Global economist Nouriel Roubini expressed his rage against Bitcoin and blockchain while displaying his profound lack of understanding in the field.
A Political Rap against Crypto
Roubini was present at an informational hearing round “Exploring the Cryptocurrency and Blockchain Ecosystem” organized by the US Senate Committee on Banking, Housing, and Urban Affairs, alongside Peter Van Valkenburgh, the Director of Research at Coin Center, a nonprofit crypto advocacy organization. The purpose of the hearing was to listen to both the sides as the House of Representatives draft bills to regulate the US crypto industry.
Roubini ranted against crypto on several accounts during his testimony, calling Bitcoin “the mother of all scams” and blockchain “the most hyped technology ever.” He continuously reminded the Senate that only criminals use crypto, that mining is bad for the environment, that decentralization is ridiculous, that most tokens are non-compliant securities, that utility tokens take society back to the stone age, that blockchain is no better than spreadsheets, and that no corporation or government would like to run a state on a public ledger.
Roubini also tried to present evidence that how a thriving industry like crypto is poised to fail, saying, for instance, that Bitcoin transaction fees are $55, and that it cannot scale to cater for global financial volume.
“Paying 55-dollars of transaction costs to buy a $2 coffee cup is [obviously] never going to lead Bitcoin to become a transaction currency,” the economist wrote.
The crypto community treated Roubini’s accusation as [yet] another attempt of a great economist to malign Bitcoin without actually understanding the underlying technology. But the fact that he made those accusations before the US Congress upper chamber raised concerns, given it could be misperceived as they go ahead drafting a regulation.
4/ For example, in his written testimony, Nouriel says bitcoin fees are $55. That’s just wrong. He says crypto can’t scale, but ignores layer 2 solutions. He says 51% attacks are frequent & easy, but provides no support.
It’s hard to have a productive conversation on this basis.
— Jake Chervinsky (@jchervinsky) October 12, 2018
To begin with, to say Bitcoin transaction fees are as high as $55 shows Roubini’s lack of understanding. Bitcoin commission had crossed the $50-mark in January 2018. He chose not to mention that the commission fees nosedived later to as low as $1 per transaction. Nevertheless, it is true that buying a coffee by paying $55 in commissions is not an ideal situation, but sending thousands of dollars over blockchain by paying the same fees is more than excellent. It is only about choice, in the end, and blockchain offers it to the consumers around the world.
The economists who share Roubini’s opinion first need to understand how a decentralized network like Bitcoin governs at the first place. The system is run by mathematics in which each participant is rewarded based on a pre-written formula that is already in the code. On the top of that, nodes that run the Bitcoin network are paid in BTC, not the dollar. When transaction fees reached $55, the value of Bitcoin was higher, and the number of users was less.
Therefore, in Bitcoin, users have the flexibility to define use-case, which Roubini chose to ignore as he continued his biased rant against the technology. If a crypto user has to pay his merchant, he always has the flexibility to opt for cheaper stablecoin while considering Bitcoin as his store of value.
And as far as scaling is concerned, Bitcoin is software in the making. The core team has already released two working solutions to cater to larger transactional volumes. Roubini should look into it before deciding to continue his attacks on crypto.