- Bitcoin is snowed under with critique after it displays heightened signs of volatility.
- Bitcoin is a store of value and lacks currency functions.
- In the current digital landscape, other digital payments provide more use cases.
Divergence in opinion creates a scenario that enables healthy debate regarding current global activities that affect the social-economic landscape. Having a one-sided view on a topic that some might not fully understand, on the other hand, is not well received by anyone who is passionate about, or genuinely understands the value of, something like blockchain or digital currencies.
Paul Krugman’s ‘Different’ View Of Crypto
In May, Paul Krugman, the 2008 Nobel laureate for Economic Sciences, and New York Times columnist, published an article in which he called cryptocurrencies a “long-running Ponzi scheme.”
His statement and commentary in The New York Times comes just after Bitcoin saw the crushing loss of nearly 50% of its all-time high value, in the wake of three government-backed Chinese institutions reiterating their stances on cryptocurrencies.
The self-proclaimed “crypto skeptic” has long held opinions in opposition to digital assets, comparing cryptocurrencies’ way of payment with the gold standard. He previously posited that crypto is a form of regression, setting the monetary system back 300 years.
Interestingly enough, his comments tend to materialize whenever crypto market sentiment is in decline.
In his article, he emphasized that Bitcoin has no usability outside price speculation, thus comparing it to a Ponzi scheme, adding that “the prices of these assets keep going up, so that early investors made a lot of money, and their success keeps drawing in new investors.”
In essence, he is comparing Bitcoin’s success to greed, and the mirage of a ‘get rich quick’ scheme.
According to Paul Krugman, cryptocurrencies are a technology that can’t be integrated into the fabric of society. Why? Because “blockchain” doesn’t perform currency functions, and as such one cannot purchase a house with cryptocurrency.
While there is a ring of truth to those words, there are instances where cryptocurrency payments are accepted. Not long ago, for instance, Tesla (NASDAQ:TSLA) was accepting Bitcoin as a method of payment. Furthermore, the payment processor NOWPayments has recently added ADA as a cryptocurrency payment method.
Krugman went on to underline that other alternative digital payments, such as Venmo, allow him to perform these economic activities. In his, later mocked, piece, he emphasized how other widely used technological items and services such as Zoom, iPads, and Venmo, have all become immersive parts of our societal norms.
While his argument appears solid at first, marketing has played an intrinsic role in allowing such technologies to become embedded in our way of life. It should not be forgotten that Bitcoin gained popularity organically, through supply and demand dynamics, while the aforementioned digital products are geared to a specific audience with for-profit purposes. They are not necessarily comparable.
On the Flipside
- Chainlink 2.0.’s Whitepaper illustrates how a decentralized oracle could enable off-chain data to integrate effectively with blockchains.
- Paul Krugman was awarded a Nobel prize for his explanation of patterns in international trade.
- Both fiat currency and cryptocurrencies solve two distinct problems of society.
- Governmental regulation could create a legal framework which enables cryptocurrencies to become integrated in everyday use.
- According to ex-CIA officials, cryptocurrencies are a “boon for Surveillance” and are not only used for illegal activities.
Actually, People Do Like The Internet!
While Bitcoin has previously been criticized for not performing ‘regular’ currency functions, research suggests that Bitcoin is rather perceived by society as a store of value due to its volatility. In his opinionated column, Paul Krugman puffed that 12 years is an “eon for technology” and blockchain should have been able to integrate by now. He further emphasized that no “killer app” has been developed to embed cryptocurrency into our everyday activities.
Mr. Krugman’s column was met with significant criticism from The cryptocurrency community.
In a Tweet following the publication of his article, he stated that “this will get a lot of hate.” Particular emphasis was placed on Krugman’s previous assertions, which compared the internet’s impact on society to the impact of “a fax machine.”
The economist also expressed his opinion that the internet should slow because “people don’t have anything to say to each other.” While Mr. Krugman’s academic achievements are well-earned; some of his statements concerning technology lack essential foundations of validity.
From fundamentalist standpoints and current economic standards, Bitcoin and cryptocurrencies might appear to hold little intrinsic value, however, the dissociation of Ethereum from the concept of utilization is short-sighted, as Ethereum is actively being transacted, and represents one such example of crypto being used within the DeFi ecosystem.
Although Paul Krugman might prop-up traditional economic models as superior, cryptocurrencies have displayed the capability to disrupt previously held understandings of monetary value and ownership.
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