Members of the US Senate have made yet another effort to find out what cryptocurrency and blockchains are. Two months ago, it was the energy committee's turn. Today, it was the Committee on Banking, Housing and Urban Affairs, which hosted two experts who had firmly anti- and pro-crypto positions, respectively: Nouriel Roubini, professor of economics at NYU's Stern School of Business, and Peter Van Valkenburgh, director of research at Coin Center.
Committee chair Mike Crapo said the hearing was a continuation of the committee's "exploration of the opportunities and challenges surrounding the cryptocurrency and blockchain ecosystem." He expressed his wish that the committee "hear about the use of cryptocurrencies and derivative products as a store of value or medium of exchange or payment; the current and potential applications of blockchain technology; and the regulatory issues surrounding the various facets of the ecosystem and how they can be improved."
For the first witness, Roubini, the answer was simple: There is no value in any of it, and it probably can't be improved.
During questioning he offered little of substance that hadn't already been included in his written testimony. Since that has been available on the committee's website since at least yesterday, some in the crypto community had already attacked his testimony before it was officially presented.
To put it mildly, Roubini has nothing positive to say about either cryptocurrencies or blockchain. He believes that the crypto-libertarian, anti-fiat critique is economically illiterate nonsense, that corporations and governments will never use public blockchains, and that Bitcoin is a scam, though many altcoins may be worse. "Actually, calling this useless vaporware garbage a 'shitcoin' is a grave insult to manure that is a most useful, precious, and productive good as a fertilizer in agriculture," he said.
He also argued cryptocurrency's 2017 peak was history's most extreme bubble. Its implosion exposed the uselessness and danger of cryptocurrency, but led some to refocus their (largely scammy) efforts on the underlying technology:
"Now that the crypto bloodbath is in full view, the new refuge of the crypto scoundrels is 'blockchain,' the technology underlying crypto that is now alleged to be the cure of all global problems, including poverty, famines and even diseases. But as discussed in detail below, blockchain is the most over-hyped – and least useful – technology in human history: in practice it is nothing better than a glorified spreadsheet or database."
Roubini also claimed there is a revolution underway in FinTech. However, it involves AI, big data, and internet of things – not blockchain.
The second witness, employed by cryptocurrency advocacy organization Coin Center, unsurprisingly had a different take. Van Valkenburgh focused on three use case areas he believes are most pertinent to blockchain tech – identity, internet of things, and digital cash, with only the latter area coming in direct contradiction with Roubini's testimony.
He claimed the real innovation of Bitcoin was the creation of consensus mechanisms:
"There are really three core innovations that underlie Bitcoin: peer-to-peer networking, blockchains, and consensus mechanisms. Of these, peer-to-peer networking is generally nothing new, and blockchains are merely novel ways of storing and validating data. Consensus mechanisms, however, are the truly disruptive, interesting, and critical component of the design."
Blockchains, he argues, can better facilitate "data minimization" – releasing the smallest amount of data necessary to accomplish a task – which protects privacy better that the current "perimeter" approach, in which once hackers breach the security of a system, they have access to all information. Raising a serious privacy issue with some of the FinTech innovations Roubini had earlier praised (e.g., WePay, AliPay), Van Valkenburgh claimed:
"The Chinese government, quite openly, has said they can look at every financial record of every citizen in their country because of that FinTech innovation…It is effectively government control and total surveillance over the population and every financial transaction they make in the world. It's a tool for totalitarians."
However, possibly in an attempt to assuage senators' concerns about illicit uses, he also said he had spoken to criminal investigators who claimed to prefer investigating crimes involving cryptocurrency rather than traditional banks, since blockchains provide clear, unbroken financial transaction records, and are, despite their reputation, not anonymous at all. So Van Valkenburgh's testimony presented an unresolved tension: While the traceability of non-blockchain FinTech transactions is a serious danger and potential source of government abuse, the traceability of blockchain transaction is, apparently, a virtue.
There was one unexpected, and unacknowledged, point of agreement between the two witnesses. Despite their differences on the utility of blockchain technology, they both seem to believe the term "blockchain" is useless. According to Roubini, "Any institution under the sun after experimenting with a pilot 'blockchain' dumps it into the garbage bin or turns it into a private permissioned database that is no 'blockchain' in any dimension but its misleading name." This, he believes, is the only type of blockchain that will survive – those that aren't really blockchains.
Van Valkenburgh was more direct, saying:
"'Blockchain technology' is not a helpful phrase. It abstracts real, specific technical innovations into a generalized panacea. The phrase suggests a vague design pattern, which is then trumpeted as the solution to all manner of societal and organizational problems."