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Economics

La insoportable inutilidad de las criptomonedas

Nov 25, 2022 Andrés Velasco

LONDRES – Se puede perdonar la deplorable gestión de liquidez (¿o fue fraude?) que dejó a FTX con menos de US$ 1.000 millones, cuando sus pasivos a corto plazo alcanzaban a US$ 9.000 millones. Cosas así también les han ocurrido a bancos.

Se puede perdonar la contabilidad poco clara, los préstamos incestuosos con garantías ficticias, los US$ 8.000 millones que alguien “accidentalmente” perdió. Contratiempos de este tipo también suceden en la bratva rusa, la camorra italiana y la yakuza japonesa.

Se puede perdonar la muy alabada tecnología de bases de datos, que para muchos propósitos es más lenta, más cara y más engorrosa que formas comunes de hacer las cosas establecidas desde hace 30 años. Alguien, alguna vez, descubrirá cómo utilizar todas esas cadenas de bloques.

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Andrés Velasco

Writing for PS since 2001
135 Commentaries

Andrés Velasco, a former presidential candidate and finance minister of Chile, is Dean of the School of Public Policy at the London School of Economics and Political Science. He is the author of numerous books and papers on international economics and development, and has served on the faculty at Harvard, Columbia, and New York Universities.

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Ramón García Nov 30, 2022

Andres, you do not get the point of modern crypto.
The value of crypto is in networks like Ethereum, BNB, TRON, or, specially Solana. Through "smart contracts" one can hold arbitrary assets, including US $ (using Circle USDC), € (EUROC). And in the future perhaps shares and bonds. Through Solana blockchain, one can send $10000 from Chile to the US for $0.20 (or from/to any part of the world).

Then, the value of cryptocurrencies like Ethereum or Solana is as means of payment of these services.

Isn't it valuable being able to send money cheaper than banks?

Second, these blockchains means that anyone in the world can hold real, redeemable $ or €. As a Chilean politician, you should like the freedom of people to hold in their personal blockchain address any currency, very difficult to block by populist governments. In other words, real freedom of capital movement and exchange of currency.
- edward.david31 Dec 1, 2022
  
  I can tell you that I certainly understand the value of modern crypto, at least from the perspective of grifters, drug dealers, ransomware farms, mobsters, money-launderers, and oligarchs who would love a way to globally move and insulate their plundered wealth. Too bad for all the suckers out there.
  - Ramón García Dec 2, 2022
    
    How about sending money abroad for 0.20$ (cost in Solana network), cheaper than banks? If you are a bank shareholder, I am sorry, but for most people a better price is an advance.
    
    How about being able to hold dollars or euros, even if your populist government wants to make it impossible (for instance: Venezuela, Argentina)? How about being free to save in your favorite currency and invest in your preferred market?
    - Mirek Fatyga Dec 3, 2022
      
      to make crypto into a cheaper transaction mechanism, you need to be able to guarantee the value during the transaction time. Otherwise you are just speculating. Transnational transfers that involve currency exchange do fluctuate, but fluctuations are reasonably predictable except for rare financial panic.
      
      There are no free lunches. Banks charge you fees to maintain the mechanism and do get some profit out of it. Crypto miners and exchange owners do not work for free either.
      - Ramón García Dec 3, 2022
        
        As I said in the first post, one can hold tokens equivalent to US dollars or €, like USDC or EURC. One only needs the cryptocurrency to pay for the services of the network, like sending to another account.
        
        Mirek Fatyga Dec 7, 2022
        
        like I said, there are no free lunches. The money for maintaining the infrastructure has to come from somewhere. You can pay for it in the money transfer fees or you can pay for it when your money disappears, either in price collapse or outright fraud.
        
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    - edward.david31 Dec 2, 2022
      
      LOL, You've got to be kidding. You think this is a good place to put real money? Look at the chart for the last year...
      https://coinmarketcap.com/currencies/solana/
      - Ramón García Dec 3, 2022
        
        As prevously explained, one can hold and transfer tokens equivalent to US $. And benefit from the low costs of the network.
        
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anyon5 Nov 29, 2022

Your fifth sentence, "what is truly unforgivable..." recognizes an old concept used in Judaeo-Christian theology to evaluate the 'goodness' of an act or thing. If a person or their acts bore 'good fruit' they were judged worthy. As you correctly point out, there is very little good created in the past 14 years via Crypto.

A close analogy to Crypto might be the Wildcat money/banks of the early 1800's. In a similar fashion, these banks issued their own currency without any backing value. The first US bank failure, the Farmers' Bank of 1809, had roughly $68 on hand and around $600,000 of currency issued. Keep up your good work, someone might listen.
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Curtis Carpenter Nov 27, 2022

If the argument here is correct (and from my limited perspective and understanding it is), then perhaps no one needs to do anything about crypto: it will be best to let it die (or at least sharply self-limit) as a result of its own internal inconsistencies, with its user base shrinking eventually to people who are motivated almost entirely by the desire to avoid any kind of scrutiny (drug, arms and people trafficers, for example).

Mathematics is a tool, and in the history of mankind there has never been a tool that has not been abused in a multitude of creative and destructive ways. People who believe that they can invest their trust in the tool rather than the people using it are doomed to disappointment. And in the end, it seems to me, it's trust, not an algorithym, that forms the foundation of every means of exchange.
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La insoportable inutilidad de las criptomonedas

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