The Chain: CryptoKitties and blockchain bears
Is Bitcoin going to crash? Is blockchain the most over-hyped technology ever? Are CryptoKitties really worth US$100,000? All this and more, in Asia Times' new daily crypto-focused column, The Chain
Blockchain is one of the most over-hyped technologies ever. So says Nouriel Roubini – and it’s not the first time this eminent economist has spoken out on the subject.
Roubini, who has worked for the IMF, the Federal Reserve and the World Bank, writes in Project Syndicate that blockchains are less efficient than existing databases, require far greater storage space and computer power, are clunky, and require huge amounts of energy.
Roubini thinks the idea that they will create a “trustless utopia” is “absurd” and blockchain’s future use, he predicts, will be limited to “specific, well-defined, and complex applications that require transparency and tamper-resistance more than they require speed – for example, communication with self-driving cars or drones.” In all other areas, this blockchain bubble, says Roubini, will soon burst just like all other bubbles have.
The cat that got the cream
But let’s move on to the serious stuff. CryptoKitties, reports CNN, are “breedable” digital cats that are traded on the Ethereum blockchain. These cats, each unique and with their own different attributes – or cattributes, as enthusiasts prefer – have been in existence for just over a year but have already generated more than US$22 million in trade sales. According to CNN, the most expensive cat – the not-so-cutely named Founder Cat #18 – sold for the equivalent of US$110,000 in December. How can anyone say this sector is over-hyped?
Billion dollar days
Talking of hype, it has emerged that crypto exchanges are currently one of the biggest virtual currency winners. According to Bloomberg, the top 10 exchanges are generating as much US$3 million in fees a day. Annual revenue, for these same top 10, is heading into the billions. The biggest exchanges are still in Asia, with Tokyo-based Binance and Hong Kong-based OKEx overseeing the largest volume of trades, with each handling a chunky US$1.7 billion every day.
Some of the biggest exchanges used to be in China, but Beijing banned them all in September 2017 and at the same time outlawed all Chinese-based initial coin offerings. It is now said to be about to shut off domestic access to overseas exchanges and will also ban Chinese bitcoin mining.
Yet intriguing stories have emerged claiming that before the exchange ban, regulators from the People’s Bank of China seemed very keen to get an inside-track understanding of just how significant cryptocurrency trading was in China. To add to the intrigue, word is coming out of the on-going National People’s Congress that members of China’s top political advisory board are proposing the creation of a national crypto-currency exchange.
The top-level annual assembly, which has also called in senior management of major internet and tech firms to give comment on the widened application of blockchain in China, is reportedly looking at a proposal for a system of virtual currency and blockchain certification, as well as a trading platform that is jointly regulated by the People’s Bank of China and the China Securities Regulatory Commission. If this happens – and that is a very big “if’ – it would be a global game-changer for the crypto market.
A very different game changer would be the total price collapse of Bitcoin. But another eminent American economist – very much in the bearish Professor Nouriel Roubini camp – believes that is exactly what is going to happen.
Harvard University professor Kenneth Rogoff, speaking to CNBC said he reckons that, in ten years, “Bitcoin will be worth a tiny fraction of what it is now… I would see $100 as being a lot more likely than $100,000… Basically, if you take away the possibility of money laundering and tax evasion, its actual uses as a transaction vehicle are very small.”
Current uses do include the buying and selling of digital cats, though.