Former central banker slams blockchain

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The economist Nouriel Roubini, who has worked at the White House, IMF, Federal Reserve and World Bank, has slammed blockchain in series of articles, tweets and public appearances, calling the distributed-ledger technology “nothing more than a glorified spreadsheet”.

Roubini, whose reputation is built on being one of the few mainstream economists to call the collapse of the US housing bubble in 2006, wrote in an article for Project Syndicate published on Monday:

“Blockchain has been heralded as a potential panacea for everything from poverty and famine to cancer. In fact, it is the most overhyped – and least useful – technology in human history.”

Referring to the fact that the valuation of Bitcoin has plummeted 65% in recent months, from a peak of $19,666 in late 2017, and to a study which reported that 80% of initial coin offerings (ICOs) in the same year were scams, the former central banker painted cryptocurrencies as a haven for financial fraudsters, oligarchs and organised crime:

“A few self-serving white men (there are hardly any women or minorities in the blockchain universe) pretending to be messiahs for the world’s impoverished, marginalized, and unbanked masses claim to have created billions of dollars of wealth out of nothing. But one need only consider the massive centralization of power among cryptocurrency “miners,” exchanges, developers, and wealth holders to see that blockchain is not about decentralization and democracy; it is about greed.”

The articles follow Roubini’s testimony to the US Senate’s Committee on Banking, Housing & Urban Affairs, in an October 11th hearing entitled “Exploring the Cryptocurrency and Blockchain Ecosystem”. In the hearing, Roubini insisted that there is a real revolution happening in the financial services industry and that it has nothing to do with blockchain. “It is a revolution built on artificial intelligence, big data, and the Internet of Things”, he said.

Roubini also highlighted Bitcoin’s low transaction throughput and the energy intensiveness of the mining process, issues that Jim Bowes explored in an article for The Panoply earlier this year.

Presenting a contrasting view was Peter Van Valkenburgh, Director of Research at Coin Center, who told the committee that blockchain was a technology still in its infancy, and that teething problems are to be expected, as an account of the hearing in CoinTelegraph relates:

“Various kinds of human interactions, Van Valkenburgh maintained, are riddled with state or corporate chokepoints. Like the internet had removed such chokepoints from the realm of communication, blockchain’s promise is to do away with single points of failure that are inherent to other interaction systems’ designs – such as that of monetary transaction systems. Giant private corporations are increasingly prone to security failures, such as electronic bank robberies and massive personal data leaks. The rise of IoT makes such concerns even more grave, as even cars and pacers can now be targeted.”

Other defenders of blockchain have come forward to refute Roubini’s claim that distributed ledger technology is useless. In a Computerworld article, Vipul Goyal, from the Computer Science Department at Carnegie Mellon University, pointed to the blockchain-as-a-service (BaaS) offerings of Amazon, IBM, Microsoft and Oracle as proof that there are real-world applications:

“Any disruptive technology takes several years to play out, become mature and find its place in the world, he said. The internet, Goyal noted, needed a decade to gain traction, and AI took even more time. Even cloud computing took several years to catch on, he said.

“”I think one should be patient and give [blockchain] time to mature rather than pass a sweeping judgement without any technical understanding just based on the price of cryptocurrencies,” Goyal said.”

In the same article, Martha Bennett, a principal analyst at Forrester Research, said Roubini was overlooking some of blockchain’s key defining characteristics:

“For example, blockchain-based architectures provide the basis for exchanging data and automating processes in a shared infrastructure, without any single party being in charge, Bennett noted.

“”This, combined with the innovation opportunities inherent in the tokenization of digital and physical assets, means that we can build new business and trust models,” Bennett said via email. “However, we need to design these first; evidence to date suggests that this is going to be the hardest part.””

In more recent blockchain news, Forbes reported yesterday that a new study conducted by Accenture has shown that a private, permissioned blockchain can scale to meet the trading volumes of the US equity market, which sees over 100 million transactions per day.