Dr. David Yermack, a finance and law professor at New York University (NYU), recently argued that bitcoin (BTC) and other decentralized cryptocurrencies are not a response to the perceived failure of the traditional financial system. Yermack’s comments were mainly in reference to the events that led to the 2008 Financial Crisis and its aftermath.
Peer-To-Peer (P2P) Electronic Cash
Explaining how bitcoin came existence, the financial markets scholar said:
Bitcoin happened to be launched in 2009, but it was the culmination of attempts to create a digital currency on a peer-to-peer (P2P) basis.
According to the Harvard business economics Phd, “Commerce on the internet” largely depends on banks serving as intermediaries to facilitate online payments. Bitcoin creator Satoshi Nakamoto acknowledged in the cryptocurrency’s whitepaper that the traditional method of processing electronic payments “works well for most transactions.”
However, the bitcoin whitepaper noted that the conventional money transfer system “still suffers from the inherent weaknesses of the trust based model.”
“Timing” Of Bitcoin’s Launch “Attracted More Users”
Yermack believes that even though the 2008 global financial crisis, which has been attributed to excessive risk-taking by major banks such as Lehman Brothers, may not have directly led to the invention of bitcoin, the “timing of its launch could only have helped attract more users.”
Arguing against the “myth” of decentralization and crypto assets, renowned economist Dr. Nouriel Roubini remarked:
They stumbled upon something – an experiment, you could say. They pretend to be libertarian, but they are a new generation of self-serving gold bugs. They only care about their money, not the protocol or the technology.
Meanwhile, many people in the crypto community point to the message in bitcoin’s genesis block (on January 3, 2009), which strongly suggests that Nakamoto developed bitcoin due to the fallout from the 2008 financial crisis.
If Not Bitcoin, Then “Something Else”
Despite bitcoin plummeting from its all-time high of nearly $20,000 in December of 2017 to currently around $6,443.87 according to data from CryptoCompare, many crypto analysts remain confident in the pseudonymous cryptocurrency’s long-term potential.
As CryptoGlobe reported (on August 18th), venture capital firm CryptoOracle.io co-founder, Lou Kerner, has predicted that bitcoin will eventually replace gold as a global store of value because it’s “functionally much, much better.”
Commenting on the movement to decentralize the financial markets, clinical associate professor of strategy at Northwestern University’s Kellogg School of Management, Dr. Sarit Markovich, said:
The quest to be decentralized can be tied to a financial crisis, but if we didn’t have bitcoin it’s likely something else to challenge centralized payment systems would have emerged.