Recently, Nouriel Roubini has made headlines for his scathing arguments against the cryptocurrency sector, while Max Keiser, a long term Bitcoin advocate, has also appeared in the news again supporting cryptocurrencies.
Nouriel Roubini, a professor at NYU’s Stern School of Business and long time economic analyst, has made numerous claims that cryptocurrencies and blockchains are much less prolific than many claim and this has been responsible for the current and, as he predicts, future price declines. He argued that “blockchain is nothing more than a glorified spreadsheet” and that the “claim of “decentralization” is a myth propagated by the pseudo-billionaires who control this pseudo-industry”. Another significant claim, which he referenced through another source, is that Bitcoin has a higher Gini coefficient, an economic metric used to evaluate inequality, than North Korea.
Contrarily, Max Keiser, who has advocated Bitcoin since 2011 when it was around $3 USD, has said that Dash “isn’t getting enough attention and should be getting more attention”. He explained his reasoning because “Dash is in Venezuela and they are helping the locals get through this currency crisis” and “the masternode system they invented is a great governance system; it’s a great way to split the mining output to create funds to do projects that the masternodes vote on”.
Details reveal that cryptocurrency stats are not unprecedented
While Roubini does draw correct attention to the fact that Bitcoin has lost 70% of its value from its peak and other coins have lost more than 80% of their value, it is nevertheless important to keep these drops in perspective. From when Max Keiser recommended Bitcoin at $3 USD to when it dropped to below $1 USD, that was a drop of over 66.7% and it is since up over 650,000%. Then during the height of the internet bubble, Amazon’s stock price was around $95 USD and dropped to below $10 USD; a drop of over 90%, but is since up over 18,000%. The overall theme is that price and value can fluctuate significantly based on supply, demand, usage, and understanding, but large declines do not necessarily mean something is bad technology or doomed to fail.
Max Kieser’s arguments in favor of cryptocurrency have largely focuses around the revolutionary technology and dynamic altering features of cryptocurrency. The early days of the internet showed signs of core revolutionary features, but was hidden by a lot of noise and dumb money funding projects that had no long-term strategy. As businesses and consumers evolved and learned more, the true revolutionary features of the internet emerged and allowed companies, like Amazon and Google, that made wise business decisions to thrive while others failed. This fulfills the creative destruction process that is integral to free markets and overall consumer benefits. The core revolutionary technological features of cryptocurrency combined with the lack of mainstream understanding, but a flurry of investment money makes it a valid comparison.
A second major argument of Roubini’s is the centralization of many cryptocurrency miners and wealth. It is true that some coins have high concentrations of mining, but since Dash relies both on miners and masternodes, this mitigates the absolute reliance on miners. Dash also has one of the best wealth distributions within the cryptocurrency sector.
Attention should also be drawn to the reference that Bitcoin has a higher Gini coefficient than North Korea. The Gini Coefficient relies on estimating what percentage of the population holds what percentage of a country’s wealth. However, complications arise for cryptocurrencies when it is realized that only individual wallet holdings can be compared in an analysis. Then individuals could have lost private keys to specific wallets, one party can own multiple wallets (causing downward bias), or that multiple parties can share a wallet such as shared Dash masternodes (causing upward bias). Additionally, the fact that individuals can freely move between cryptocurrencies, and hold multiple cryptocurrencies at one time, makes the Gini coefficient somewhat less applicable than when evaluating the wealth distribution of a country all denominated in the same currency.
Dash strives for decentralization and everyday usage
As Max Keiser pointed out, Dash is actually being used in Venezuela, and significantly for that matter, with over 2,000 merchants now directly accepting Dash. This is providing a real solution to the real problem of hyperinflation that the Venezuelan government caused with poor economic policies. Dash is able to accomplish this real adoption because of its unique DAO structure that not only enables funding of Dash development to maintain super low transaction costs, but also able to pay for professional community outreach to educate consumers that might not otherwise know much about cryptocurrency. Dash is already accepted at over 3,600 merchants, globally, and is constantly expanding adoption by users and merchant. This all furthers Dash along its goal to become a digital, decentralized, peer-to-peer currency used in everyday transactions, which is much different than the picture that Nouriel Roubini paints.
Correction: Two math errors were corrected. Bitcoin is up 650,000% from $1 USD whereas previously it was written as being up 6,500%. Amazon is up 18,500% whereas previously it was written as being up 180%.