Nobel Laureate Economist Bengt Holmstrom: Bullish on Blockchain But Skeptical of Bitcoin
Bengt Holmstrom, the Nobel Memorial Prize in Economic Sciences of 2016 and professor at the Massachusetts Institute of Technology, is the latest well-distinguished economist who takes a dim view on bitcoin.
Though skeptical of bitcoin, the laureate has an opposite attitude towards the underlying technology of bitcoin, bullish on blockchain technology and its future.
Bullish on blockchain and skeptical of bitcoin
“I have confidence in the future of blockchain technology and believe it will change the way financial institutions operate, but I’m skeptical about bitcoin which I don’t believe will replace fiat currency.” said Nobel laureate economist Bengt Holmstrom at a finance forum in Shanghai.
The promise of blockchain technology, in Holmstrom’s view, is that it provides “a possible solution to the trust issue – the biggest problem in human history”. Blockchain is a medium for evidence storage while open to all, that’s why it has the potential to revolutionize the way financial institutions operate.
He explained that the oversimple registration process of bitcoin transaction might fail to guarantee the authenticity of the registered information of the parties involved in a transaction, while the service of identity authentication, in fact, costs much and requires a lot of money and labor work.
Nobel laureate economists say no to crypto
Cryptocurrency has been dividing people since its inception. Some believe in it religiously, while some call it a bubble, still others hate crypto but love blockchain. Holmstrom is not the only economist who casts a critical eye on bitcoin. A group of distinguished economists whose opinions count for something has also said nah to bitcoin, including some Nobel prize winners in economics.
Laureates Richard Thaler (2017 Nobel laureate in economics) and Paul Krugman (2008) claimed bitcoin was a bubble likely to collapse sooner or later; Eugene Fama (2013) and Robert Merton (1997) said bitcoin value is likely to go to zero at some point; Robert Shiller (2013) said this May that bitcoin is a bubble and it could go extinct within the next 100 years; Joseph Stiglitz (2001) rebuked bitcoin has no legal functions.
It seems that distinguished economists see a dim prospect of crypto. However, it could be argued that, since crypto emerges as a “threat” to traditional economics – the field most of them devoted their lives to, it is understandable that they feel there is nothing that crypto can bring to the table. However, the crypto trend is not stopped by their words.