over bitcoin as a currency. How well do governments "guarantee" fiat's value, considering their apparent ability to increase its supply without limitation and influence interest rates?

Indeed, the report goes on to note that bitcoin may actually be functioning better as a currency in countries such as Argentina and Zimbabwe "where confidence in the country's own currency retaining its value is very low."

Bitcoin may be more fitting as an investment, the report says, comparing it to gold in having a limited supply. But even if it significantly appreciates in value, this is detrimental to its use case as currency--its purchasing power is correspondingly compromised.

Overall, the report expresses concern over the lack of "physical form", apparently in contrast with fiat. This point too is highly debatable, as physical manifestations of fiat are coincidental, occasionally a matter of convenience. But the majority of financial transactions exist only as information, which is defined by the legal parameters of the governing authority backing it.