Add Nobel Prize winner Robert Shiller to the list of people who are skeptical about bitcoin.
In a piece published on the Project Syndicate website, Shiller cast a critical eye on bitcoin’s claim to be an innovation by providing examples of failed currencies from history. They had a similar spiel as bitcoin but failed to take off. For example, the Cincinnati Time Store sold items based on “labor notes” or paper notes that were time units that represented the amount of labor required to bring the product to market. In effect, they represented a promise by the buyer to perform an equivalent amount of work for the store’s owner in exchange for the product. But the concept proved to be unpopular and the store closed down in 1830.
Other examples provided by Shiller in his note relate to the use of energy as units of payment. For example, Technocracy, a movement at Columbia University, intended to use units of energy, known as ergs, to replace the dollar. Economist John Pease Norton came up with the idea of using electricity as backing for the dollar. “At a time when most households in advanced countries had only recently been electrified, and electric devices from radios to refrigerators had entered homes, electricity evoked images of the most glamorous high science,” writes Shiller. “But, like Technocracy, the attempt to co-opt science backfired.”
Cryptocurrencies share characteristics with these other attempts to create an alternative to fiat currencies. Further, their complex technology further confuses people. “Practically no one, outside of computer science departments, can explain how cryptocurrencies work,” wrote Shiller. “That mystery creates an aura of exclusivity, gives the new money glamour, and fills devotees with revolutionary zeal.” In a reference to the Satoshi Nakamoto origin myth associated with bitcoin, Shiller cautioned that a “compelling story” may not be enough to attract the masses.
Shiller joins a long list of prominent names, from legendary investor Warren Buffett to JPMorgan head Jamie Dimon, who have cast doubts on cryptocurrencies and bitcoin. In April, he told CNBC that bitcoin’s rise was a result of “faddish human behavior”. “..it's a story that I think goes way beyond the merit of the idea. ... It is more psychological than something that could be explained by the computer science department,” he said. (See also: Bitcoin "Fad" May Survive A Crash).
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