TR 03.08



Paul Krugman, (recipient of the Nobel Memorial Prize in Economic Sciences for his work on international trade theory), published a rather damning article on the future of blockchain in The New York Times this week. Two major flaws he posits, are 1) high transactions costs and 2) ‘absence of tethering’.

Point one is true - in part. For version 0.0 blockchains designed 10 years ago. Yes, bitcoin mining is energy-intensive. Yes, this and other flaws make transaction costs high. But as Paul should know - through the homework he hopefully did before publicly condemning blockchain - proof-of-work mining is not the only consensus mechanism out there. Far from it. The more distributed ledgers develop (with blockchain being just one of the set of DLTs), the more sophisticated consensus mechanisms we see. Transaction costs and other scaling issues will be eliminated in DLTs within years - see Radix that already runs Visa volumes at negligible cost. Point one doesn’t stand.

And talking of costs, what about the transaction costs that banks currently charge? What about cross-border transaction costs? Mr Krugman glosses over these.

The second argument he makes is that blockchain is not tethered to anything. Where do Bitcoin and Ethereum tokens derive their value from? Krugman’s argument that “fiat currencies have underlying value because men with guns [governments] say they do. Cryptocurrencies, by contrast, have no backstop, no tether to reality. Their value depends entirely on self-fulfilling expectations — which means that total collapse is a real possibility”.

It’s nonsense to start with: no two cryptocurrencies are the same. And we have thousands. Most aren’t even currencies. They’re commodities, derivatives, assets… even liabilities. Each of their values need to be independently assessed.

Talk of valuation and Apple’s $1 trillion mark reminds me of a little thought-experiment I suggested this week:

Traditional shares in companies like Amazon derive their value and demand from the widely-believed notion that these shares will pay a dividend at some point in the future. Now imagine if a flaw was discovered in the Amazon design that meant no dividends could be paid - ever. After all, it hasn’t yet! What would happen to the share price? Would it continue to increase? What would Amazon be valued at? Surely you’ve become a charity, and you’re now… worthless? I jest - but it’s a serious question and relates to the (most) cryptocurrencies without dividends. What are these instruments worth?

“By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.”, Paul Krugman, 1998.



“A massive wrong-way bet on Bitcoin left an unidentified futures trader unable to cover losses, burning counterparties and threatening to dent confidence in one of the world’s largest cryptocurrency venues.”




  • Hedera Hashgraph has successfully completed a $100 million raise, reportedly valuing the project at a $6 billion valuation on total supply pre-launch. The project plans to use the raised funds to finish developing and then launch the network. The project plans to raise an additional $20 million through a public sale open to only accredited investors.
  • Handshake a project headed by Joseph Poon, the creator of bitcoin’s lightning network has raised $10.2 million to replace the digital entities that today authenticate web payments. The project is backed by a number of prominent funds including A16z Crypto, Founders Fund, Polychain Capital and Draper Associates. The project plans to distribute 85% of it’s tokens valued at $115 million to open source developers on Github, the P2P Foundation and Freenode.


International Blockchain Congress - Hyderabad, India - 3-4 August, 2018

Dubai International Blockchain Summit - Dubai, UAE - 9 August, 2018

Regulation and Compliance in Blockchain Investing - New York, USA - 7 August, 2018

M2Banking and Fintech Latam 2018 - San Francisco, USA - 7-9 August, 2018