This week, Noriel Roubini’s delivered well-researched statements for the Senate banking committee, on why cryptocurrency is a scam (“the mother or father of all scams and bubbles”), and blockchain is massively overhyped (“In practice it is nothing better than a glorified spreadsheet or database”).
Roubini is a professor at NYU, studies asset and credit bubbles, and correctly predicted the 2008 mortgage crisis.
Roubini is not the first to raise concern about cryptocurrency, but he has includes something you hear less often: critical statements about the future of blockchain.
This is also the reason why corporate blockchains or Enterprise DLT are another fad this is now fading and imploding, as a recent Bloomberg analysis revealed. Most companies will halt their blockchain or DLT tests this year; and in 90% of the cases “the experiments will never become part of a company’s operations”. An analyst from Gartner – the leading tech research firm – concluded: “The disconnect between the hype and the reality is significant — I’ve never seen anything like it…. “In terms of actual production use, it’s very rare.”
And the interest in corporate blockchain is collapsing: “Only 1 percent of chief information officers said they had any kind of blockchain adoption in their organizations, and only 8 percent said they were in short-term planning or active experimentation with the technology, according to a Gartner study. Nearly 80 percent of CIOs said they had no interest in the technology.”
Here in Cleveland, there’s a real “you’re either with us or against us” culture in the Blockland effort. In August, Bernie identified “naysayers” as the biggest obstacle to Blockland’s success. For better or worse, I’m a naysayer.
In his statements, Roubini raises many concerns that I share about blockchain: inefficiency, limited scalability, high energy consumption, limited use cases. Those are a big deal, and are the essence of my skepticism about the future of blockchain.
I also have some local concerns. The city has spent $300k to invest in the speculative research of a Toronto blockchain research institution. This is money paid to gain access to that research. In the world of access to research, that’s not a huge sum. But the value of that access is extremely speculative. And further, $150k of that came from the great local entrepreneurship center Jumpstart. I just have to wonder which local programs aren’t being funded by Jumpstart and by the city, which local entrepreneurs and small businesses won’t be supported because that $150k is committed elsewhere. We have a lot of local programs on the ground in Cleveland neighborhoods that are making huge impacts on neighbors’ lives every day, and could do so much more with just a tiny slice of that. Microgrants at $10k or $20k can make such a difference in neighborhood programs.
And the people involved in Blockland? Cleveland Scene reports more than 1,300 people are involved with this effort in some capacity. Destination Cleveland has committed extensive personnel time to the overall Blockland effort, as well as the upcoming Solutions conference. Now, this kind of stuff is definitely in their wheelhouse so they should certainly be involved. But again, the opportunity cost of speculation… how much staff time from the city, from Destination Cleveland, is no longer working toward proven, valuable programs which attract visitors and new residents to this great city?
I’m a tech guy, but I’m not a Blockland guy. I haven’t taken a very public position on this because I’m new in Cleveland, and why would anyone listen to me anyway? I’m not interested in opposing or changing the course of the Blockland effort, but I do hope decisionmakers will proceed with caution, pay attention to contrarian analysis such as Roubini’s, and not bet the farm on it.
Roubini Testimony, October 2018
Bloomberg analysis, July 2018