Former Greek Minister of Finance Yanis Varoufakis said that blockchain is indeed an incredible technology but Bitcoin is unfit to replace money and will only make the crises worse as we read more in the latest Bitcoin news.
The former Greek Minister of finance said that there is an uneven distribution of BTC and its limited supply adding that not much will change for the companies and private banks even if BTC becomes the new fiat. VAroufakis knows a few things about financial crises as in 2015 he was in charge when the country was hit with the harsh financial straits and were unable to pay 1.6 billion EUR to the International Monetary Fund. He is using the expertise to comment on whether Bitcoin will succeed as a replacement for Fiat money and argued that BTC should not replace fiat because it will only make “capitalism uglier, nastier and dangerous.”
— Yanis Varoufakis (@yanisvaroufakis) July 27, 2020
On the other hand, he said that that the blockchain technology has huge potential but argued that BTC is incapable of reacting to various economic woes such as the current COVID-19 pandemic because its monetary policy is hardcoded:
“Consider the Crash of 2008 or the more recent 2020 Covid-19-induced crisis. Suppose that Central Banks did not have the capacity instantly to create trillions of dollars, euros, pounds and yen – and instead had to rely on a spontaneous majority of Bitcoin’s users to agree to a massive increase in the supply of money. he result would be a 1929-like collapse of banks and corporations.”
The supply is limited to 21 million which is a hard cap that will unlikely change and until this is reached, the supply is created at a constant rate that halves every four years. The BTC network is unable to increase the supply but its proponents argue that this is a good thing. Varoufakis pointed out that BTC ownership is unequally distributed and people that own a lot won’t be excited of the idea of increasing its supply because it will devalue its own holdings. If BTC wants to replace fiat currencies, it will exacerbate the problem of wealth inequality during crises:
“In short, the free-rider problem that guarantees the maximal reinforcement of any capitalist crisis (in any economy relying on Bitcoin as its main currency) will be turbocharged by the unequal ownership of Bitcoin – which is unavoidable in any monetary system overlaid upon contemporary capitalism. Bitcoin’s dominance will not democratise economic life”
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