Why do we really need cryptocurrencies?

Last week, in his New York Times column, Krugman called the hype around the concept of blockchain and the crypto market a “tragedy” as it led to “losses of epic proportions”. This is just one of the latest episodes of Krugman’s criticism of crypto. Overall, he’s been “burying” the industry for several years now – and quite unsuccessfully at that.

Cover of a course on cryptocurrencies from the MasterClass platform

And here’s Paul’s quote from an argument with Chanpen as part of the course.

We’ve always thought that we can’t figure out what problem crypto solves, what it really does that we don’t already do, or how it can solve a problem better than other more traditional tools when there is a problem.

Another course cover showing Krugman next to Zhao

Zhao’s argument against this quote is that the advent of Bitcoin has provided humanity with a new way of transferring value. That said, earlier in a similar vein, the advent of the internet gave people a whole new way of transmitting information. Here’s Chanpen’s rejoinder.

Bitcoin in particular is a slightly better form of money – it solves some of the problems we have with money today: limited supply, difficulty of use, limited freedoms and not very low fees. If you take into account global trade, international transfers, remittances, micropayments and so on.

Economist Paul Krugman

According to the founder of Binance, Bitcoin was originally conceived as a fundamentally new payment system, but over time that side of the cryptocurrency’s application has been relegated to the back burner. At the same time, the crypto-industry itself has developed new tools with its own uses. For example, the distribution of unique tokens gives content creators the ability to monetise their work much more profitably. Zhao continues.

It’s global fundraising, making it much easier for entrepreneurs to raise money on a global scale. Using cryptocurrencies, a reputable businessman can raise between $10 million and $20 million in cryptocurrency equivalent in a matter of days.

According to Decrypt’s sources, the arguments weren’t enough to shake Krugman’s scepticism.

I’m a bit puzzled – it’s unclear why blockchain should make it easier to raise money on its own.

Bitcoin’s global price movement

Zhao responded that the blockchain concept allows funds to be transferred without regard to national borders. The Binance CEO pointed to global differences in economic opportunities, citing the dynamic US economy compared to China, Vietnam and African countries. Here’s his rejoinder.

It is very difficult for someone outside the US to transfer money here because of international SWIFT fees and so on.

Again, the opponent has found his arguments.

But this is not a question of technology, but of regulation. Isn’t this essentially just a way of getting around laws that, for whatever reason, governments have seen fit to introduce?

That is, Krugman is still not aware of all the benefits of cryptocurrencies in terms of technology. To him, crypto remains a sphere that exists on a semi-legal basis. Unfortunately, this myth is believed by many people who have yet to invest in crypto and get involved with this asset category in general.

Zhao tried to approach this discussion point from a different angle.

There are no regulators prohibiting us from investing in a project that would allow a person in Dubai to invest in another project in South Africa. But the mechanics of the process are very complicated for traditional financial institutions.

The economist responded by suggesting that another way to go is to reform traditional finance in a way that makes it easier for cross-border payments. And, by the way, there is a curiosity in this – banks and other financial institutions would still have to resort to blockchain to accomplish such a task.

Finally, Krugman said that comparing the crypto industry to the early Internet of the 1990s is no longer as relevant as Bitcoin is almost 13 years old. But here, too, Zhao found fault with his opponent’s argument – the first concept of the Internet originated in the US back in the ’60s under the name ARPANET. Initially the project was intended only for the needs of the military and scientists, but it later evolved into the global phenomenon that the Internet is today.

ARPANET

It’s entirely possible that in another decade, the crypto industry will change beyond recognition. According to Krugman, crypto will be virtually indistinguishable from traditional finance. Zhao, on the other hand, has a different prediction – the evolution of the crypto industry will not adjust, but instead will change the global financial regulatory system.

We think scepticism about digital assets today is strange. Still, there is more than enough data about cryptocurrencies in the public domain, which means a person just needs to take the time to familiarise themselves with the right information and interact with the technology. Chances are, the key benefits of crypto will not leave one indifferent, but to do so, one should treat the coin niche without any bias. And Krugman has one.

What do you think about it? Share your opinion in our millionaire cryptochat. There, we’ll talk about other important topics that affect digital asset prices.

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