Already, thousands of real businesses are using these technologies to disrupt every aspect of financial intermediation. Dozens of online-payment services – PayPal, Alipay, WeChat Pay, Venmo, and so forth – have hundreds of millions of daily users.
Now, compare this real and ongoing fintech revolution with the record of blockchain, which has existed for almost a decade, and still has only one application: cryptocurrencies.
Blockchain’s boosters would argue that its early days resemble the early days of the Internet, before it had commercial applications. But that comparison is simply false. Whereas the Internet quickly gave rise to email, the World Wide Web, and millions of viable commercial ventures used by billions of people, cryptocurrencies such as Bitcoin do not even fulfill their own stated purpose.
As a currency, Bitcoin should be a serviceable unit of account, means of payments, and a stable store of value. It is none of those things. No one prices anything in Bitcoin. Few retailers accept it. And it is a poor store of value, because its price can fluctuate by 20-30% in a single day.
Until now, Bitcoin’s only real use has been to facilitate illegal activities such as drug transactions, tax evasion, avoidance of capital controls, or money laundering.
Cryptocurrencies have no intrinsic value, whereas fiat currencies certainly do, because they can be used to pay taxes. Fiat currencies are also protected from value debasement by central banks committed to price stability; and if a fiat currency loses credibility, as in some weak monetary systems with high inflation, it will be swapped out for more stable foreign fiat currencies or real assets.
Clearly, Bitcoin and other cryptocurrencies represent the mother of all bubbles, which explains why every human being I met between Thanksgiving and Christmas of 2017 asked me if they should buy them. Scammers, swindlers, charlatans, and carnival barkers (all conflicted insiders) have tapped into clueless retail investors’ FOMO (“fear of missing out”), and taken them for a ride.
Eulogy made by Nouriel Roubini