Nobel Laureate Paul Krugman Predicts an Eternal Winter for Blockchain

Nobel Laureate Paul Krugman Predicts an Eternal Winter for Blockchain

Nobel laureate and renowned economist Paul Krugman has warned about the possibility of an eternal winter for blockchain projects, including crypto. In a recent article published in the New York Times (NYT), the economist criticizes blockchain as a technology and its uses, citing several signs that he believes precede the upcoming winter.

Paul Krugman Compares Crypto Winter to Fimbulwinter

Paul Krugman, a Nobel laureate, and renowned economist has warned about an "upcoming eternal crypto winter" for blockchain-based projects, including bitcoin and other cryptocurrency networks. In an NYT opinion piece published on Dec. 1, the economist discusses the technology and the signs that predict a future downfall.

Krugman criticizes the utility of the technology vis-à-vis other centralized alternatives that currently function well. Krugman explained his skepticism, stating:

"What’s the point?" Why go to the trouble and expense of maintaining a ledger in many places and carrying that ledger around every time a transaction takes place?"

With the recent downfall of one of the biggest cryptocurrency exchanges in the world, FTX, Krugman believes that the crypto winter might lead to an abandonment of blockchain and crypto technology. He has compared it to the Fimbulwinter, a winter that precedes the end of the world according to Nordic mythology.

Signs of the Fall

Krugman has noted that in the last few months, there have been several signs of impending abandonment. The economist cites the recent write-off that several companies like Maersk and the Australian Stock Exchange have made regarding their blockchain-based projects as part of its justification.

Krugman also criticizes Bitcoin’s raison d’être openly, stating that "banks rarely steal their customers’ assets, while crypto institutions easily succumb to the temptation, and extreme inflation that destroys money’s value generally happens only amid political chaos."

Krugman calls out Bitcoin’s proof-of-work (PoW) consensus, estimating the damage that it has brought to the environment in the tens of billions of dollars with no apparent benefit besides producing "worthless tokens."

However, his opinion is different from the one that he expressed on May 2021. At the time, he expressed that while he did not believe in the fundamentals behind bitcoin, he was sure that the market was a "cult that can survive indefinitely." In June, he compared cryptocurrencies to the housing bubble and the subprime mortgage crisis, saying, "It is a house built not on sand, but on nothing at all."

What do you think about the opinion of Paul Krugman on the future of blockchain and crypto? Please post your comments.