I just read, a week after publishing, The Big Blockchain Lie, by Nouriel Roubini on the often thought-provoking if sometimes bland and sometimes self-congratulating Project Syndicate.
I was surprised by the angry and poorly supported rant from a thinker who, generally, I find cooler and more balanced that like-minded opiners such as Joseph Stiglitz or Yanis Varoufakis. If he wanted to create controversy, though, it was a good play, with seventy-nine comments so far, six of them while I write this piece.
Rather than going after each unsubstantiated jab, which I may do separately in my blog, let me stick to the panoramic view of this article.
- The doomsday view.
Is there a bloodbath? You might say so judging by the standards of traditional assets with clear established prices that are the promise to deliver a static and clearly stated underlying good. However, if one thinks cryptoassets are in the process of price discovery, oscillations might not be such a surprise. Think of the present as the first few minutes of the Big Bang and consider how behavior deviates from standard physics in this environment. Some “retail” investor likely lost some money, sure, but this is far from rational evidence of a scam.
- Blockchain vs Bitcoin
I deride blockchain lovers in Coffe Talk, but I have a hard time believing Mr. Roubini buys his own claim that a blockchain is just a spreadsheet. By that measure, penicillin is just random mold and the internal combustion engine just arson inside some iron ore block. The concept of blockchain, though far from the final, winning representative of crypto-value structures, is a genial construct that offers opportunities to coordinate and therefore enhance human activity in ways we cannot completely imagine yet. Claiming the contrary is disingenuous and, from an accomplished academic, suspect.
- Economic Hell
The spectre of monopoly, centralization and manipulation is real. I pointed out in Another take on what makes a good cryptocurrency some problems with bitcoin as Satoshi Nakamoto laid out in his seminal paper. Bitcoin has a scaling problem that goes beyond the petty dispute about megabytes. A truly global crypto platform must scale by distributing and not concentrating and it must be able to forget as much as it is able to remember.
Nevertheless, Mr. Roubini’s arrogant underestimation of the buying decisions of free economic actors is insulting. He assumes mathematicians, financiers and data scientists are regularly duped by very bad hombres in undisclosed unsavory locations. In reality, most crypto holders are highly educated individuals who buy the concept of crypto and use the currencies for their advantage.
Monopoly and manipulation are unpleasant and not necessarily persistent phenomena and roadkill, though unfortunate, should be viewed in a Shumpeter-like fashion, as part of the creative destruction intertwined with progress.
- No institution under the sun.
Well, no institution under the sun would have trusted email contracts, digital signatures, telephone conversations for that matter just a few years or decades ago. ‘Nough said.
- Appeal to discrimination.
I have no time now to reread and find where in the rant the writer regrets the absence of minorities in crypto (he shouldn’t really, if this is such a scam). But this cheap shot is just in line with attributing it all to “greed” a concept that hardly fits with economic science.
Finally,
My father used to ask “cui prodest”, perhaps assuming someone who pushes something often does it out of self interest of, as Mr. Roubini would put it, greed. In this case, I wish I knew.
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