Transaction Costs and Tethers: Why I’m a Crypto Skeptic (NYT)

Final paragraphs of a timely cryptocurrency reality check by Paul Krugman

"Cryptocurrencies, by contrast, have no backstop, no tether to reality. Their value depends entirely on self-fulfilling expectations – which means that total collapse is a real possibility. If speculators were to have a collective moment of doubt, suddenly fearing that Bitcoins were worthless, well, Bitcoins would become worthless.

Will that happen? I think it’s more likely than not, partly because of the gap between the messianic rhetoric of crypto and the much more mundane real possibilities. That is, there might be a potential equilibrium in which Bitcoin (although probably not other cryptocurrencies) remain in use mainly for black market transactions and tax evasion, but that equilibrium, if it exists, would be hard to get to from here: once the dream of a blockchained future dies, the disappointment will probably collapse the whole thing.

So that’s why I’m a crypto skeptic. Could I be wrong? Of course. But if you want to argue that I’m wrong, please answer the question, what problem does cryptocurrency solve? Don’t just try to shout down the skeptics with a mixture of technobabble and libertarian derp."

Transaction Costs and Tethers: Why I’m a Crypto Skeptic (NYT)