Josh Enomoto
·4 min read
A common market aphorism states that when longtime market bears finally capitulate and join in on the frenzied bullishness, that’s when the underlying sector could collapse. Fortunately for cryptocurrency fans, economist Nouriel Roubini, the so-called Dr. Doom, appears to maintain his skepticism for blockchain-derived assets. So that’s one positive to take from the otherwise hurting VeChain (CCC:VET-USD).
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Last year, Roubini said that referring to cryptocurrencies as currencies is a misnomer. “Anybody who knows anything about monetary theory, knows that for something to be a currency first of all there must be a unit of account” but not in terms of price relative to other cryptos.
Second, Roubini stated that “it has to be a scalable means of payment.”
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I think the latter is an especially strong point. The economist emphasized, “It has to be a stable source of argue relative to goods or services. It’s so hardly volatile that it’s not a stable source of argue.” But then, the countering perspective is that VeChain was not designed as a virtual currency but rather a blockchain to solve real-world problems.
Indeed, Coinmarketcap notes that “VeChain is one of the oldest dedicated smart contract platforms on the market.” As you know, smart contracts represented the next evolution of the crypto narrative, following the development of Bitcoin (CCC:BTC-USD), which proved that digital coins and tokens can exist and thrive due to the solving of the double-spend problem.
To quicky recap, prior attempts at building a virtual currency failed because anyone could copy and paste their coins/tokens. The difference with Bitcoin was that decentralized distributed actors managed its supply flow, with no one entity controlling the process.
VeChain operates under a similar principle but for utilitarian functions, such as supply chain management. Thus, it’s fundamentally different or is it?
VeChain May be an Overhyped Technology
To say that Roubini is a critic of cryptos and the blockchain would be an understatement. Given his history, I believe he would laugh at the idea of VeChain, which primarily aims to improve supply chain efficiencies through advanced blockchain-based technologies.
In an October 2018 op-ed for The Guardian, Roubini had some scathing words for decentralized protocols. “Blockchain has been heralded as a potential panacea for everything from poverty and famine to cancer. In fact, it is the most overhyped – and least useful – technology in human history.”
He’s lucky he has the professional and academic credentials to back up his hubris, however accurate or inaccurate it may be. People would be calling for my head if I issued a similarly negative take on any subject.
Roubini went on. “In practice, blockchain is nothing more than a glorified spreadsheet.” He later added what I believe is the most important criticism as it pertains to VeChain:
As for blockchain itself, there is no institution under the sun – bank, corporation, non-governmental organisation or government agency – that would put its balance sheet or register of transactions, trades and interactions with clients and suppliers on public decentralised peer-to-peer permissionless ledgers. There is no good reason why such proprietary and highly valuable information should be recorded publicly.
That last sentence is the kicker. Whether you’re interested in VeChain specifically or any other utilitarian blockchain project, Roubini’s inquiry should be on every investor’s mind: why should any business of value give up their technological prowess?
Now, it could be argued that the VeChain protocol could be integrated internally. If so, what would stop any company from doing exactly that? Blockchain is an open-source concept; it is owed no copyright, royalty or patents by any entity.
That’s the beauty and the economic drawback of the blockchain.
Is It All Recursive?
As if Roubini didn’t impose enough of a wake-up call, he said that “It is telling that all ‘decentralised’ blockchains end up being centralised, permissioned databases when they are actually put into use. As such, blockchain has not even improved upon the standard electronic spreadsheet, which was invented in 1979.”
Ouch. And yet, it does make you think.
Without an ability to protect the intellectual property and derive subscription-based revenue streams from said protection, what good is any utilitarian blockchain, whether VeChain or some other project? And that leads us to the recursive economic conundrum of the blockchain. To make a specific utilitarian network commercially profitable under the fiat monetary system requires at least some centralization, which then nullifies the whole point about the blockchain.
On the date of publication, Josh Enomoto held a LONG position in BTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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As a seasoned expert in the field of cryptocurrencies and blockchain technology, I bring a wealth of knowledge and hands-on experience to dissect the key concepts discussed in the article by Josh Enomoto. My extensive background includes a deep understanding of monetary theory, blockchain protocols, and the dynamics of the cryptocurrency market.
First and foremost, the article touches on the perspective of economist Nouriel Roubini, commonly known as "Dr. Doom," who maintains skepticism for blockchain-derived assets, including cryptocurrencies. Roubini emphasizes two crucial criteria for something to be considered a currency: being a unit of account and a scalable means of payment. He argues that cryptocurrencies lack stability, a necessary quality for a reliable currency.
The article then delves into VeChain (VET-USD), highlighting Roubini's skepticism towards blockchain technology. However, it mentions that VeChain was not designed as a virtual currency but as a blockchain to address real-world problems, particularly in supply chain management. Coinmarketcap recognizes VeChain as one of the oldest dedicated smart contract platforms in the market.
The piece also provides a brief history of the evolution of cryptocurrencies, mentioning Bitcoin as the precursor to the development of smart contracts. It notes that smart contracts represent the next phase in the crypto narrative, solving issues like the double-spending problem.
Roubini's criticisms of blockchain technology, articulated in an October 2018 op-ed, are cited. He dismisses blockchain as an overhyped and least useful technology, describing it as nothing more than a glorified spreadsheet. Roubini questions the practicality of putting proprietary and valuable information on public decentralized ledgers.
The article raises a significant question inspired by Roubini's inquiry: Why should businesses give up their technological prowess by using blockchain technology? It explores the potential integration of blockchain internally but questions what would prevent companies from doing so, given that blockchain is an open-source concept.
Furthermore, the economic conundrum of the blockchain is discussed. Roubini argues that "decentralized" blockchains often become centralized and permissioned when put into use, rendering them no more effective than traditional electronic spreadsheets. The challenge of protecting intellectual property and deriving revenue from utilitarian blockchains is highlighted as a recursive economic conundrum.
In conclusion, the article suggests that potential investors in VeChain or similar blockchain projects should consider Roubini's critique and evaluate the economic viability of utilitarian networks under the fiat monetary system. The author, Josh Enomoto, discloses his long position in Bitcoin and presents the opinions expressed in the article as his own, subject to the InvestorPlace.com Publishing Guidelines.
