WEBVTT - Bitcoin's Big Problems 0:00:02.200 --> 0:00:05.400 It's a combination of a bubble, a Ponzi scheme, and 0:00:05.480 --> 0:00:09.240 an environmental disaster. That's how one of the world's leading 0:00:09.280 --> 0:00:13.800 authorities on finance and economics described bitcoin earlier this year. 0:00:14.360 --> 0:00:18.320 On this week's episode, will explore the world of cryptocurrencies 0:00:18.600 --> 0:00:21.360 and dig into why they're unlikely to live up to 0:00:21.400 --> 0:00:25.840 the hype, where cryptocurrencies might actually hold some promise, and 0:00:26.200 --> 0:00:39.680 how bitcoin might end up breaking the Internet. Welcome to Benchmark. 0:00:39.920 --> 0:00:43.559 I'm Scott Lanman, an economics editor with Bloomberg News in Washington. 0:00:44.159 --> 0:00:47.360 On this episode, we head across the Atlantic to talk 0:00:47.360 --> 0:00:50.080 with our guests, who's based in Switzerland at the Bank 0:00:50.159 --> 0:00:53.640 for International Settlements, which is essentially a cential bank for 0:00:53.720 --> 0:00:57.320 central banks. Jon Song Shin is the head of Research 0:00:57.360 --> 0:01:00.360 at the BIS. Previously, he was a professor Sir at 0:01:00.360 --> 0:01:04.319 Princeton University and the London School of Economics. Dr Shinn, 0:01:04.400 --> 0:01:06.880 thank you for joining us on Benchmark. Thank you, Scot, 0:01:06.959 --> 0:01:09.920 it's good to be on the on the show now, Jean, 0:01:10.040 --> 0:01:12.800 it was actually your boss, Augustine Carston's the head of 0:01:12.840 --> 0:01:15.640 the b i S who made that comment about bitcoin 0:01:15.720 --> 0:01:19.120 being a bubble, a Ponzi scheme, and an environmental disaster. 0:01:19.720 --> 0:01:22.520 You recently had a chapter in the bi S Economic 0:01:22.600 --> 0:01:25.000 Report and made a speech on the topic that we're 0:01:25.080 --> 0:01:28.560 a bit less sensational, though still critical of the limits 0:01:28.600 --> 0:01:33.000 with bitcoin and cryptocurrencies. Before we get into those issues, 0:01:33.520 --> 0:01:36.920 let me ask you why do you think bitcoin and 0:01:36.959 --> 0:01:41.399 cryptocurrencies have gotten so much hype and attention and hit 0:01:41.440 --> 0:01:44.280 a nerve with some people as the next big thing. 0:01:45.280 --> 0:01:49.280 I think it's the promise of technology solving one of 0:01:49.320 --> 0:01:53.880 the basic problems and economics, which is to generate trust 0:01:54.040 --> 0:01:59.360 in a very decentralized way. And to re address that question, 0:01:59.440 --> 0:02:04.000 it's worth thinking about what money is. And money is 0:02:05.280 --> 0:02:09.360 a social institution where I accept money as payment in 0:02:09.400 --> 0:02:13.800 the expectation that others will accept money. And in that sense, 0:02:14.080 --> 0:02:18.240 money itself is a worthless token, and that's true whether 0:02:18.280 --> 0:02:20.680 it's a piece of paper with a face on it 0:02:20.840 --> 0:02:24.160 or whether it's the digital token. But the fact that 0:02:24.200 --> 0:02:27.720 others accept the money gives it value. And in that sense, 0:02:28.280 --> 0:02:33.280 although the tokens are intrinsically worthless, it becomes something of 0:02:33.360 --> 0:02:36.519 value because of the social conventions that back up the 0:02:36.639 --> 0:02:39.560 use of money. And I think what's really captured the 0:02:39.560 --> 0:02:44.720 imagination is that bitcoin and other cryptocurrencies have come along 0:02:45.560 --> 0:02:51.160 which promise money like acceptability, but without the backing of 0:02:51.200 --> 0:02:54.880 a central authority like a central bank. That's right, and 0:02:54.919 --> 0:03:00.120 I found that history of money in your chapter very fascinating, 0:03:00.160 --> 0:03:03.320 and I agree that it is kind of avoiding the 0:03:03.639 --> 0:03:07.760 use of authority, this anti authority streak that runs through 0:03:07.800 --> 0:03:11.480 some veins of our world, that's probably driving that. Let's 0:03:11.520 --> 0:03:14.160 just talk about the use of bitcoin for a moment. 0:03:14.639 --> 0:03:19.520 How does buying something with bitcoin compare or contrast with 0:03:19.600 --> 0:03:22.880 a regular online transaction that I might do with a 0:03:22.919 --> 0:03:26.560 credit card. Yes, so I think it's worth looking at 0:03:26.639 --> 0:03:29.680 some of the some of the basic concepts here when 0:03:29.720 --> 0:03:33.160 anthropologists have looked back and looked at early human society 0:03:33.240 --> 0:03:36.280 is without money, with the conjecture that you know, goods 0:03:36.280 --> 0:03:39.600 were provided for the promise of someone to return their 0:03:39.600 --> 0:03:42.720 favor in the future. And in that sense, money can 0:03:42.720 --> 0:03:45.000 be seen as a kind of record keeping device where 0:03:45.040 --> 0:03:48.720 we keep tabs on who's paid whom and who I 0:03:48.840 --> 0:03:52.480 was what to whom, and rather than having a tangle 0:03:52.600 --> 0:03:56.360 of io us, money is a kind of summary of 0:03:56.480 --> 0:03:59.560 the services that you've provide others in the past and 0:04:00.080 --> 0:04:05.160 gives you an entitlement to goods and services with respect 0:04:05.200 --> 0:04:09.440 to others in the future. Now, the way that cryptocurrencies work, 0:04:09.480 --> 0:04:13.720 in particular a blockchain based cryptocurrencies work, is that it's 0:04:13.720 --> 0:04:18.760 an ecosystem which has the users who make and receive payments. 0:04:19.680 --> 0:04:23.359 But then you need others to maintain the system. So 0:04:23.480 --> 0:04:27.839 there are the bookkeepers who record the transactions. And what's 0:04:28.480 --> 0:04:32.480 very distinctive about bitcoin and other similar cryptocurrencies is that 0:04:33.240 --> 0:04:40.080 the register is maintained by broadcasting the transactions to every 0:04:40.120 --> 0:04:42.960 node in the system. That's to say, every there is 0:04:43.000 --> 0:04:48.919 a network of bookkeepers and the ledger is updated simultaneously 0:04:49.000 --> 0:04:52.320 so that every ledger is identical, and in that sense, 0:04:52.720 --> 0:04:55.920 there is no need for a central authority. So if 0:04:55.960 --> 0:04:58.720 I were to make a transaction, what would happen is 0:04:59.440 --> 0:05:03.800 I will record the transaction, make a payment to let's 0:05:03.800 --> 0:05:10.080 say a vendor, and then the the bookkeeper who who 0:05:10.360 --> 0:05:13.360 will update the leisure, will then broadcast that transaction to 0:05:13.480 --> 0:05:17.240 every other bookkeeper and all the books, all the ledgers 0:05:17.240 --> 0:05:21.520 are updated simultaneously, and so when everyone accepts that transaction, 0:05:22.120 --> 0:05:27.320 that would be a value transaction within the system. And 0:05:27.360 --> 0:05:31.320 that's different from a traditional system, the current system where 0:05:31.880 --> 0:05:34.600 it's really a central authority like the central bank, that 0:05:34.640 --> 0:05:38.680 would validate the transaction. Correct, that's right. So under the 0:05:38.720 --> 0:05:42.800 conventional system, what would happen is that I have a 0:05:42.839 --> 0:05:45.279 deposit in the bank and then I make a payment 0:05:45.480 --> 0:05:49.400 by instructing the bank to make the payment to a vendor. 0:05:50.240 --> 0:05:52.479 What the bank would do is then to debit my 0:05:52.520 --> 0:05:57.880 account and credit the account of the vendor and in 0:05:57.920 --> 0:06:02.040 the payment system as a whole all. Ultimately, what would 0:06:02.040 --> 0:06:04.720 back up the system is that these transactions are then 0:06:04.880 --> 0:06:08.680 settled on the central banks balance sheet. Now, when you 0:06:08.720 --> 0:06:12.120 talk about how everybody has to keep this ledger, this 0:06:12.279 --> 0:06:16.960 gets to the issue of why bitcoin or why cryptocurrencies 0:06:17.240 --> 0:06:19.440 can only get so big. You really get to this 0:06:19.480 --> 0:06:24.480 issue of what you call scalability. What would happen if 0:06:24.520 --> 0:06:27.560 if bitcoin or cryptocurrency were to become so widely used 0:06:27.560 --> 0:06:30.479 that it were kind of like a global currency and 0:06:30.920 --> 0:06:34.000 it would require tons and tons of computing power just 0:06:34.080 --> 0:06:37.000 to process each individual transaction. Is that where we get 0:06:37.040 --> 0:06:41.680 into the environmental disaster part of what Mr Carson said, Yes, 0:06:41.720 --> 0:06:45.480 I think this goes to the ecosystem that I discussed earlier. 0:06:45.640 --> 0:06:48.640 So there are the users who make and receive payments, 0:06:48.720 --> 0:06:51.600 but then there are the bookkeepers, and the way that 0:06:51.680 --> 0:06:55.400 the system works is to use the individual incentives of 0:06:55.440 --> 0:06:59.080 the bookkeepers so that they have an incentive to maintain 0:06:59.080 --> 0:07:01.440 the system, and they have an incentive to maintain the 0:07:01.520 --> 0:07:05.880 system that keeps the records faithful to the intentions of 0:07:05.920 --> 0:07:10.040 the users. And the way that it works in the 0:07:10.120 --> 0:07:15.680 case of bitcoin is that the miners compete to scoop 0:07:15.800 --> 0:07:19.560 up the transactions that are waiting to be processed, and 0:07:19.600 --> 0:07:24.760 they compete by solving mathematical puzzles using computing power at 0:07:24.760 --> 0:07:29.080 their disposal, and the solution of the puzzles do not 0:07:29.400 --> 0:07:32.600 serve any particular purpose in itself other than to select 0:07:32.680 --> 0:07:37.840 a minor to update the payment and um. The natural 0:07:37.920 --> 0:07:40.320 question then is what is in it for the miners? 0:07:40.720 --> 0:07:43.360 What are the incentives for the miners to engage in 0:07:43.440 --> 0:07:45.920 this kind of activity, And the answer is, of course, 0:07:45.960 --> 0:07:51.440 that they receive a reward for engaging in mining and 0:07:51.560 --> 0:07:56.240 engaging in updating the ledger, and the reward comes in 0:07:56.320 --> 0:07:59.800 two forms. One is a reward in terms of the 0:08:00.000 --> 0:08:02.880 of the bitcoin itself, so there's a block rewards are called, 0:08:03.320 --> 0:08:06.119 but that part is due to be phased out over time. 0:08:07.200 --> 0:08:09.200 But the other part, which is A crucial part is 0:08:09.240 --> 0:08:12.600 that the users pay a voluntary user fee, So they 0:08:12.720 --> 0:08:17.040 pay a fee so that the transactions are processed. And 0:08:17.760 --> 0:08:22.160 because it's voluntary, it really depends on how much the 0:08:22.200 --> 0:08:24.600 system is being used at that time. So if there 0:08:24.720 --> 0:08:27.320 is a lot of congestion in the system where many 0:08:27.440 --> 0:08:31.880 users are trying to have their transaction process, then you're 0:08:31.960 --> 0:08:35.960 you're competing with other users who are also paying their fees. 0:08:36.800 --> 0:08:40.200 So um, when you have a lot of congestion, you 0:08:40.240 --> 0:08:45.080 can have episodes when the users have to pay quite 0:08:45.080 --> 0:08:48.800 a high fee in order for their transaction to be processed. 0:08:49.360 --> 0:08:52.400 At some point last year in December, you had to 0:08:52.440 --> 0:08:56.800 pay in excess of fifty dollars per transaction in order 0:08:56.840 --> 0:08:59.400 to have your for a two dollar coffee, as you 0:08:59.520 --> 0:09:02.720 as you men in that paper right exactly. So if 0:09:02.720 --> 0:09:06.680 you bought a two dollar coffee and insisted on paying 0:09:06.720 --> 0:09:09.559 for it using bitcoin, you would have had to pay 0:09:09.760 --> 0:09:14.520 in excess of fifty dollars to have that transaction processed. Now, 0:09:15.080 --> 0:09:18.520 the natural question there is why don't you just increase 0:09:18.559 --> 0:09:22.319 the capacity, because that is simply a technical issue. But 0:09:22.360 --> 0:09:25.600 I think this is where the question becomes very interesting, 0:09:25.679 --> 0:09:29.800 because we need to think about not only the technology, 0:09:29.840 --> 0:09:33.439 but also the economics, because the question down is what's 0:09:33.440 --> 0:09:38.600 in it for the minor when you increase the capacity, Well, there, 0:09:38.720 --> 0:09:42.280 because the user fee is voluntary. If you increase the 0:09:42.280 --> 0:09:45.800 capacity to such an extent that there is no congestion, 0:09:46.679 --> 0:09:50.000 then the users really have no incentive to pay a 0:09:50.200 --> 0:09:53.800 volunteer user fee, and then there are no rewards there 0:09:53.800 --> 0:09:58.080 to be collected by the miners, and the bookkeepers themselves 0:09:58.080 --> 0:10:03.000 will have no reward worts to sustain, you know, their activity. 0:10:03.040 --> 0:10:05.520 So I think this is a case where the economics 0:10:06.120 --> 0:10:09.960 really bump into the the technology. How do you get 0:10:10.000 --> 0:10:13.000 from here to where you say that it could break 0:10:13.040 --> 0:10:16.440 the Internet if it's too big. I think that's really 0:10:16.679 --> 0:10:21.280 about the specific workings of of a particular type of cryptogramesy, 0:10:21.280 --> 0:10:24.400 which is which is bitcoin, and the the idea is 0:10:24.440 --> 0:10:31.360 that once the transactions accumulate over time, and the and 0:10:31.400 --> 0:10:33.800 the value of a system like this is that the 0:10:33.880 --> 0:10:37.080 whole history of transactions are recorded, and everyone is carrying 0:10:37.120 --> 0:10:41.079 around the ledger of all the past transactions, and the 0:10:41.600 --> 0:10:45.640 size of the transactions become larger and larger. And if 0:10:45.679 --> 0:10:49.920 you imagine lugging around a very large ledger of the 0:10:50.000 --> 0:10:54.880 history of all transactions and that ever occurred, then these 0:10:54.880 --> 0:10:58.880 files can become larger and larger, and it could become 0:10:59.040 --> 0:11:04.240 a very big burton on on the capacity of the 0:11:04.280 --> 0:11:08.720 system to actually maintain. But of course this is particular 0:11:08.760 --> 0:11:11.640 to a specific cryptocurrency, which is bitcoin. It's not a 0:11:11.720 --> 0:11:16.600 general point about cryptoccorencies that may rely on alternative ways 0:11:16.760 --> 0:11:21.560 of keeping records. So let's talk about the other issue, 0:11:21.600 --> 0:11:24.840 another major issue that you discussed, and that's the finality 0:11:25.080 --> 0:11:29.400 of transactions. Can you talk a little bit about about 0:11:29.480 --> 0:11:32.160 this hurdle that someone might be able to actually go 0:11:32.240 --> 0:11:35.200 back and maybe erase the transaction you made to to 0:11:35.360 --> 0:11:41.920 falsify the ledger. Isn't that a major weakness of cryptocurrencies? Yes, 0:11:41.920 --> 0:11:45.240 And I think this, uh, the issue of finality goes 0:11:45.320 --> 0:11:48.560 back to what a payment system is. So finality is 0:11:48.559 --> 0:11:51.560 the idea that once you've made a payment, it's final, 0:11:51.880 --> 0:11:55.640 so that no one can go back and alter the 0:11:55.760 --> 0:11:59.240 facts to to you know, distort history as it were. 0:11:59.600 --> 0:12:04.240 And so the technicalist you're here is that because what 0:12:04.440 --> 0:12:09.040 is a valid payment depends on what the bookkeepers agree 0:12:09.400 --> 0:12:11.920 is a valid payment. It is the result of the 0:12:11.920 --> 0:12:18.080 collective decision of the bookkeepers themselves, and just as there 0:12:18.200 --> 0:12:22.160 is a an interaction between the users, there is also 0:12:22.160 --> 0:12:27.160 an interaction between the miners. And the way that a 0:12:27.200 --> 0:12:30.520 block chain based cryptocurrency works is that what is the 0:12:30.600 --> 0:12:36.000 truth depends on what is the current valid chain of 0:12:36.120 --> 0:12:41.240 the blocks of transactions, and theoretically it is possible for 0:12:41.280 --> 0:12:46.000 a group of the bookkeepers to clude and hitch the 0:12:46.120 --> 0:12:49.480 latest transaction to a block that is further up the chain, 0:12:50.240 --> 0:12:54.160 rather than follow the rules and hitch the block to 0:12:54.240 --> 0:13:00.120 the longest chain. And if that happens, the branch that 0:13:00.200 --> 0:13:05.200 consists of the transactions recorded in the block that comes 0:13:05.200 --> 0:13:09.120 to a dead end become all void. So you may 0:13:09.160 --> 0:13:12.600 have thought that you have brought something and paid for it, 0:13:13.240 --> 0:13:15.840 but then if it is part of a branch that 0:13:15.960 --> 0:13:22.400 dies off, it no longer becomes valid. And so um, 0:13:22.440 --> 0:13:25.840 if your transaction ends up in one of these dead 0:13:26.000 --> 0:13:31.800 end chains, your payment, which you thought you had made, 0:13:32.440 --> 0:13:35.080 turns out not to have been made after all. And 0:13:35.120 --> 0:13:40.720 so although it's very likely that when your transaction is 0:13:40.760 --> 0:13:45.199 accepted and hitched to the latest chain that your payment 0:13:45.280 --> 0:13:50.560 is valid, it's not valid. It's valid with a very 0:13:50.679 --> 0:13:56.920 high percentage, but not exactly. And once UM you allow 0:13:57.040 --> 0:14:03.079 the possibility that a payment may not be final with certainty. 0:14:04.040 --> 0:14:07.120 What you might come across is a case where you 0:14:07.160 --> 0:14:10.439 would like to make a payment which which is conditional 0:14:10.520 --> 0:14:13.559 on another payment. So if it's a very large payment, 0:14:14.160 --> 0:14:16.640 I don't have money in my account at the moment, 0:14:17.360 --> 0:14:20.240 I am relying on receiving a payment in order to 0:14:20.440 --> 0:14:24.000 make my own payment. Well, imagine that we have an 0:14:24.000 --> 0:14:27.480 economy where there is a large network of these very 0:14:27.480 --> 0:14:32.000 complex payments. If it turns out that some of the 0:14:32.040 --> 0:14:36.280 payments in the past are declared null and void, then 0:14:36.440 --> 0:14:39.760 there will be a cascade of payments which were relying 0:14:39.760 --> 0:14:43.160 on that payment which become undermined as well. So you 0:14:43.200 --> 0:14:47.600 could have another twist to what is a fairly familiar 0:14:47.600 --> 0:14:51.400 problem in systemic risk, where could have a cascade of 0:14:51.640 --> 0:14:57.280 defaults where one payment being declared void will mean that 0:14:57.320 --> 0:15:01.760 other payments are declared void as well. Now it doesn't 0:15:01.800 --> 0:15:04.720 sound like a very stable system, or or at least 0:15:04.800 --> 0:15:07.440 something with a lot of holes that you're describing. Probably 0:15:07.480 --> 0:15:13.640 why central banks have been fairly downbeat on on cryptocurrencies 0:15:13.880 --> 0:15:16.640 as as something that you know could actually be used 0:15:16.680 --> 0:15:20.720 in the world, and the Bank for International Settlements view 0:15:21.360 --> 0:15:24.360 is uh you know, it's partly because as a bank 0:15:24.440 --> 0:15:28.120 that kind of gathers central bankers together, institution that gathers 0:15:28.160 --> 0:15:32.280 them together. You often talk about these kinds of regulatory issues. 0:15:33.040 --> 0:15:37.040 Is there any way that this world can potentially be 0:15:37.360 --> 0:15:40.320 regulated by any institution which you basically have to create 0:15:40.360 --> 0:15:43.320 a new global regulator out of whole cloth if this 0:15:43.400 --> 0:15:46.080 were to become something that was that was more widely used. 0:15:47.360 --> 0:15:51.280 I think to some extent, the whole nature of cryptocorencies 0:15:51.360 --> 0:15:56.440 is that they were designed to lie outside any particular jurisdiction. 0:15:56.840 --> 0:15:59.760 But I think the issue of regulation, you know, need 0:15:59.840 --> 0:16:03.240 not become a big issue unless it affects, you know, 0:16:03.280 --> 0:16:06.320 other aspects of economic activity. I think what what has 0:16:06.360 --> 0:16:11.040 generated some disquiet is the fact that cryptocurrencies piggyback on 0:16:11.440 --> 0:16:14.080 the conventional monetary system. I mean, it's it's really the 0:16:14.200 --> 0:16:19.560 price in conventional money of cryptocurrencies which has grabbed all 0:16:19.600 --> 0:16:23.440 the headlines, and it's the way in which it has 0:16:23.520 --> 0:16:27.520 taken on some of the appearance of financial assets that 0:16:27.560 --> 0:16:31.840 has I think also generated some some concerns. So it's 0:16:31.840 --> 0:16:36.240 the fact that they are intertwined with the conventional monatory 0:16:36.280 --> 0:16:41.360 system and they have a price in terms of conventional money, 0:16:41.600 --> 0:16:44.760 which you know, gives it another dimension, and um, I 0:16:44.800 --> 0:16:49.560 think there is a larger debate about whether cryptocurrencies have 0:16:49.680 --> 0:16:53.040 taken on more of a character of an asset where 0:16:53.600 --> 0:16:57.440 people pay to hold them rather than to use them 0:16:57.480 --> 0:17:01.480 as money. And I think it's the second aspect of 0:17:02.200 --> 0:17:07.920 you know, this attribute of cryptocurrencies as financial assets, which 0:17:07.960 --> 0:17:11.640 has I think generated a debate about whether about whether 0:17:11.640 --> 0:17:16.640 they should be regulated, whether consumers should be protected from 0:17:16.800 --> 0:17:21.280 fraud and market manipulation. And I think this is where 0:17:22.280 --> 0:17:27.560 the um the debates on regulation have become much more acute. 0:17:28.680 --> 0:17:32.040 And certainly the price of bitcoin has been a regular 0:17:32.080 --> 0:17:36.879 headline on Bloomberg for some years now. Now aside from 0:17:37.000 --> 0:17:40.439 how big bitcoin or cryptocurrencies would get, you know, we 0:17:40.520 --> 0:17:44.359 hear a lot about blockchain technology that you were discussing, 0:17:44.600 --> 0:17:48.040 and you know, how it could potentially be used in 0:17:48.119 --> 0:17:52.720 ways maybe outside of the cryptocurrency world. Is their promise 0:17:53.040 --> 0:17:58.880 for blockchain technology by itself, and in addition, are their 0:17:58.920 --> 0:18:03.200 potential uses for cryptocurrencies on a small scale that might 0:18:03.280 --> 0:18:05.879 be vow that might actually help some corners of the 0:18:05.960 --> 0:18:10.600 financial system. I think it's a definitely the case that 0:18:10.640 --> 0:18:16.520 the technology itself has many useful applications. The the general 0:18:16.600 --> 0:18:20.520 version of blockchain is what's called distributed ledger technology, and 0:18:20.560 --> 0:18:26.200 the idea there is that among many dispersed individuals, they 0:18:26.240 --> 0:18:30.919 can keep a record of the current state of a 0:18:30.960 --> 0:18:37.359 complex system by updating in um in real time the 0:18:37.480 --> 0:18:41.320 ledger of all the transactions, so that everyone can have 0:18:41.920 --> 0:18:46.040 the same view of where things stand. So this is 0:18:46.080 --> 0:18:49.240 an idea with with many applications, for example, within a 0:18:49.280 --> 0:18:53.600 single firm, where you have many decision makers within the firm, 0:18:53.920 --> 0:18:57.560 but you know they may be separated by distance, and 0:18:57.800 --> 0:19:00.399 they may be separated by different time zones, but you 0:19:00.400 --> 0:19:03.760 can always keep track of where things stand, where you 0:19:03.800 --> 0:19:06.360 stand with respect to the system. And this is just 0:19:06.440 --> 0:19:09.800 like any other database where you know you can update, 0:19:10.280 --> 0:19:13.879 you know who's paid whom, where the goods are, where 0:19:14.840 --> 0:19:17.040 the next input needs to be made, and so on, 0:19:18.040 --> 0:19:23.840 and the technology itself can be maintained without any particular 0:19:24.000 --> 0:19:28.239 use as as currency. It's just like it's just like 0:19:28.320 --> 0:19:31.960 updating an Excel spreadsheet, but making sure that everyone has 0:19:32.040 --> 0:19:36.000 exactly the same copy of that spreadsheet. I think where 0:19:36.000 --> 0:19:41.439 it becomes much more difficult is when the technology takes 0:19:41.480 --> 0:19:45.680 on this attribute of a financial asset which then masquerades 0:19:45.720 --> 0:19:49.440 as a currency. Uh, and then you know, gives rise 0:19:49.520 --> 0:19:54.240 to promises that may not be full of fulfilled, you know, 0:19:54.320 --> 0:19:59.200 given the some of the underlying flaws of the economics. Now, 0:19:59.240 --> 0:20:03.960 to wrap up in your speech, you conclude that cryptocurrencies 0:20:04.080 --> 0:20:07.320 quote fall a long way short of being able to 0:20:07.359 --> 0:20:11.320 sustain a monetary system. After all we've discussed here, is 0:20:11.359 --> 0:20:14.440 there any chance that we're all wrong and will wake 0:20:14.520 --> 0:20:16.800 up one day and it will be central banks who 0:20:16.840 --> 0:20:20.040 are the relics and bitcoin that's replaced the dollar as 0:20:20.040 --> 0:20:23.439 the world's leading currency. I think the bar for that 0:20:23.600 --> 0:20:26.240 is quite high. If we think about the way that 0:20:26.960 --> 0:20:34.240 the monitor system works. It's underpinned by trust, and the 0:20:34.280 --> 0:20:37.040 promise of cryptocurrencies is that you can deliver that trust 0:20:37.160 --> 0:20:40.879 in a decentralized way while at the same time having 0:20:40.880 --> 0:20:45.760 the scale to accommodate you know, very large transactions by 0:20:45.880 --> 0:20:49.800 very many people in a flexible way, and something which 0:20:50.080 --> 0:20:56.160 gives certainty. And it's certainly possible that the technology will 0:20:56.240 --> 0:21:00.159 advance that will iron out some of the wrinkles. But 0:21:00.280 --> 0:21:02.480 one of the things that we tried very hard to 0:21:02.520 --> 0:21:05.480 do um in the special Chapter of the Annual Economic 0:21:05.520 --> 0:21:09.880 Report is to point out that the underlying economics are 0:21:09.920 --> 0:21:15.720 really quite challenging, and no matter how advanced the technology becomes, 0:21:16.200 --> 0:21:19.560 the underlying problems innate in the economics look like you know, 0:21:19.680 --> 0:21:24.560 quite insurmountable problems. Okay, John song Shin, head of Research 0:21:24.600 --> 0:21:28.120 at the Bank for International Settlements in Basel, Switzerland, Thank 0:21:28.119 --> 0:21:31.040 you very much for being with us on Benchmark. Thank you, 0:21:31.080 --> 0:21:37.359 scot Benchmark will be back next week. Until then, you 0:21:37.400 --> 0:21:40.240 can find us on the Bloomberg terminal, Bloomberg dot com 0:21:40.320 --> 0:21:43.359 or Bloomberg app as well as podcast destinations such as 0:21:43.400 --> 0:21:47.240 Apple Podcasts, Spotify or wherever you listen. We love it 0:21:47.280 --> 0:21:49.560 if you took the time to rate and review the show. 0:21:49.840 --> 0:21:52.600 Some more listeners can find us and you can find 0:21:52.680 --> 0:21:56.280 us on Twitter follow me at Scott Landman, and our 0:21:56.400 --> 0:21:59.080 guest is at h y U N S O n 0:21:59.160 --> 0:22:02.679 G s A h I M. Benchmark is produced by 0:22:02.720 --> 0:22:06.360 tofor Foreheads. The head of Bloomberg Podcasts is Francesca Levie. 0:22:06.600 --> 0:22:08.440 Thanks for listening. See you next time.