Economist explains the two futures of crypto | Tyler Cowen

Summary

This transcript explores the rise of cryptocurrency, highlighting both its potential and the reasons for skepticism. It explains how crypto functions as a decentralized system, offering new forms of money, investment, and technology. Skeptics point to its use in criminal activities, environmental impact, and unmet promises, while proponents see a future where crypto enables global transactions and new economic systems. The discussion remains open-ended, balancing both optimism and caution about how significant cryptocurrency may become in our financial future.

Takeaways

• 💡 Cryptocurrency is becoming more popular and might be part of our financial future.
• 🧠 Bitcoin is a recordkeeping system that pays people to validate records through blockchain technology.
• 💼 Cryptocurrency offers a new kind of money, investment asset, and even a new type of computing system.
• 🤔 There is skepticism about cryptocurrency due to its grand, ambitious plans and unclear execution strategies.
• 🚨 A significant concern is the use of cryptocurrency for illegal activities like ransom payments in hacking cases.
• ⚠️ Blockchain transactions are irreversible, adding to the risks of using crypto.
• 🌍 Cryptocurrency in its current forms consumes a lot of energy, contributing to environmental damage.
• 💸 Many of the promised benefits of cryptocurrency, such as cheaper banking and finance, haven't been realized yet.
• 🌐 Crypto could support a more global, interconnected economy, allowing easy cross-border lending and transactions.
• 🔮 The future of cryptocurrency could involve secure property rights, new investment assets, and a more accessible, expansive internet economy, but this remains speculative.

Q & A

What is cryptocurrency often compared to in terms of functionality?

Cryptocurrency is often compared to a recordkeeping system where people are paid in Bitcoin or other cryptocurrencies to validate records in a self-enforcing, decentralized process.

Why is cryptocurrency considered a fundamentally new idea?

Cryptocurrency is considered a new idea because it introduces a decentralized system that functions as a new form of money, investment asset, and even a type of computer for recordkeeping.

What is one of the main concerns raised by cryptocurrency skeptics?

One major concern is that crypto is used in illicit activities like paying off ransoms, and the irreversible nature of blockchain transactions means lost money can’t be recovered.

How does cryptocurrency negatively impact the environment?

The energy consumption from the computers solving cryptographic problems to validate transactions is so high that it significantly contributes to carbon emissions and environmental damage.

What is the bullish or optimistic case for cryptocurrency?

The optimistic case for cryptocurrency envisions the internet evolving into its own economy with crypto providing systems for recordkeeping, property rights, and global transactions, potentially making resource transfers cheaper and more accessible.

Why do some people believe that cryptocurrency could make finance cheaper?

Some proponents of crypto argue that it could lower the costs of banking, finance, and lending by eliminating intermediaries and allowing for more direct peer-to-peer transactions.

What is the skeptical view regarding the promised benefits of cryptocurrency?

Skeptics argue that many of the benefits, like cheaper banking and lending, have yet to materialize, and they believe these promises might be impossible to achieve in the near future.

What could be the role of cryptocurrency in the future global economy?

Cryptocurrency could play a major role in facilitating global transactions and recordkeeping for a decentralized economy, enabling direct lending and transactions across borders with lower costs.

What are some of the speculative aspects of cryptocurrency’s future potential?

One speculative idea is the creation of a 'Metaverse' or expanded internet where people own digital assets validated by blockchain, enabling easier, cheaper, and more secure resource movements.

Why do some people feel both skeptical and optimistic about cryptocurrency?

People may feel skeptical due to the challenges in realizing the promised benefits, yet optimistic about the underlying potential of crypto to transform the global financial system and internet economy.