Nobel Prize-winning economist Paul Krugman has warned of the possibility of a multi-year winter for blockchain projects, especially crypto. In a recent article published in the New York Times (NYT), the economist criticizes blockchain as a technology and its applications, citing several signs that he believes point to the coming winter.
Paul Krugman compares cryptocurrency winter to Fimbulwinter.
Paul Krugman, the Nobel laureate, warns of an eternal winter ahead for blockchain-based projects, including bitcoin and other cryptocurrency networks. In a NYT article published on December 1, the economist discusses the real utility of this technology and the signs that already point to its future demise.
Krugman criticizes the real utility of this technology when there are other centralized alternatives that currently work very well. On this point, Krugman explained his skepticism by saying:
What is the point? Why the hassle and expense of maintaining a ledger in many places and essentially carrying that ledger around every time a transaction takes place?
Based on this, and also the recent fall of one of the world’s largest cryptocurrency exchanges, FTX, Paul Krugman believes that this crypto winter could lead to a complete abandonment of blockchain and crypto technology. . He compares it to Fimbulwinter, a winter that precedes the end of the world according to Norse mythology.
signs of autumn
For Paul Krugman, several signs of this coming abandonment have been observed over the past few months. The economist cites to justify himself the recent delisting of several companies such as Maersk and the Australian Stock Exchange regarding their blockchain-based projects.
Additionally, Paul Krugman is an outspoken critic of bitcoin’s raison d’etre, stating that “banks rarely steal their customers’ assets, while crypto-institutions fall more easily to the temptation, and extreme inflation that destroys the currency’s value usually only occurs in times of political chaos.“
Similarly, Paul Krugman highlights bitcoin’s proof-of-work (PoW) consensus and estimates the environmental damage it has caused in the tens of billions of dollars, with no apparent benefit other than producing “worthless tokens.”
However, this opinion is different from the one he expressed on May 20, 2021. At that time, he expressed that although he did not believe in the fundamentals of bitcoin, he was sure that the market was a “cult that can survive indefinitely.” In June, he compared cryptocurrencies to the housing bubble and subprime crisis, saying that “it is a house built not on sand, but on nothing.“