Instead of governments manipulating the value of the currency for trade or fiscal reasons, cryptocurrencies would rely on the notion of the code being the law; it would be immutable and secure. Instead of banks being able to monopolise the movement of money and therefore profit from it, a public ledger would cheaply, easily and transparently maintain the integrity of the system.
Sadly, this is not the way it has worked out. Perhaps the lead flag-bearer of the negative school is Nouriel Roubini, a professor at New York University’s Stern School of Business.
Writing for Project Syndicate, Roubini says its obvious that cryptocurrency is not about “decentralisation and democracy; it is about greed”. That’s obvious since a small group of companies, mostly located in “such bastions of democracy as Russia, Georgia and China, control between two-thirds and three-quarters of all crypto-mining activity. Apparently, blockchain fanatics would have us put our faith in an anonymous cartel subject to no rule of law, rather than trust central banks and regulated financial intermediaries.”
Even if you leave these aspects out of it and focus on the hallowed idea of distributed ledgers — ledgers that exist on the internet and that everyone can see — Roubini remains sceptical, calling it the most overhyped and least useful technology in human history.
“There is no institution under the sun … that would put its balance sheet or register of transactions, trades, and interactions with clients and suppliers on public decentralised peer-to-peer permissionless ledgers. There is no good reason why such proprietary and highly valuable information should be recorded publicly.”
Several technical issues buttress Roubini’s arguments. One was a limit of seven transactions a second which was written into the original code and that led to a protracted fight among developers how to enhance the payments system. The dispute dented the image of currency, and forced developers to introduce a “fork”; some supported a new system, others the traditional one. But that created its own problems since one of the founding arguments was that the system is not fungible. In fact, it turns out, it is.
The 2017 rush into the currency put pressure on the network and as a result, transaction fees jumped to as much as $54 per transaction. That undermined the idea of seamless, practically costless transactions. They are now back down to 50 US cents, but the damage was done.