Cryptographic Institutions and Paul Krugman: A History of Misunderstanding

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The views and opinions expressed here belong solely to the author and do not represent the views and opinions of the Crypto News editorial.

Paul Krugman fails to understand the true value of blockchain technology and its associated crypto assets. His article confuses centralized and decentralized entities, permissionless and permissioned blockchains, and fails to grasp the importance of digital tokens in ensuring the security of distributed networks. His readers will pay the price.

Nobel laureate and esteemed NYT columnist Paul Krugman recently published a column in The New York Times titled Blockchains, What Are They Good For?

Krugman, who is known as much for what he is wrong as for what he is right, suffers from the notoriety of having declared that the impact of the Internet on the economy will not be greater than that of the fax machine.

But, hey, he’s human like all of us, and we’re all allowed to make mistakes.

So, let’s give him the benefit of the doubt and take this article on its own merits.

Unfortunately, however, he comes back to it, as he clearly demonstrates his lack of understanding of the industry by confusing blockchain technology, with blockchain (aka crypto), the permissionless, no middleman, 24/7, decentralized and self-model sovereign economy.

It also confuses crypto assets with crypto institutions. For example, implying that FTX is a crypto institution is a bit like saying that the New York Mercantile Exchange is a corn producer.

FTX was a centralized entity that traded crypto assets. It was definitely NOT a crypto institution.

Cryptographic institutions, if they can be called that, are decentralized, relying on distributed networks to guarantee code execution. They may be called DAOs or protocols, but not enterprises in the traditional sense.

And this is only the first transgression.

The examples he cites of the impact of blockchain on industries (Maersk, the Australian stock exchange) prove nothing. These were going to be, at best, permissioned blockchains, which, if you ask me, defeats the very purpose of having an open, decentralized ledger. It’s just a form of distributed database. It’s the back-end equivalent of a corporate intranet when the real innovation is on the public internet.

For a blockchain, or any type of distributed ledger technology, to have any real value, it must be open, public, and permissionless. This is where innovation will flourish, but that will only happen when there is a way to keep this network secure, where crypto assets come in, a digitally native way to pay for digital security .

Krugman, who this time, says preemptively,

No doubt I will hear many people still insisting that I don’t understand. But it really feels like there’s never been this to get,

..actually don’t understand.

He does not understand the difference between centralized and decentralized institutions. He doesn’t understand the difference between permissionless and permissioned blockchains, and he doesn’t understand the role of crypto tokens at all.

I feel bad for Krugman, but not so bad. Hell went down in history as a Nobel laureate, after all.

The people I feel really bad for are all those people who read his columns and thereby miss a generational opportunity.

About the Author: Jeremy Epstein is Chief Marketing Officer at Radix. He has worked with innovative blockchain-based organizations including Dapper Labs, Arweave, SingularityNet, OpenBazaar, and Zcash. Jeremy has written three books, over 150 articles and nearly 1000 blog posts on the impact of blockchain technologies on society and has briefed senior officials from the US Department of Defense to the Pentagon on several occasions.

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