Bitcoin Getting Blocked
Columbia University Professor Joseph Stiglitz has expressed his opinion that regulations on cryptocurrency will end up making it worthless.
If you were hoping that bitcoin would be on the uptake again, there’s bad news on the horizon. Nobel Laureate and Columbia University Professor Joseph Stiglitz has expressed his opinion that regulations on cryptocurrency will end up making it worthless. These opinions are not why he earned his Nobel Memorial Prize in Economic Studies. He’d earned that way back in 2000 before cryptocurrency and blockchain came onto the scene. The Nobel Prize, on top of other honors and awards he’s earned, does give him street cred when it comes to talking about financial regulations, money, and important things related to all that stuff. He is an authority in the field of economics, so his opinions at least carry some weight. More important than his opinions is the fact that blockchain and cryptocurrencies are still unreliable. Stiglitz is simply pointing this out.
A Quick Lesson on Blockchain and CryptocurrencyBlockchain, at its core, is a different way to track money and exchanges. Instead of a government watching who gives money to who and determining the value of the legal tender in use, Blockchain instead uses digital code to do that. There’s no government backing it. This is a good and a bad thing. Good in that no government has control over the value of the currencies on the blockchain. This means cryptocurrencies are less affected by politics. The bad news is that cryptocurrency is still based on faith in a system. That system may not be a government, but a system of numbers and mathematical equations. This feels appealing when you look at countries that are in dire financial straits because their own governments made a bad choice or were corrupt. When this happens the legal tender, currency, of that country goes down in value. It may not mean much to us, but to those within that nation, it’s a bad thing. For example, after World War I Germany was bankrupt, and no one would trade with them. One solution was to print more Deutschmarks. Instead of fixing the economy, it got worse. Deutschmarks became worthless because they were so plentiful. Rather than buying bread with them, some German citizens instead used them to fuel their woodstoves. Remembering this makes blockchain look good. Besides, if a government is determining the worth of their own money, and can make that money worthless on a whim, why not create a system that removes that option? Enter blockchain. The Blockchain is based on earning money by solving complex mathematical equations. But who writes the equations? As of this writing, the author of this post has yet to figure that out. It’s also worth mentioning that he was, and still is, not very good at math.
Who Would Trust Blockchain Then?The future is uncertain. Blockchain, like all new technology, is a gamble then. The Philippines, on the other hand, are willing to take that bet. Yesterday, provisional licenses were issued to three exchanges outside The Philippines to allow them to trade Cryptocurrencies on their domestic exchanges. By building a presence there, these crypto-exchanges are looking to leverage access to Trans-Pacific sea lanes and remain open to international markets. The crypto community is happy to hear this, feeling it gives them more credibility. It’s not a lot, as the licenses are provisional and heavily restricted. But it is a step in the right direction. Keep in mind, however, this does not mean all The Philippines are open to using cryptocurrency, nor does it mean Bitcoin will be in use there as a legitimate form of currency. This is a trial run. A baby step. For Blockchain and Cryptocurrency to be accepted on a global scale, a much larger nation needs to accept it as its legal tender. This isn’t to say The Philippines aren’t to be taken seriously as they explore this new form of currency. Far from it. The situation can be viewed one of two ways; The Philippines are an early adopter or a gambler stepping up to a new table. With a smaller economy, it’ll be interesting to see how cryptocurrencies fare there and if there is any success.
Is Stiglitz Right?Stiglitz, though he has a Noble Prize among other awards, is still human. He could still be wrong. He could also be right. Blockchain and its plethora of cryptocurrencies are still a risky bet right now. To break into this new field requires a lot of money (not bitcoin) to purchase the computers and programs to mine for coins and be profitable. It’s not as simple as clicking a button for a stock trade. Before committing to it, take the time to assess your situation. Talk to trusted friends. Seek out advice from both supporters and critics of Blockchain. Joseph Stiglitz is one of the critics. These two resources will get you started. With any luck, you’ll make a sound financial decision.
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