{"id":523687,"date":"2022-12-09T02:57:58","date_gmt":"2022-12-08T23:57:58","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/what-paul-krugman-gets-wrong-about-crypto\/"},"modified":"2022-12-09T02:57:58","modified_gmt":"2022-12-08T23:57:58","slug":"what-paul-krugman-gets-wrong-about-crypto","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/what-paul-krugman-gets-wrong-about-crypto\/","title":{"rendered":"# What Paul Krugman gets wrong about crypto"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2353c0383fe\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2353c0383fe\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/what-paul-krugman-gets-wrong-about-crypto\/#%E2%80%9D_What_Paul_Krugman_gets_wrong_about_crypto_%E2%80%9C\" >&#8221; What Paul Krugman gets wrong about crypto &#8220;<\/a><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_What_Paul_Krugman_gets_wrong_about_crypto_%E2%80%9C\"><\/span>&#8221; What Paul Krugman gets wrong about crypto &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMTIvOTZiOWVlNGItYTRjNS00ZjY0LTlmNDctOTVjY2YyOTgzZmQxLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-30a6cf80>In mid-November, as crypto markets reeled in the aftermath of FTX\u2019s meltdown, Nobel Prize-winning economist Paul Krugman made use of his New York Times column to <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/web.archive.org\/web\/20221125225116\/https:\/\/www.nytimes.com\/2022\/11\/17\/opinion\/crypto-banks-regulation-ftx.html\">disparage<\/a> crypto assets \u2014 again. Despite his unquestionable academic credentials, Krugman reiterated a common misunderstanding in his attempt to understand crypto assets \u2014 by conflating Bitcoin (BTC) with other cryptocurrencies.<\/p>\n<p>Despite being the oldest, most valuable and most well-known member of this emerging class of digital assets, Bitcoin has a unique use case that differs widely from all others. Therefore, in order to understand this asset class as a whole, it would make more sense to choose as your starting point an asset with more tangible utility. Filecoin, for instance, provides storage for digital files in a similar vein to Google Drive or Dropbox, but in a decentralized manner. This network allows users with surplus storage to rent that capacity to other users in exchange for a fee. This fee is paid with the network&#8217;s native token, also called Filecoin. This example is far more representative of most crypto assets: a network that provides financial incentives for services in a decentralized manner, with added efficiency and reduced costs as a result of its lack of inter<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>ries and central counterparties. Bitcoin, however, is different.<\/p>\n<p>But what exactly is Bitcoin? This seems to be another blind spot in Paul Krugman\u2019s comprehension. Bitcoin has evolved over time, both in regards to its <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a>, with updates and improvements to its functionalities, and its most prominent investment thesis. Krugman, according to his own column, perceives Bitcoin (and, it goes without saying, other crypto assets) as a means of payment. That was, in fact, the intended purpose disclosed in the white paper that launched Bitcoin in 2008, remaining so in the years immediately following its publication.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Crypto\u2019s downturn is about more than the macro environment<\/em><\/strong><\/p>\n<p>However, this thesis has evolved over time. Most notably, in 2017, when a great debate arose within the Bitcoin community over whether to prioritize its functionality as a means of payment or its characteristics as a store of value. The will of the store of value proponents prevailed, and the dissidents created Bitcoin Cash. Since then, the predominant consensus is that Bitcoin should strive to be a substitute for gold, not fiduciary currencies \u2014 with the added benefits of greater portability and resistance to seizure. <\/p>\n<p>In light of these characteristics, Bitcoin has become greatly sought after in extreme situations \u2014 such as the war in\u00a0Ukraine\u00a0and Venezuela\u2019s hyperinflationary crisis \u2014 by ordinary people rather than criminals, as Krugman wrongly suggests. Evidently, Bitcoin has a long way to go before it effectively establishes itself as`a true store of value \u2014 the first step of which would be achieving greater price stability. Additionally, there are other use cases under development. The needed scalability improvements, which would allow it to flourish as a means of payment, have been assigned to the so-called layer-2 solutions, such as the Lightning Network. One of Bitcoin\u2019s most recent updates implemented in September allowed for the creation of tokens within its network. Crypto has continued to evolve, but Krugman is still hung up on the 2008 white paper. The eventual failure of Bitcoin as a means of payment would not mean the end of Bitcoin itself, much less the end of all crypto assets. <\/p>\n<p>Underpinned by this misunderstanding about the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a> nature of crypto assets and, in particular, of Bitcoin, Krugman arrives at conclusions that, despite being coherent within themselves, are completely mistaken, such as, for instance, his argument that the crypto industry would not survive increased levels of regulation. In 1998, when discussing a comparable topic, Krugman wrongly stated: \u201cBy 2005, it will become clear that the Internet\u2019s impact on the economy has been no greater than the fax machine\u2019s.\u201d His bias against crypto assets may lead to predictions as inaccurate as his now-infamous quote about the future impact of the internet.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>From the NY Times to WaPo, the media is fawning over Bankman-Fried<\/em><\/strong><\/p>\n<p>Well-designed regulation for companies that provide services associated with crypto assets is welcomed by the vast majority of industry participants and is actually perceived as a development that would foster the confidence among investors needed to propel this technology toward mass adoption. Furthermore, many of the services offered by these companies are of a financial nature and, as the successive events that have occurred this year have shown us, contagion effects exist. This in itself justifies the need for greater regulation. Just as Krugman stated in the first line of his op-ed, \u201crecent events have made clear the need to regulate crypto.\u201d He was correct on that point.<\/p>\n<p>It&#8217;s likely that the crisis created by FTX will spur regulators to expedite their efforts around the world and, consequently, help to consolidate crypto assets and blockchain technology. Just as Krugman\u2019s misguided predictions haven\u2019t meant the demise of his reputation, this crisis is not the end <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/game\/\" data-internallinksmanager029f6b8e52c=\"7\" title=\"Game\" target=\"_blank\" rel=\"noopener\">game<\/a> for crypto. <\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Jo\u00e3o Marco Braga da Cunha<\/strong> is the portfolio manager at Hashdex. He obtained a master of <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/sciencee\/\" data-internallinksmanager029f6b8e52c=\"5\" title=\"Science\" target=\"_blank\" rel=\"noopener\">science<\/a> in economics from Funda\u00e7\u00e3o Getulio Vargas before obtaining a doctorate in electrical and electronics engineering from the Pontifical Catholic University of Rio de Janeiro.<\/div>\n<\/div>\n<p class=\"post-content__disclaimer\"><em>This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/what-paul-krugman-gets-wrong-about-crypto\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; What Paul Krugman gets wrong about crypto &#8220; In mid-November, as crypto markets reeled in the aftermath of FTX\u2019s meltdown, Nobel Prize-winning economist Paul Krugman made use of his New York Times column to disparage crypto assets \u2014 again. Despite his unquestionable academic credentials, Krugman reiterated a common misunderstanding in his attempt to understand&#8230;<\/p>\n","protected":false},"author":1,"featured_media":523688,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/cdn-cgi\/image\/format=auto,onerror=redirect,quality=90,width=1200\/https:\/\/s3.cointelegraph.com\/uploads\/2022-12\/96b9ee4b-a4c5-4f64-9f47-95ccf2983fd1.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[76176,135234,75029,74355,108122,40445,131619,4948,70868],"class_list":["post-523687","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-filecoin","tag-ftx","tag-lightning-network","tag-adoption","tag-dropbox","tag-media","tag-paul-krugman","tag-the-new-york-times","tag-ukraine"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/523687","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=523687"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/523687\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/523688"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=523687"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=523687"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=523687"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}