YANIS Varoufakis has said Bitcoin will never become a currency in a modern economy.
The former Greek finance minister, who has interjected on the topics of cryptocurrency and blockchain technology in recent years, said that if Bitcoin replaces fiat money, “it would be catastrophic”.
Varoufakis said the cryptocurrency lacked the inherent mechanisms needed to tackle major crises, whether they be financial or pandemic-related.
Despite Bitcoin’s price surge (and subsequent dip) over the past 18 months, the idea of cryptocurrency being the best safe haven to store value during troubled economic times has failed to come to fruition.
Instead, economies across the globe have seen the opposite come true. Even the most fiscally conservative of governments have pumped money into the economy – whether it be for furlough, rent support or business grants.
Compare that to the finite supply of 21 million Bitcoin – nations cannot increase the supply of the cryptocurrency due to its inherent nature.
Varoufakis told Greek Reporter: “Bitcoiners celebrate Bitcoin because is not state money but if you take this to its natural conclusion it means that it can never be a currency.
“Suppose that with a magic wand Bitcoin replaces fiat money.
“This will be catastrophic. We would all be now in very dire straights.
“What will happen when we have a pandemic and you need to increase the money supply? You cannot increase the supply of bitcoin because it is of fixed supply.”
He concluded that Bitcoin “can never be a currency, and it should never be a currency.”
It’s not all bad news for crypto-advocates, however. The technology behind Bitcoin is far more respected by the economist, who has previously said he was “enthusiastic on blockchain’s capacities”.
In short, blockchain is a specific type of data base which chains data blocks together in chronological order. In Bitcoin’s case, it is used in a decentralised manner to record transactions, with the intention being that all users retain control – and the whole process is transparent.
While primarily utilised by right-wing libertarians, some leftists have floated the possibility of progressives using the technology for the public good.
[READ MORE: How Bitcoin and Modern Monetary Theory can work together for the public good]
Varoufakis called the blockchain code “brilliant”, describing it as “a decentralized ledger which allows a complete record and full transparency while preserving anonymity in transactions.”
But the very strength of decentralising currency may also be its downfall, according to Varoufakis.
“Money is always political,” he said.
“The question is whether it will be democratized or not. I am afraid that many of those who got really excited about Bitcoin, because they thought you could democratize money, are completely wrong.
“Given its fixed supply and given the fact that there is no democratic mechanism to determine who gets and how many Bitcoins, it creates a kind of feudalism run by the early adopters of Bitcoin.”
The Blockchain Socialist, a leftist advocate of blockchain and cryptocurrency, told Redaction Report: “From a socialist point of view, the Bitcoin monetary system is not desirable but it’s good to see that Varoufakis acknowledges that Bitcoin is not the only option we have – and that the technology is very compostable in a way that it can reflect socialist values.”
Featured Image: Michael Coghlan @Flickr
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