Crypto institutions and Paul Krugman: a tale of misunderstanding
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Paul Krugman fails to understand the true value of blockchain technology and its associated crypto assets. His article conflates centralized and decentralized entities, permissionless and permissioned blockchains, and fails to grasp the importance of digital tokens in providing security to distributed networks. His readers are going to pay the price.
Nobel laureate and esteemed NYT columnist Paul Krugman recently published a column in the New York Times entitled “Blockchains, What Are They Good For?”
Krugman, who is known as much for what he gets wrong as what he gets right, suffers from the notoriety of having said that the “internet’s impact on the economy will be no greater than that of the fax machine.”
But, hey, he’s human like the rest of us, and we are all entitled to make mistakes.
So, let’s give him the benefit of the doubt and take this article on its own merits.
Sadly, however, he’s back at it, as he clearly demonstrates his lack of understanding of the industry by conflating blockchain-the technology, with blockchain (aka crypto), the permissionless, intermediary-free, 24/7, decentralized, and self-sovereign economic model.
He also conflates “crypto assets” with “crypto institutions.” For example, implying that FTX is a “crypto institution” is a bit like saying that the New York Mercantile Exchange is a corn producer.
FTX was a centralized entity that traded crypto assets. It was most definitely NOT a “crypto institution.”
Crypto institutions, if they can be called that, are decentralized, relying on distributed networks to guarantee code execution. They can be called DAOs or protocols, but not companies in the traditional sense.
And that’s just the first transgression.
The examples he cites of how blockchain will impact industries (Maersk, the Australian Stock Exchange) don’t prove anything. Those were going to be, at best, permissioned blockchains, which – if you ask me – defeats the very purpose of having an open, decentralized ledger. It’s just a form of distributed database. It’s the back-end equivalent of a corporate intranet when the real innovation is on the public internet.
For a blockchain, or any type of distributed ledger technology, to really have value, it needs to be open, public, and permissionless. That’s where the innovation will flourish, but that will only happen when there’s a way to guarantee the security of that network…which is where the crypto assets come into play, a digitally native way to pay for digital security.
Krugman, who this time, preemptively says,
“No doubt I’ll hear from many people still insisting that I don’t get it. But it really looks as if there never was an it to get,
..actually doesn’t get it.
He doesn’t understand the difference between centralized and decentralized “institutions.” He doesn’t understand the difference between permissionless and permissioned blockchains, and he doesn’t understand the role of crypto tokens at all.
I feel bad for Krugman, but not that bad. He’ll go down in history as a Nobel laureate, after all.
The people I really feel bad for are all of those individuals who read his columns and miss a generational opportunity as a result.
About the author: Jeremy Epstein is the chief marketing officer at Radix. He has worked with leading, innovative blockchain-based organizations, including Dapper Labs, Arweave, SingularityNet, OpenBazaar and Zcash. Jeremy has written three books, more than 150 articles, and nearly 1000 blog posts on the impact of blockchain technologies on society and has briefed senior U.S. Department of Defense officials at the Pentagon on multiple occasions.
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