💭 [Analysis] Economist cites transaction costs, tethering for continued skepticism – Paul Krugman

Paul Krugman believes that cryptocurrencies will not succeed for two reasons:

1. Cryptocurrency increases transaction costs.

• All other monetary innovations have reduced friction.
• Cryptocurrency could "set the monetary system back 300 years."
• Few firms accept them as payment.

1. Cryptocurrency is not backed by anything.

• "Fiat currencies have underlying value because men with guns say they do."
• The value of cryptocurrencies depend on self-fulfilling expectations.
• Total collapse is a real possibility.

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