Bloomberg: crypto pits economists against engineers

Economist Nouriel Roubini, nicknamed Dr. Doom for predicting the most recent global financial crisis, has crossed swords with cryptocurrency guru and Ethereum founder Vitalik Buterin. In the epic battle of words, both are right about some things, and neither is quite wrong. Theirs is a fundamental, and philosophical, conflict.

It started with Roubini’s testimony before the US Senate’s Banking Committee on Wednesday (October 10, 2018). The New York University professor, who has long disparaged virtual currencies and the blockchain technology behind them, delivered a particularly stinging indictment of the industry. As for the blockchain, it isn’t a revolutionary technology, the economist said, because the financial solutions based on it are not scalable, truly decentralized, or secure.

Roubini’s testimony was also full of personal attacks on Buterin for his failure to deliver a scalable system he’s promised since 2013, and even for the allegedly buggy code of his Ethereum platform. Buterin was quick to counter with an attack on Roubini’s credentials. “I officially predict a financial crisis sometime between now and 2021,” he tweeted. “Not because I have any special knowledge or even actually think that, but so that I can have a ~25% (or whatever) chance of later being publicly acclaimed as ‘a guru who predicted the last financial crisis’.”

This started off a debate between him and Roubini in several Twitter threads which can best be described as an economist’s conversation with a technologist; it’s not quite as bad talking over each other in two different languages, but it’s close. The exchanges reflect a fundamental difference in worldview.

The economist looks at the present state of affairs, and sees a familiar phenomenon: A hype-based bubble without workable fundamentals, and a highly imperfect technology that, at the moment, works worse than other solutions. (Roubini’s examples include fintech leaders such as PayPal and Alipay). The engineer sees a problem worth solving — in this case, removing a central approving and certifying authority from financial transactions, and all kinds of contracts — and works on solutions. For the economist, the current failure rate is important, and the sheer number of scams surrounding a particular technology triggers red alarms. For the engineer, the failures are merely inputs, and the scams are irrelevant.

Even if the crypto market implodes, as some predict, the engineers will keep working on the technology. A second coming should not be ruled out; there are plenty of precedents: electric cars, tablet computers, virtual reality. The smart money isn’t on the hype, it’s on the research and development.

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