Nobel Prize-winning economist Paul Krugman has cautioned about a potential eternal winter for blockchain projects such as cryptocurrency. In An article published in the New York Times (NYT), the economist shares his criticisms of blockchain technology and the signs that could foreshadow its decline.
Paul Krugman Compares Crypto Winter to Fimbulwinter
Nobel laureate Paul Krugman has sounded the alarm on an impending crypto winter that could spell the end of blockchain-based projects, including Bitcoin and other digital currencies. In An opinion piece in the NYT published on December 1, the economist dives deep into the actual usefulness of this technology and the events that could lead to its downfall.
Krugman expressed his doubts about the technology’s practicality when compared to other central alternatives that work well. He explained:
What’s the point of going through the hassle and expense of maintaining a ledger in multiple locations and carrying it around with every transaction?
This comes in addition to the recent crash of FTX, one of the world’s largest cryptocurrency exchanges. Krugman believes that the crypto winter could mark the end of crypto and blockchain technology, much like the Fimbulwinter of Norse mythology which preceded the end of the world.
Signs of the Fall
For Krugman, there have been several indicators in the recent months that suggest an abandonment of the tech may be coming. The economist also points to the cancellations of certain projects such as Maersk and the Australian Stock Exchange, which he used to support his assertions.
Krugman also does not mince words when it comes to criticizing Bitcoin’s purpose, stating that “banks rarely steal their customers’ assets, while crypto firms are more likely to succumb to temptation, and hyperinflation often destroys the value of money, leaving one to fend for themselves in times of political turmoil.” He also criticized Bitcoin’s Proof-of-Work (PoW) consensus, estimating the environmental damage to be in the tens to billions of dollars with no clear benefit besides the production of “worthless tokens.”
However, this opinion is not the same as his in May 2021. At the time, he stated that while he didn’t believe in the fundamentals of Bitcoin, he was sure that the market was a “cult that can survive indefinitely.” In June, he likened cryptocurrency to the subprime crisis and housing bubble, saying that it’s “a house built not on sand, but on nothing.”
What do you think about Paul Krugman’s opinion on the future of blockchain and crypto? Have your say in the comments section below.
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