The May/June 2022 issue of MIT’s alumni magazine, Technology Review, asks “Is cash over?” and answers the question with an implicit “yes” via the issue title: The Dawn of New Money.
When the enormous brainpower of all of MIT is harnessed, what do we learn?
A new generation of cryptocurrencies is emerging that promises to fix many of Bitcoin’s flaws. Stablecoins, cryptocurrencies whose stable value comes from being backed by reserves of US dollars or other reputable fiat currencies, are proliferating. Stablecoins are billed as reliable, easily accessible digital payment systems that will make both domestic and international payments cheaper and quicker. However, unlike Bitcoin, which is fully decentralized, they require transactions to be validated by the issuing institution—which could be a bank, a corporation, or just an online entity. This means users must trust that institution to validate only legitimate transactions and hold adequate reserves, and regulators currently do not require independent verification of either of those actions. Thus, despite their laudable goal of meeting the demand for better payment systems, stablecoins have raised a raft of concerns.
What happened with crypto while the issue was going through editing, printing, and mailing?
The recent collapse in the value of stablecoins shows they are ill-suited as a form of money and that their attempt to piggyback on money issued by central banks does not give them the stability their name suggests, according to the Asia-Pacific head of the Bank of International Settlements (BIS).
The implosion of several stablecoins, including TerraUSD which saw its value reduced to almost nothing in May from being the third-largest with a US$18.7 billion market capitalisation at its peak, has revealed the pitfalls of cryptocurrencies, said Siddharth Tiwari, chief representative of the BIS Asian office.
What about the #1 cryptocurrency? Bitcoin was at $38,000 on May 1. It finished out June (this is the May/June issue) at around $19,000 (i.e., half the value was lost during the on-the-newsstand time for the issue celebrating crypto).
I never really understood fractional reserve banking, much less crypto. Waves hands, shamefully exits…
There’s an easy way to fix it: there’s a concise (130 pages) and very readable book (none of that pseudo-mathematical gobbledygook) on money and monetary systems: https://mises.org/library/what-has-government-done-our-money
I’m with you on not understanding fractional reserve banking. If any of us normal folks tried fractional reserve banking, we’d definitely to go jail. Seems fraudulent.
When did the whales become dinosaurs? At the MIT Instrumentation Lab? Or the Applied Physics Laboratory at JHU?
But maybe it’s a signal that it’s time to buy again!
My own personal view of Crypto has been that – despite the tremendous rise of Bitcoin – it would be much too volatile in the near term for anything except the most speculative of investments. I do wish I’d bought a few at the very beginning, though.
As things stand now, however, I still see them as far too volatile for placing any “faith” in as a “store of value” – which is what they were sold as. I’d like to see the 19,000+ cryptos come down to maybe 10 and then I’ll consider it. There are other people in the world who enjoy injecting pure risk right into their veins. I’ll let them do that in my place. YMMV.
My overall impression has been: “I could make my own currency with this technology and I *know* I’m stupid. That means most of the other people who are doing it are also stupid. Let’s wait and see.”
So I’m risk-averse when it comes to cryptocurrency. I don’t enjoy watching other people get burned and I know I can’t personally afford to get burned myself.
Also, we should *never* get rid of cash. I know Larry Summers has been (either directly or indirectly) working to accomplish that. Some of his reasons are laudable, some of his reasons are totalitarian. If the U.S. economy ever reaches a point where a $100 bill isn’t enough to buy a Kit-Kat bar at a convenience store, maybe it will take care of itself, though.
Cash is a good thing. It’s great for people who are relatively poor and don’t have the knowledge or personal capital for higher forms of finance. They will lose a little if they stash $20,000 in a mattress, but they’ve counted on inflation remaining low to preserve the value of that. In most cases they worked hard for that money. Inflation destroys what meager things they were able to scrape together and now MIT is implicitly saying: “Hey, yeah: take what you’ve got left and ‘invest’ it in this digicrap!”
I’d rather buy bullets.
Finally: As soon as I saw Hollywood people like Larry David pimping Crypto during the Superbowl, I knew a lot of it was a total screwjob, like Gwenyth Paltrow selling 1.5 ounces of Goopsubstance for $600 a gallon and the fragrance of of how her vagina smells. Just say no.
https://www.youtube.com/watch?v=sUyEkW0zOh0&t=1s
This is not something to bet your life savings on, and in my estimation won’t be for a relatively long time, unless we re-elect Democrats. Then all bets are off.
The government needs to get the inflation readings down & the easiest way to do it is to make a new currency equal to 1 trillion doll hairs. That’s the only reason we’re moving to a crypto currency. There’s nothing in the various schemes that’s going to make crypto currency any more valuable than the last 10,000 years of fiat money.
FOMO is God. Curb Your Enthusiasm but pony up to participate in all the mischief.
MIT has become a total laughingstock…
Can not blame MIT Technology Review. The cover clearly states that for success of stablecoin we need T-Rex, blonds, and a bag of gold in a terrarium. Or is the cover made this so the alumni would actually browse the magazine?
Crypto is the modern equivalent of tulips. And will end similarly. It’s a Ponzi scheme, plain and simple. Early investors make out like bandits, late investors get left holding the bag.
No, they are not the same. Unlike Crypto, Tulips did not contribute to global “warming” by sucking up electricity away from “green” EV cars.
Where are all the tree-huggers and liberals? Shouldn’t they be rioting against Bitcoin?