‘Dr Doom' blasts blockchain as 'one of the most overhyped technologies ever'
The technology behind cryptocurrencies, blockchain, is unlikely to replace the existing systems used by banks, according to economist Nouriel Roubini, who is known as ‘Dr Doom" for his pessimistic predictions.
In an opinion piece on the Project Syndicate website, Roubini said that “In reality, blockchain is one of the most overhyped technologies ever.” He added that many people are confusing what it means to run a blockchain application.
“For starters, blockchains are less efficient than existing databases. When someone says they are running something 'on a blockchain,' what they usually mean is that they are running one instance of a software application that is replicated across many other devices.”
According to Roubini, blockchains are often slower than traditional processes because they require all transactions to be verified cryptographically. It's unlikely that blockchain technology would be able to eliminate financial intermediaries, the economist said.
“This is absurd for a simple reason: Every financial contract in existence today can either be modified or deliberately breached by the participating parties. Automating away these possibilities with rigid 'trustless' terms is commercially non-viable, not least because it would require all financial agreements to be cash collateralized at 100 percent, which is insane from a cost-of-capital perspective.”
As he's done previously, Roubini took another swipe at cryptocurrencies. The famed economist said ethereum is “vulnerable to manipulation by influential insiders” and ripple's technology won't replace the current system of cross-border money transfers between financial institutions called SWIFT.
Blockchain will not become a “new universal protocol” similar to the likes of HTML on the internet, the ‘Permabear’ said. Roubini added, however, that blockchains could make sense “in cases where the speed or verifiability tradeoff is actually worth it.”
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