Paul Krugman, a Nobel Prize-winning economist, has cautioned against the prospect of a never-ending winter for blockchain projects, including cryptocurrency. The economist criticised blockchain technology and its applications in a recent essay that appeared in the New York Times (NYT), citing various indicators that, in his opinion, foreshadow this impending winter.
Krugman, Paul compares Fimbulwinter with Crypto Winter
For blockchain-based initiatives, such as Bitcoin and other cryptocurrency networks, Nobel Prize laureate Paul Krugman is predicting an impending endless financial winter. The economist explores the true utility of this technology and how there are already warning indications of its impending demise in an opinion article that was published in the New York Times on December 1.
Krugman questions the technology’s true utility in light of other centralised options that already perform admirably. Krugman provided an explanation for his doubt about this, saying:
What is the purpose?
Why bother with the hassle and cost of keeping a ledger in many locations and essentially hauling the ledger around every time a transaction occurs?
Using this as a foundation, as well as the recent collapse of FTX, one of the largest cryptocurrency exchanges in the world, Krugman theorises that this crypto winter may herald the complete abandonment of blockchain and crypto tech. He compared it to the Fimbulwinter, a winter that, in scandinavian mythology, occurs before the end of the world.
There have been various indications of this abandoning, according to Krugman, in recent months. The economist bases its argument on the recent write-offs made by many businesses, including Maersk and the Australian Stock Exchange, in relation to their blockchain-based projects.
Krugman also openly rejects the justification for Bitcoin, claiming that “severe inflation that destroys the value of money often happens only amid political upheaval, while crypto institutions more easily succumb to the temptation.”
In a similar vein, Krugman criticises the proof-of-work (PoW) consensus used by Bitcoin, estimating the environmental costs to be in the tens of billions of dollars, with no clear gain other than the creation of “worthless tokens.”
But this viewpoint differs from the one he offered in May 2021. He said at the time that although he didn’t think that Bitcoin’s underlying principles were sound, the market was a “religion that may flourish endlessly.” He said that cryptocurrencies are “a house constructed not on sand, but on nothing at all,” when comparing them to the housing boom and the subprime mortgage disaster in June.