ING: Future Bitcoin Protocol Should Include Central Bank Functions

A new video report from eZonomics by ING, a money management resource operated by Netherlands-based multinational banking company ING, suggests that bitcoin could one day be supplanted by an improved protocol that seeks to control digital currencies in a similar way to government-backed central banks.

In the video clip, ING economist Teunis Brosens theorizes that in order to function as efficiently as traditional currencies, a bitcoin algorithm needs to be developed that “smoothly matches money supply and demand”.

Brosens further suggested that such a technological advancement could be wildly popular in the marketplace, stating: “The inventors of that successful algorithm would make such a momentous step forward that they would surely qualify for the Nobel Prize in economics.”

 

The statements came as part of an introductory video on bitcoin by eZonomics by ING, an ING resource that seeks to increase financial education by providing practical information on money management.

Where bitcoin falls short

The video finds Brosens introducing the basics of cryptocurrencies before discussing how the technology meets the traditional definitions of money.

He suggests that ING believes bitcoin only meets one of the three central tenets of traditional currency due to its volatility and lack of oversight, saying:

“Real currencies dampen these fluctuations by regulating money supply and prices through interest rates, but it is an explicit goal of bitcoin to do away with central authorities.”

Can #bitcoin and other virtual currencies ever replace “real” money? New #economic update #video http://t.co/RRUwCpXCVp

— eZonomics (@eZonomics) July 15, 2014

Price fluctuations

The video further emphasized the varying price of bitcoin as a weakness, citing the “several fluctuations” in bitcoin price that have occurred in bitcoin’s five-and-a-half-year history.

Brosens summed up this viewpoint, adding:

“Money is a means of exchange, unit of account and store of value. Cryptocurrency may take the first box if it is accepted more widely, but the second and third are problematic because the value of bitcoin is very volatile.”

The video arrives shortly after a recent report by another major Dutch financial company, payments specialist Innopay, which saw the financial entity speaking with a variety of bitcoin experts as part of a wider fact-finding effort.