There was a United States Senate Committee Hearing earlier this month for the Committee on Banking, Housing, and Community Affairs. In it, Nouriel Roubini, an academic from the Stern School of Business at New York University was asked to testify on blockchain. He called it the “mother of all scams.”
I can't do better justice to the testimony's diatribe than the quotations can, so I'm just going to leave them here. Think of this as the Nouriel Roubini guest editorial.
"Bitcoin is a poor store of value. At its 70% capital loss, it was a 'good' deal compared to thousands of alt-coins (better known as 'shitcoins'). Actually, calling this useless vaporware garbage a 'shitcoin' is a grave insult to manure, that is a most useful, precious, and productive good as a fertilizer in agriculture."
"Blockchain is the most over-hyped - and least useful - technology in human history; in practice it is nothing better than a glorified spreadsheet or database."
"Cryptocurrencies have not and will never have the tools to pursue economic and financial stability. The few whose supply is truly constrained will never be able to stabilise recessions, deflations and financial crises, and lead to permanent and pernicious deflation. The rest will never be able to provide economic or price or financial stability. They will rather be tools of massive financial instability if their use were to become widespread."
"Buterin's inconsistent trinity shows how you cannot have at the same time scalability, decentralisation, and security. Whichever way you try to slice it blockchain leads to centralisation and lack of security. No decentralised blockchain will ever be able to achieve scalability."
"Crypto is the result of a bunch of self-serving, greedy white men who have pretended to create billions of wealth out of nowhere while pretending to care about billions of poor and unbanked humans around the world."
"Whereas the Internet quickly gave rise to email, the World Wide Web, and millions of viable commercial ventures used by billions of people in less than a decade, cryptocurrencies such as Bitcoin do not even fulfill their own stated purpose."
"The only reason to create a means of purchase through tokens is to create an illegal cartel of service providers who are safe from price competition and in a position to gouge their customers."
"The only applications of "blockchain" in reality are: private, not public; centralized, not decentralized; non-distributed on a few controlled ledgers; permissioned by only a few authorised to add and change the ledgers, not trust-less; and centralised, as a permissioned intermediary is in charge of authentication. They are called blockchains, but they have nothing to do with public distributed ledger technology. They are effectively no improvement over using an Excel spreadsheet."
"A 'trustless' utopia eliminating the need for reliable intermediaries is absurd. Every financial contract in existence today can be modified or deliberately breached by the participating parties. Automating away these possibility with rigid 'trustless' terms is commercially non-viable, not least because it would require all financial agreements to be cash collateralised at 100%, which is insane from a cost-of-capital perspective."
"Bitcoin is a slow, energy-inefficient dinosaur that will never be able to process transactions as quickly or inexpensively as an Excel spreadsheet. Ethereum's plans for an insecure proof-of-stake authentication system will render it vulnerable to manipulation by influential insiders. Most companies will halt their blockchain experiments this year, and in 90% of cases, blockchain experiments will not become a part of the company's operations. Only 1% of CIOs said they had any kind of blockchain adoption in their organisations, and nearly 80% have no interest in this type of technology."
In his point-by-point teardown of the technology type, Roubini discredits arguments that blockchain and/or bitcoin can be a currency, that its steady-state supply is viable in the face of its deflationary attributes, that the existence of stable coins is credible, and that central banking generally causes financial crises. And all of that is before considering the overwhelming energy costs that are required to keep this horrific scam alive. The misuse and waste commanded by this "technology" is larger than the energy use per year of a mid-sized advanced economy.
If you spend enough time in early-stage technology, you start to gain an appreciation for indicators of potential. In our sector, they look like: a clear and demonstrable innovation, usefulness in solving an important problem, and practical applicability. Innovation and worth mean these things far more often than they mean "world-rewriting new paradigm."
Roubini calls on all of us in his Senate testimony to end the hype. I think he's right. It is time.
Yours in HAT,