The economist who saw the financial crisis of 2008 told the American congress day bitcoin and blockchain last week are a major threat to the stability of the financial market. But he gets a lot of criticism about that.
Nouriel Roubini is a leading professor at New York University and global economist who testified last week for a US senate committee dealing with cryptocurrency banking (PDF). He went straight in and called cryptocurrency as bitcoin ‘the mother all bubbles and scam’. He called blockchain, the underlying technology that cryptovalyuta use, the most hyped – and least useful – technology in the history of mankind.
After criticizing this, Roubini put even heavier yesterday through a column that was published on CNBC.com. In it he stated that the blockchain’s promise to solve all our problems with decentralization is “a ruse to rid investors of their hard-earned real money”. Blockchain, a database technology to create a decentralized electronic ledger, “is not even an improvement on the standard spreadsheet that was developed in 1979,” says the economist in the column.
“There is no institute in the world – bank, company, NGO or government organization – that would store a balance sheet or trade register, trade and customer interactions on a public, decentralized peer-to-peer ledger,” he writes. “There is no good reason why such proprietary and very valuable information should be stored publicly.”
Roubini is known as one of the few economists who saw the financial crisis of 2008 coming. After seeing the price trap of bitcoin in the past year, he thinks that this and other cryptocurrency is the mother’s market bubble that tempts investors “especially people who do not have financial knowledge – people who do not know the difference between stocks and bonds – are turned into a feverish madness driven to buy bitcoin and other crypto “.
No naive blockchain investors
Computer science professor Vipul Goyal of Carnegie Mellon University says the testimony “was certainly amusing and received a lot of media attention, but it is not clear to me whether he is a techology expert and understands the world of crypto.” Goyal refers to tech giants like Amazon, IBM, Microsoft and Oracle who develop blockchain projects and deliver Blockchain-as-a-Service so that companies can use decentralized databases to exchange information with business partners.
Before he became a professor at CMU, Goyal was a researcher at Microsoft for seven years. He noted that Microsoft CEO Satya Nadella spoke several times about his vision on blockchain. “These are certainly not the naive, gullible people that Roubini is talking about,” says Goyal.
The bitcoin rose to a record high at the end of last year and the 17,000 euro passed. But the cherry has dropped by more than 65 percent in the past nine months. This month the bitcoin always hangs around 5400 to 5600 euros. Roubini calls that great loss the crypto-apocalypse. When the value sank, the popularity of blockchain increased as a business transaction tool so that transparent and secure data is exchanged between members of a group.
Looking at technology, not the course
Blockchain was successfully rolled out after pilot projects for financial transactions abroad, as a platform for supplier management and as the basis for a new ‘trust economy’. Health institutions also investigate the technology as a basis for confidential information.
Actually blockchain is a victim of its own success, says Goyal, who notes that blockchain has gone ‘public’ too quickly. “Wall Street and stockbrokers started to follow it on a daily basis and that became the benchmark for success rather than how the technology actually evolves.”
It takes years before a truly disruptive technology becomes mature and finds a place. Internet needed about ten years, he notes, and AI lasted even decades. Even a large and rapidly emerging technology such as cloud needed a few years. “I think you have to be patient and blockchain the time to mature, instead of judging without understanding the technical basis based on the exchange rate of cryptocurrency,” says Goyal.