Former Greek Finance Minister believes Bitcoin dominance will only worsen financial crises.
He is particularly worried about the inequality in the distribution of bitcoins and their limited reserves..
At the same time, he welcomes the blockchain technology itself..
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Former Greek Finance Minister Janis Varoufakis is confident that while blockchain as a whole is an outstanding technology, replacing fiat currencies with bitcoin will only exacerbate future crises..
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Economist Janis Varoufakis is familiar with financial crises. He served as Greece’s finance minister at a very difficult time for the country, when it faced the threat of default. Now, in an open letter published the day before, he, referring to his experience, argues that Bitcoin cannot replace fiat currencies, since this will only make “capitalism more ugly and dangerous for humanity.”.
Everything is counted and divided
Varoufakis believes that Bitcoin is unable to effectively respond to various economic problems. This is due to the fact that Bitcoin’s monetary policy is hardcoded and not so easy to correct..
As an example, Varufakis cites the crisis provoked by the pandemic. When he demanded an immediate response, what would happen if the central banks did not have the ability to immediately create huge amounts of new money. Instead, they would have to rely on a spontaneous majority of bitcoin users to agree to the money supply. The result would be a financial crisis a la 1929, he concludes..
Meanwhile, the final volume of the supply of bitcoins was initially stipulated as 21 million coins, and this situation is unlikely to change. No matter what happens, the BTC network is not able to arbitrarily increase the supply of coins.
Varoufakis believes that bitcoins are extremely unevenly and unfairly distributed among owners. It is the bitcoin whales that are primarily opposed to an increase in the MTC money supply, since this can devalue their reserves. Accordingly, if Bitcoin suddenly replaces fiat, it will only exacerbate the problem of inequality and social stratification..
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Bitcoin will only make things worse
Thus, Bitcoin’s dominance will still be unable to democratize the economy and solve the problems of most people in traditional capitalist systems, Varufakis concludes. Nothing will change at the corporate level either, he adds. Monopolists will continue to control their markets and exploit weaker ones.
Perhaps private banks will be able to create complex bitcoin derivatives and use them as “private money” as a store of value and means of payment. “However, replacing fiat money with bitcoin will bring us back to the post-modernist version of America in the 19th century. This is not the perspective for which the socialists should go to the barricades, “says Varoufakis..
As a result, this can lead to new depressions, which will be even more severe due to the inability of bitcoin – or the unwillingness of the rich – to increase or otherwise adjust the volume of military-technical cooperation in times of crisis.
Blockchain is bigger than bitcoin
As a result, the democratization of money through bitcoin will not be able to democratize capitalism, sums up Varufakis. Moreover, this will give a powerful impetus to regression and make the face of capitalism even uglier and more dangerous, since the tail (the monetary system) will never be able to wag the dog (capitalism).
However, Varoufakis noted that although Bitcoin is not a panacea, the blockchain technology itself can become an effective tool for creating a qualitatively new financial structure..
These reflections have already caused a lively response from readers. Some in the comments supported the voiced opinion regarding Bitcoin, and the co-founder of Ethereum Vitalik Buterin asked Varufakis which blockchain applications he considered the most valuable – whether “in an ideal democratic socialist society, or right here and now”.
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