Nouriel Roubini knows a lot less about blockchain and crypto than you actually think

In the light of the recent comments made by Nouriel Roubini in front of the US Senate, I felt the need to right some wrongs within that testimony. Before we begin, credit needs to be given where credit is due. Global economist Nouriel Roubini was one of few that predicted the 2008 financial crisis and he should be given credit for that. Unfortunately, there is a common belief that Roubini did not do enough research on some topics he brought up during his speech. Let's have a closer look.

Criticizing the whole crypto space because of price corrections in the market

During his opening speech, Mr Roubini brought forth the "crypto crash" of 2018. He described it as the biggest bubble in history with record-breaking losses that in some cases exceeded 90%. If he was objective about this case, Mr Roubini would recall that Bitcoin suffered a number of such price corrections in the past that also came close to 90% losses. To make things even fairer, here is a chart of stock prices from the 2000's period.

The crypto market is immature and needs time to reach stability, just like the stock market did. This is something an economist should be aware of.

Transaction fees

"Paying $55 dollars of transaction costs to buy a $2 coffee cup is obviously never going to lead Bitcoin to become a transaction currency."

Yes, this was the case when Bitcoin transactions peaked but this was also happening while the Lightning Network was still in development. As a counter-argument, here is a BTC transaction that totaled about 289 million USD. The transaction fee was 4 cents...

Bitcoin is a bad store of value because of volatility

Right after the opening statements, Roubini explained that Bitcoin is a very poor store of value when compared to gold and fiat. "it [Bitcoin] is a poor store of value because its price can fluctuate by 20-30% in a single day." This statement is very contradictory, to say the least because we were all witnesses of the Venezuelan Bolivar case where the national currency lost more than 30% of its value in a single day on April 8th this year. How is one a volatile currency that is obviously a scam and the other is a completely legitimate store of value for Venezuelan citizens that now weight their currency on scales to buy groceries?

There are too many cryptocurrencies

Here is another quote that is very questionable. "Since the invention of money thousands of years ago, there has never been a monetary system with hundreds of different currencies operating alongside one another." 180 different currencies around the globe coexist with one another. They can be exchanged to other currencies, just like crypto and they can be exchanged for goods, just like crypto (to an extent). The crypto space is young and with mass adoption, they could just be a better version of fiat with much more usability and functionality.

Another big issue that needs to be addressed here is Mr Roubini's lack of research when talking about utility tokens. As far as he is concerned, they are the biggest scams in crypto. What he fails to understand is that utility tokens are an improved version of stocks where the early investor profits from the usability of the token. The bigger the demand, the higher the price... Just like stocks but with a real use-case.

Nouriel Roubini doesn't understand how forking works

"According to its promoters, Bitcoin has a steady-state supply of 21 million units, so it cannot be debased like fiat currencies. But that claim is clearly fraudulent, considering that it has already forked off into several branches and spin-offs: Bitcoin Cash and Bitcoin Gold. "

Bitcoin, just like the majority of cryptocurrencies, is an open source project. Anyone can access the code and create their own currency on top of it. There is no control over this and this is the same case with open source software that is a common thing in the 21st century. Again, this is just a lack of understanding and a huge lack of research.

" It took a century for Coca-Cola to create the new Coke and call the old one Coke Classic. But it took three years to Ethereum to dump the first ETH into Ethereum Classic and create and brand new spin-off, ETH"

As if we needed more evidence that this man didn't do his homework... A reminder to everyone who isn't familiar with what produced ETH and Ethereum Classic. A venture capital fund called The DAO that was built on the Ethereum network raised around $168 million in May 2016. These funds would be invested in projects using smart contracts. In the same month, a paper was published pointing out the vulnerabilities of DAO that could allow ether to be stolen by hackers. A breach happened in June and 3.6 million Ether (approximately $50 million USD) was stolen. This incident incited a debate where members of DAO and Ethereum debated what actions should be taken to prevent such cases with immutability being the main obstacle. A vote was cast and Ethereum was created as a hard fork from what is now known as Ethereum Classic.

The question here was not if the problem can be solved but should it be solved. Immutability on the blockchain implies that all information and all code is law and none of those should be changed. The group that decided to make the changes went on to work on Ethereum while the ones who stood by the belief that 'code is law' are still working on the original Ethereum. So no, this was not a branding issue and it should definitely not be compared to Coca-Cola products because you can't compare ethical questions to branding.