New York-based economist Nouriel Roubini predicted a financial crisis in 2008 when only a few thought it might be a threat to the current course of the event.
Harvard alumni and current professor at the NYC Stern School of Business, Mr. Roubini has always criticized the crypto and blockchain industry. On October 11, 2018, he testified at a congressional hearing at Capitol Hill in Washington, warning American senators against "the mother or father of all the scams and bubbles" - crypto.
We met Mr. Roubini at BlockShow Americas in Las Vegas and explained why he did not believe in smart deals; he thought Ethereum was a fraud, and he might want to try the industry again.
To be "against" the crypto industry
"I'm not against [yes], I'm open to any innovation, but I'm a specialist in financial crises and bubbles. And I've become famous in predicting the global financial crisis - breaking this bladder.
I can see the bubble when one - and for me, that space was the mother and father of all the financial bubbles, and now [explode]
Last year almost everyone I knew asked me every two days: "Should I buy Bitcoin?
The price of bitcoin quadrupled, doubled, tripled, and increased to $ 20,000. And when this bubble burst, today it collapsed from $ 20,000 to $ 6,000 (at the time of the meeting).
If you purchased it at the peak, you lost 70% of your value. And this is typical for all these financial bubbles: they stand until they fail. And Bitcoin is the best [example] because the average cryptocurrency has lost more than 90% of its value over the past nine months.
I talked about the existing bladder and the closure of this bladder. And guess what? Last year he bankrupted. So, I think I'm justified and correct.
Bitcoin could go on a moon or zero; I will not even make any money because I'm neither short nor long.
I'm just academic about it. And I saw a big bladder, and I think it's also intellectually to talk about these things and then figure out what's wrong. "
On the future price movement and Ethereum as a "scam."
"The university study suggests that 81% of all ICOs were scammed for a start, 11% failed or died, and the remaining eight percent traded on the stock market, the top ten lost 95% of their value over the past year, more than Bitcoin.
So there was a bladder - and everyone was driving it, everyone was releasing the ICO, raising money - but now bankrupt.
I think they've already lost 95% of their value and could lose 95% more.
I would say that 99% of the crypt valued is zero. Just because some people believe in something other than fiduciary money - an alternative to gold - then, like a collector, some people will stick to Bitcoin. Bitcoin will not leave. But, you know, Ethereum is a bubble, and that's a little scam - it's worthless - the XRP, everyone else, all bankrupt. "
Catherine Ross: Why is the Ethereum Scam?
It's a scam about technology. They talk about smart deals - nothing is smart, they're all bad. These are not real contracts because you have to apply them, you can not just have the code.
They tried things they did not succeed: their DAO was a failure.
You know, a lot of people [who] talk about their DOMPs or their distributed applications. What is 75% of these entries? CryptoKitties, Ponzi Schemes, and other pyramid schemes and other casino games, such as Las Vegas. So, after ten years, what Ethereum should show us? CryptoKitties and Ponzi Schemes? And what are they doing? They do nothing that is of any use to anyone.
CR: But if it's smart technology agreement - and you said: "it's a buggy" - technology can be problematic and can be corrected. Do not you think we need more time to see technology and smart deals work better?
NR: First of all, I do not believe in smart deals. By definition, each contract must be executed by lawyers - [nothing is done] by itself. So the idea of putting everything in the code in the contract is stupid, to begin with. And you know, another typical program has less than 1% of bugs in your code, and a typical smart contract with 10% of its buggy code [sic].
I mean, this is the reality we're in now.
By the way, the more general question of cryptocurrency is that they are not scalable and that the system does not make them scalable. They are not decentralized because the whole system [becomes] centralized; and they are not sure because there are so many ways to hunt them.
So there is no function [she] should have: it is not scalable, is not safe, it is not decentralized. So what is it worth? With Bitcoin, you can make five transactions per second. With Visa, you can earn 25,000 transactions per second.
They [the block-chain community] say for ten years: "We will solve it with evidence of participation, not proof of work." It was not working yet. Even if something developed, it would be centralized and therefore unsafe. So there is a fundamental lack of technology.
The least financial systems we know are centralized, yes, but safe and scalable.
Vitalik Buterin, the creator of Ethereum, explained that it is impossible to have a system of blocks with three identical properties: to be scalable, decentralized and secure.
On a reliable financial system
CR: Even after the global financial crisis in 2008, do you believe in a traditional banking system?
Traditional financial systems are centralized - and there is nothing wrong with institutional centralization, in my opinion. They [the block communist community] criticize him by saying, "We want to be decentralized."
But I prefer a centralized system with trusted authority - but at least they are safe and scalable.
We are talking about decentralization: miners are centralized as oligopolies, coders are centralized, exchanges are centralized - 99% of all transactions take place on a centralized exchange - and there is a great concentration of wealth. It is higher than North Korea regarding inequality of income and wealth.
Reality is the opposite: it is a completely centralized system.
[At the same time], traditional financial systems pose many problems. I was one of the biggest critics of the financial system. And I think there are ways to [democratize] the finances and make it more effective, but it does not rely on the blockchain.
There is a revolution in financial services: it is called the fintech and has nothing to do with cryptocurrency and blockchain.
It is based on artificial intelligence, machine learning, Internet stuff, and great data. Revolves the payment system, insurance, loan assignment, capital market functions, and asset management.
Take, for example, payment systems: [There are already many digital payment systems - billions of transactions a day and used by billions of people around the world - which are not based on blockchains. In China you have AliPay and WeChat Pay; in India, you have all these UPI systems; in Africa, you have M-Pesa; the United States, which we Venmo, PayPal, Square - and so on. These are useful transactions.
With these models, you can export millions of transactions - and billions of transactions are performed by billions of people today. These are digital payment systems, which are based on the traditional financial institution and the fintech. They have nothing to do with the blockade. We do not need blockchain; we do not need to crypto [democratic] finance.
There is already a revolution: there will be much more competition, there will be much more available. If you are a poor farmer in Kenya today using M-PES. On your small smartphone, you can trade, borrow and borrow, buy and sell your goods and services, have a range of financial services, no virtual bank. And all this is available to billions of poor people in Africa. What do they have to do with blockchain or crypto? Nothing, zero. So there is a revolution and has nothing to do with the blockchain.
CR: The whole philosophy of the industry was to create a transparent system and create a new world from a reliable financial system financial system that thinks from customer to customer. Do you think he did not do what he was supposed to do?
NR: Of course, it's completely gone: after ten years no more revolutionary applications. Cryptocurrency assets in bankruptcy; lost 99% of their value; all these experiences have not led any company or financial institution to use this technology, and there is no reason why they want to use this technology. And why should it?
Why would I want to trust someone in Russia or China to check my transactions? It's not safe. Why would I want to do this? There are central banks, companies, and institutions that have always existed and are based on trust - reputation. And I know what I'm against.
I would like these institutions to check my transaction, not somebody in China who can handle everything I do. Why should I rely on someone when I do not know what the name is, who she is, what she is doing.
CR: So, do you want to entrust the bank? How can you be sure your money is safe?
NO: We have security laws. If the bank manipulates, hundreds of billions of dollars of cash punishment and their guilt are imposed on banks - people have been imprisoned. There are many problems with the traditional financial system: Blockchain and cryptocurrency do not solve this problem. Fintech solves it, but fintech has nothing to do with blockchain or cryptocurrencies.
I was the first critic of the financial system, I wrote about the financial crisis, I criticized the banking system. I do not believe crypto or block-betting solves any problem in our existing financial system [and they] do nothing.
It's just something for a group of interested people who talk about decentralization, freedom, democratization of finance - and there is no democratization of funding, access to financial services through crypto or blockchain is now impossible. There are other alternatives, such as M-PES, which give power and democratize the funds to billions of people in Africa. These things have nothing to do with the blockchain. I believe in these things.
I do not believe in the blockchain.
CR: I see your point of view, but I want to make it clear that the banking system has existed for centuries, right? So, maybe you should try the cryptography and blockchain industry?
NO: No, I will not try. I will try to innovate in the financial field to change the financial system.
All these things [those above] - they revolutionize finances, create competition, force the banking system to innovate or not survive, and they change the world. But they have nothing to do with the blockade. Why I should give priority to suspicion of something that has not provided any app that someone uses. I do not believe the proof is in the pudding.
CR: My last question is: Have you ever tried to trade cryptocurrency?
NR: I did not try. Some people say, "Oh, you're criticizing cryptography because you're doing a short-sighted bitcoin or cryptic transaction." I do not have a position - I do not have a long position or a short position.
Maybe I'm right or maybe wrong, but the crypto might go to the moon to go to zero; I will not make money. I'm an intellectual. I'm an academic. I have no conflict of interest.
My only thing is my academic reputation. If I'm wrong, my reputation will suffer. But I will not make a coin. So, I will not take one or the other way, because if I do, I have a financial interest to criticize or increase a certain crypt; and it is not my interest.
I am an intellectual and I will not make money in this or that way.