Ethereum Founder Debates Nouriel Roubini Over Crypto
A lively debate between economist Nouriel Roubini and ConsenSys founder Joseph Lubin didn’t disappoint the crowd at the Fluidity Summit in New York. Roubini repeatedly attacked cryptocurrencies and blockchain technology as being irrelevant, while Lubin argued that the technology had tremendous potential in many industries.
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Roubini Attacks Cryptocurrencies, Lubin Looks on the Bright Side
Roubini repeatedly pointed out during the debate what he saw as the many flaws in cryptocurrencies and blockchain technology during the debate, which was streamed live (starting at 3:10:00). He said that while there is an ongoing technological revolution of the financial system, it’s being driven by artificial intelligence and the internet of things, not crypto:
“Most of this stuff has nothing to do with blockchain. Has nothing to do with cryptocurrencies.”
Roubini, an NYU professor who is also known as Dr. Doom for his pessimistic–but-accurate–prediction of the 2008 financial crisis, dismissed cryptocurrencies and blockchain technology almost completely, only leaving room for the possible tokenization of securities as a use case.
Lubin, wearing a t-shirt promoting decentralized exchange AirSwap, described Ethereum as “next-generation database technology” and said it has multiple use cases in industries as diverse as financial services, digital identity, supply chains, voting systems, and digital content management and licensing. He took an optimistic view of blockchain technology and said he believed that Ethereum could “usher in a more collaborative world on this new trust infrastructure.”
Cryptocurrencies Do Not Have the Attributes of Currencies
The moderator, Donna Redel, former chairman of COMEX and managing director of the World Economic Forum, challenged Roubini by noting how established financial players such as the New York Stock Exchange, Goldman Sachs, the CBOE, and CME Group have begun entering the crypto space in recent months. Roubini decided not to comment on the developments, aside from saying he believed in centralization institutions.
Roubini argued that cryptocurrencies are not actually currencies, as they don’t fulfill the requirements of currencies: providing a unit of account that goods or services are priced in; being an effective means of payment; and acting as a useful store of value.
Lubin agreed that most cryptocurrencies aren’t a good store of value, but said that stablecoins or similar projects, such as MakerDAO, could provide a solution to volatility within cryptocurrencies. He also argued that there are multiple ways that cryptocurrencies can scale, mentioning second layer solutions being developed on Ethereum, such as state channels or plasma, or other scaling methods like sharding.
Going Back to the Stone Age, Says Nouriel Roubini
Roubini said that having a token economy would be like going “back to Stone Age of barter, because that’s what tokenization is all about.” Noting that the widespread use of different tokens would make determining the value of the relative prices of goods and services difficult, he said, “It’s totally inefficient, it’s never gonna work. It’s totally confusing.”
When criticized by Roubini about the large amounts of electricity required by proof-of-work blockchains like Ethereum and bitcoin, Lubin said that proof-of-stake, which Ethereum has the goal of transitioning to, would solve that problem. Roubini pointed out that Vitalik Buterin has been promising proof-of-stake on Ethereum for years, but it has yet to arrive.
“I can show you the code,” replied Lubin to laughter from the crowd. Roubini remained unimpressed however, saying that proof-of-stake is “vaporware.”
More Inequitable Than North Korea, Too Difficult for My Grandma
Nouriel Roubini often had the crowd on his side, with his rather bombastic style. He said that the crypto space was just as centralized as the standard financial system, with there being the centralization of mining, exchanges, the development process, and the concentration of wealth (or tokens). He noted that the Gini coefficient (a measure of income equality in a given economy) is .88 in bitcoin, higher than in North Korea at .86. Germany, by comparison, has a Gini coefficient of around .31.
He further asserted the problem of custodianship of private keys in a decentralized system, saying:
“How will my grandmother or anyone believe and do that stuff, remember their private key, it’s totally lunatic as a system! It doesn’t make any sense!”
He also quoted from his recent article, “Initial Coin Scams,” where he quoted advisory firm Satis Group, which said that 81 percent of all ICOs are scams and that only 8% of them have a coin trading on exchanges.
One point that both Roubini and Lubin both agreed on was that blockchain might be able to be used for the tokenization of financial securities. Lubin said that Ethereum will allow for the programming of securities to do “astonishing things.” Roubini agreed, but noted that it would require a trusted centralized authority to oversee and approve the process, and thus would not happen on a public blockchain like Ethereum.
After the debate, both men made multiple tweets referring to it:
Much like #blockchain, the @fluiditysummit was all about collaboration regardless of viewpoint. Really enjoyed my spirited debate with @Nouriel. Thanks to everyone who came out to the truly majestic venue. Now go check out https://t.co/7xpNR5b8Uk and get building. pic.twitter.com/60rsDEL5DS
— Joseph Lubin (@ethereumJoseph) May 10, 2018
Crypto-land has worse inequality than North Korea. Gini inequality coefficient 4 Bitcoin ownership is 0.88 (worse 4 ETH), for North Korea is 0.86, 0.47 for USA. So @VitalikButerin & @ethereumJoseph beat Kim Jung Un when it comes to inequality. So much for democratizing finance
— Nouriel Roubini (@Nouriel) May 11, 2018
Have your say. Do you find merit in some of Nouriel Roubini’s assertions?
Images via IEEE Spectrum, Democracy Now, Pixabay