 We don't need blockchain, we don't need crypto, that their DAO was a failure. I would say 99% of cryptocurrencies are worth zero. Should people just stop using blockchain? Why would I want to trust somebody in Russia or somebody in China to verify my transactions? So even after the 2008 financial global crisis you still live in traditional financial banking system? That's why he's talking about the crypto apocalypse. But it might be fixed, I think. Hi Nero, thanks for joining me here. How are you doing today? Great, I've been here at the blog show. I gave a keynote, I spoke on a couple of panels, did some interviews, had lots of interesting people, so a great event. So it is a crypto event, right? You know that. So my question is, why are you here if you're kind of against the crypto? You've been talking a lot about the end of the crypto era. Why do you visit crypto events then? Well, you know, I've been speaking to many different crypto events because I'm one of the few academic economists who is very skeptical of just cryptocurrency, but also blockchain, and I've been doing a lot of research analysis that I can speak about intelligently. And people in this space usually like to have some contrarian views rather than having every speaker saying how wonderful this space is. And since I'm quite sophisticated in terms of understanding this space event and the nuances of technology, people like to help me at these events. And I enjoy having a spirit and intellectual debate with people. I might disagree, but some of them are smart. I'm sure you're tired of being asked this question, but why are you against the crypto industry or the crypto assets? So what's your stand on it? Well, you know, I'm not against it. I'm open to any type of technology innovation, but I'm an expert of financial crises and asset bubbles, and I became famous predicting the global financial crisis and the bust of that bubble. So I can see a bubble when there is one. And to me, this entire space has been the mother and the father of all financial bubbles and now it's gone bust, you know. Last year, pretty much everybody knew was asking me every other day should I buy Bitcoin, and the price of Bitcoin doubled triple quadruple and went to 20,000. When that bubble burst, it collapsed, collapsed from 20,000 down to 6,000 today. So if you bought the peak, you lost 70% of your value, and it's typical of all these financial bubbles. They go up until they collapse, and Bitcoin is actually the best of them because the average cryptocurrency has lost in the last nine months more than 90% of their value. So I spoke about the bubble existing and this bubble going bust, and guess what? And last year has gone bust. So I think I've been vindicated and proven right in saying this is a bubble, it's a bubble that's gone bust. And I've been eloquent because people in this space have lots of scammers, lots of manipulators, lots of shady people, lots of self-interest people. I have no financial interest. Bitcoin could go to the moon or zero. I'm not going to make a penny either way because I'm neither short or long. And I'm just an academic who speaks his mind. And I saw a big bubble, and I think that it's fair as an intellectual to discuss these things and then figure out what's going wrong. There are a lot of predictions about Bitcoin among other cryptocurrencies going up eventually in five years and 10 years. What do you think about that? We will see, is the bubble over or it will be violating once again? Well, you know, there have been so far almost 2,000 cryptocurrencies or tokens or coins that have been issued. But an academic study suggests that 81% of all ICOs were a scam to begin with. 11% of them have failed or they're dead. And of the remaining 8% that is traded on exchanges, the top 10 have lost on average in the last year, 95% of their value more than Bitcoin. So there was a bubble, and everybody was writing the bubble. Everybody was issuing ICO and raising money, but now it's gone bust. And right now it's very hard to do an ICO. It was easy money last year when the prices were going up the after-day. Now that price has fallen 95%. I think the average investor is becoming sophisticated and says, why do we need all these tokens? Why do we need all these cryptocurrencies? What are they worth for? And they're not worth anything. There are ways for people to raise money and go having big vacation, any visa or somewhere else or stealing their money and running. Now it's gone bust and people are becoming much more sophisticated. That's why he has spoken about the crypto apocalypse. It's very rare to see an asset class where in nine months 95% of the asset value is disappearing and it's disappearing, it's not going to come back. So the crypto apacalipsis is now, right? Yeah, it's now. It has already happened. Yeah, it was a bubble last year, but now the average cryptocurrency has lost 95% of its value. And when you have, of all ICOs, 81% of them being scams and another 11% already failed. And, you know, this was a bubble that's gone already bust. So what do you think will happen to the prices of cryptocurrency? Will they just stabilize in a way? Because a lot of people say that it's immature market and eventually it will be, you know, more mature and we will see more prices coming, more stable right now. What do you think will happen? I think that they've lost already 95% of the value. They could lose another 95%. Yeah, I mean, I would say 99% of cryptocurrencies are worth zero. I think something like Bitcoin that was the first one was created is also in a bubble and has already lost 70% of its value. It's gone from 20 to 6,000. Maybe it's going to be worth around 1,000 eventually, but not more than that. So just because some people believe in something alternative to fiat currencies, alternative gold and like collectibles, some people are going to hold some Bitcoin. So Bitcoin is not going to disappear, but, you know, Ethereum is a bubble and it's a bit of a scam. It's not worth nothing. XRP, all the other ones, they're all going bust. Why do you think Ethereum is a scam? You said it's a scam as well. It's a scam because the technology, they talk about smart contracts. There is nothing about them that is smart. They're all buggy. They're not real contracts because you have to enforce certain contracts. You cannot have just a code. They've tried things that have failed and their doubt was a failure. You know, there's a lot of... People talk about their dApps or distributed apps. 75% of those apps are what? Cryptokitties, Ponzi schemes and other pyramid schemes and other casino games like Las Vegas. And 25% of it is the centralized exchanges that are essentially trading stuff that is worth nothing and has no liquidity. So after a decade, what does Ethereum has to show us? Cryptokitties and Ponzi schemes? That's what they're doing. They're not doing anything of any use to anybody. So it's a bubble and it's gone bust already. The market value of Ethereum has lost almost 90% of its value. Don't you think we just need time to see the technology rise and the smart contract working? I don't believe, first of all, in smart contracts. By definition, any contract has to be enforced by lawyers. There is nothing that enforces by itself. You cannot find out in a contract every state of the world. It has to be interpreted one way or another. So the idea that you put everything in a code in a contract is silly to begin with. And, you know, typical NASA program has less than 1% of bugs in his code and a typical smart contract has 10% of his code is buggy. I mean, this is the reality where we are right now. And by the way, the broader question about cryptocurrency is that they're not scalable and there is no system that makes them scalable. They're not decentralized because the entire system is coming centralized and they're not secure because there are so many ways to hack them. So it doesn't have any functions. It should have. It's not scalable. It's not secure. It's not decentralized. So what is it worth for? At least financial system that we know are centralized, yes, but they're secure and they're scalable. You know, with Bitcoin you can do five transactions per second. With Visa you can do 25,000 transactions per second. And this problem of scalability has not been resolved. They've been saying for a decade when a resolver with proof of stake rather than proof of work has not worked yet. And even if there was something scalable, it's going to be centralized and therefore it's not secure. So there's a fundamental flaw in the technology. But it might be fixed. They've been talking about fixing it but Vitalik Buterin was the creator of Ethereum said you cannot have a blockchain system that has three characteristics at the same time. Being scalable, decentralized and secure. Traditional financial system are centralized and there's nothing wrong with institutional centralized in my view. They criticize it. Say we want decentralized but I prefer a centralized system with trust and authority. But at least they're secure and they're scalable. In the crypto space there is nothing scalable. There's nothing secure and there's nothing decentralized. There's a lot of talk about the centralization. Miners are centralized as an oligopoly. Coders are centralized. Exchanges are centralized as 99% of all transactions occurs on a centralized exchange and there's a massive concentration of wealth. This is worse than North Korea in terms of income and wealth inequality. So there's a lot of talk about the centralization. The reality is just the opposite. It's a totally centralized system. So it goes against the logic of having a distributed public peer-to-peer system. It's just the opposite. It's not distributed. It's not public and it's not decentralized. And they're not going to be able to change it because there are fundamental reasons why it cannot be secure, decentralized and scalable. So even after the 2008 financial global crisis you still believe in traditional financial banking system? There are many problems with the traditional financial systems and I've been one of the biggest critics of the financial system and I believe that there are ways to democratizing finance and make it more efficient but it's not based on blockchain. There is a revolution in financial services. It's called Fintech as zero to do with cryptocurrency, zero to do with blockchain. It's based on AI, machine learning, internet of things and big data. It's revolutionizing payment system, insurance, credit allocation, capital market functions and asset management. Take for example payment system. There is already plenty of digital payment system that do billions of transactions a day that are used by billions of people around the world that are not based on blockchain. In China you have Alipay and WeChat Pay. In India you have all these UPI systems. In Africa you have M-Pesa. In the United States you have Membo, PayPal, Square and so on and so on. These are things that are used for transactions. With Bitcoin you can do five transactions per second. With Visa you can do 25,000. With these other models you can do millions of transactions and there are billions of transactions done by billions of people today. They are digital payment systems based on traditional financial institutions and Fintech. They have nothing to do with blockchain. We don't need blockchain. We don't need crypto to democratizing finance. There is already a revolution. There is going to be much more competition. There will be much more access. If you are a poor farmer in Kenya today, you are using M-Pesa. On your little smartphone you can make transactions. You can borrow and lend. You can buy and sell your goods and services. You have a whole slew of financial services without a brick and mortar bank. And all these things are available to billions of poor people. In Africa what they have to do with blockchain or crypto? Nothing, zero. So there is a revolution. There is nothing to do with blockchain. I'm sure there are a lot of people that would disagree with you. You know that right? That you can put data on blockchain. You can help data storage in terms of farming as well. People talk about all this stuff. The reality is everything that they talk about is not something. They say, we can do this, we can do that, we can do that. I've been saying for 10 years, there is not a single application of it. Everybody is trying blockchain stuff. And then they realize it doesn't do the job for me. And then they give up. There is other stuff that is used by real companies, real people with real revenues, that resolves problems of the real world. Most of blockchain is a solution to a problem that does not exist. So there is a gap between what in principle people say this technology will do and the practice is just the opposite. There is not a single killer app after a decade. What is it the killer app? Bitcoin? CryptoKitties? Pyramid schemes? Come on. Have you checked them all? Maybe there are. I follow the system and even people in this space they say, you're right, so far we don't have a single killer app. By the beginning of the internet, there was email. There was a killer app. There were web browser. There were killer app. There were websites, billions of them. Those were killer apps. Everybody started to using them. After a decade, this entire industry can only tell us that are CryptoKitties. In terms of enforcing something about cryptocurrencies, there are a lot of regulations. Do you think that the governments should ban crypto assets entirely or somehow regulate them? Well, the reality is that ICOs are securities, but they are non-compliant securities. So most of them are actually skirting every security law. Security laws tell you you have to register your security. You have to give information about the issues. You have to protect smaller investors. There are KYC, know your customer regulation. There are AML, anti-money laundering. There are restrictions to avoid tax evasion and so on and so on. And you look at 99% of all securities and regulators have said, with exception maybe of Bitcoin, that is technically speaking more of a commodity rather than security, but Ethereum is a security. XRP is a security. And every other ICO is a security. It's illegal security because they've been issued in a way that they're skirting and avoiding traditional security regulations. So they're illegal and they're going to crack down on them. They're going to start to crack down. Ethereum was not seen as a security. It is a commodity token right now. No, that's not true. There have been people who are experts in this field who argue that Ethereum, the way it was designed, is a security. But it is a decision by the SEC. The SEC is the regulator. If the SEC is going to decide they've not taken a stance, but people who are experts who have been working on security regulation have said that Ethereum is a security. So we'll see what the legal ramification of that is, but most people believe it is a security, but it's a non-compliant security. So crypto assets in your terms should be regulated as a security. There should be. But they should not be banned. I'm not against banning. If you want to issue a security, then you don't do an ICO, you do an IPO. There are good reasons why we have security regulations to protect investors, to make sure there are no scams, that there are anti-money laundering, that you know your customer, that you avoid terrorist financing, that you avoid tax evasion. All these things have some compliance costs. So far the entire industry has ignored and no wonder that 81% of all ICOs are formally a scam. There's a study on that, that 11% of them have failed and that are trade-on exchanges. 95% of them have lost most of their value. If blockchain is useless, should people just stop using blockchain? People are not using blockchain. You know, every CEO of every company goes to a board meeting and the shareholders say, we've heard about blockchain, why don't we try blockchain? And the CEO says, okay, I'll invest half a million dollars if you're JP Morgan or CT or any other company. Let's do an experiment. They do an experiment, just a little something for six months and they say, hey, you know, it's useless, no need. Tell me a single company that has used blockchain in any systematic way. And by the way, most companies, why would they want to use blockchain? Why would you want to put your entire P&L, your entire balance sheet, every transaction you do on a public ledger that is distributed? First of all, you're opening up your entire financials, including every information about anything you do to the public. There are good reasons why corporations want to keep their information private. Two, you have to trust as an authentication some weirdo miner in China or Russia or Belarus to then approve every transaction that IBM or Microsoft or JP Morgan or Goldman Sachs does. Why would you want to trust these guys? There is no reason why to trust them. And you're going to use 100,000 computers to just do 100,000 replicas of all your balance sheet and all of your ledgers when you have a centralized one. So the only applications that are going to work in blockchains are not going to be permissionless. They're going to be permissioned. They're not going to be public. They're going to be private. And they're not going to be distributed, but they're going to be concentrated. And they're not going to be trustless, but they're going to be on a trusted, essentially, authority that can approve those things. But if you do it private, permissioned, and based on a trustee, what's blockchain? In that case, it's just the glorified Excel spreadsheet. It's not blockchain. 100% of enterprise DLT is essentially a glorified Excel spreadsheet. There's nothing to do with blockchain. There's nothing public about it. There's nothing peer-to-peer. There's nothing distributed because nobody in their mind, in any corporation that works, is going to put on a public blockchain everything to do with that corporation. There is no economic logic. It's actually crazy to do so. That's why nobody at the enterprise level is using blockchain in a public way. It's just never going to happen. The entire idea of the industry was to create a transparent system and to create a new world of the financial system that you can trust, of the financial system that think about a user, a client. So you think it failed? It completely failed. After 10 years, there is no killer app. The crypto assets are going bust. They've lost 99% of that value. All these experiments have led not a single corporation or single financial institution to use this technology. And there is no reason why they want to use this technology. And why would you want... They say it's distributed and it's private and whatever not. Why would I want to trust somebody in Russia or somebody in China to verify my transactions? It's not safe. Why would I want to do it? There are central banks, there are corporations, there are institutions that are being existing forever that are based on trust, on the reputation. I know when dealing with it, I'd rather have those institutions verify my transaction rather than somebody in China who can manipulate everything I do. There is no reason why I should do it. They say they are decentralized. There is nothing decentralized about them. Centralization of miners, centralization of code, centralization of exchanges, centralization of financial interests is a completely centralized system, the blockchain and crypto. There is a rhetoric about decentralization. There is nothing decentralized. To centralize this system, I would rather use traditional trusted authority rather than some miner, somewhere on the other side of the world that I don't know what their interest is. There is no reason why I should trust somebody who I don't even know what their name is, who they are, what they do. So you would rather believe a bank? We have security laws. If a bank manipulates, there have been hundreds of billions of dollars of fines on the banks and their misbehavior. People ended up in jail. There is no financial system. Blockchain and cryptocurrency do not resolve this problem. Fintech resolves it, but Fintech has nothing to do with blockchain or cryptocurrencies. You are saying something is bad about our system? Yeah. I'm the first one who has criticized the financial system. I've been writing about financial crisis. I've been criticizing banking system. I don't believe that crypto or blockchain resolves any of the problems that exist in the financial system. There is something for a bunch of self-serving people speaking about decentralization, speaking about freedom, speaking about democratization of finance and there is no democratization of finance. There is no more access to financial services to crypto or blockchain. There are other alternatives that exist out there like M-Pesa that giving power and giving democratization of finance to billions of people in Africa. Those things have nothing to do with blockchain. I believe in those things. I don't believe in blockchain. I don't see a point to you, but just to be clear the banking system has been around for centuries. Maybe you should just give the crypto industry and blockchain industry a try. No. I'm not giving a try. I'm going to give a try to financial innovation that changes the financial system. As I said, the Fintech based on AI, big data is revolutionizing the financial system. That's why there are digital payment systems that have nothing to do with blockchain or crypto that are accessible to billions of people at zero cost for billions of transactions every day. Those things are already existing. They are democratizing finance and they are out there. Is Alipay? Is M-Pesa? Is Venmo? Is PayPal? All those things have very low transaction costs. They are revolutionizing finance. They are leading to competition. They are forcing the banking system to innovate or not survive and they are changing the world. I don't believe that any application is used by anybody. I don't believe in it and the proof is in the pudding. There is no application used by anybody. My last question is have you ever tried cryptocurrency trading? No. No, I haven't tried it also because as I said I'm not talking my book. Some people say that you are critical of crypto because you are shorting Bitcoin or cryptocurrencies. I have zero position. I have no long position. I have no short position. I may be right or may be wrong but crypto could go to the moon or go to zero. I'm not going to make a penny out of it. I'm an intellectual. I'm an academic. I have no conflicts of interest. Pretty much everybody else who speaks in the industry everybody else who speaks at this conference has some financial interest. They are padding their coin, their blockchain thing, their events, their business, even their media. I have no interest. My only thing is my own academic reputation. If I'm proven wrong, my reputation is going to be negatively affected but I'm not going to make a penny and therefore I'm not going to take a position one way or another because I've taken a position I have financial interest to talk down or up a particular cryptocurrency and that's not my interest. I'm an intellectual and I'm not going to make money one way or another out of it. I see. Thank you so much for your time. Thank you for being here with us.