EconExtra is a sequence of posts that transcend the textbook, relating present occasions and up to date developments in economics to content material requirements, and offering useful resource recommendations that will help you incorporate the present occasions into your classes. This publish might be tied into any dialogue of what constitutes cash.
Headlines
In its comparatively quick lifespan, cryptocurrency has already seen a number of dramatic booms and busts. Why does the crash final week really feel a bit completely different? For starters, it was a “stablecoin” that was worn out as worth of property of all lessons have been tumbling. This has simply ratcheted up the requires extra regulation of the market, significantly for steady cash.
(CNBC does an awesome job of explaining steady cash, explaining what occurred with Terra and Luna, and which international locations are taking a look at regulation and why.)
In fact this newest slide in crypto pricing has additionally introduced lots of the crypto critics much more consideration. They query the aim of cryptocurrency. Why ought to one thing with solely speculative (versus intrinsic) worth exist, particularly one which makes use of a lot energy to create and preserve? The celebrities that have been touting crypto as not too long ago because the Tremendous Bowl have gone quiet, and business leaders are something however united of their views.
Among the many quite a few articles showing this week, there are two which have a standard premise: that cryptocurrency is an answer on the lookout for a (professional) drawback to unravel.
The primary is from Vox. This text offers an excellent overview of the evolution of crypto and associated components of the business with out getting too technical.
“Crypto is an answer searching for an issue, or moderately, issues. And in the mean time, it’s laborious not to wonder if it’s, as a substitute, creating extra issues than it’s value”
The second is an interview of a vocal critic from UC Berkeley, laptop science Professor Nicholas Weaver, that appeared in Present Affairs. He argues that cryptocurrency is ineffective and damaging, and may “die in a hearth.” (There’s additionally a hyperlink within the article to his precise class lecture on this topic.)
His interviewer tries to summarize his views as follows:
“….Is it correct to summarize what you have been saying earlier than as, primarily: There isn’t any drawback that cryptocurrency solves, and to the extent that it’s practical, it does issues worse than we are able to already do them with present digital fee programs. To the extent it has benefits, the benefit is doing crimes. And each different declare made for the prevalence of cryptocurrency as foreign money falls aside if you happen to scrutinize it.”
Project Concepts
A) Introduce the subject with the headline occasion: the crash of the stablecoin Terra. Have college students learn the CNBC article and talk about the next questions:
1) What occurred with Terra resembled a financial institution run. Are you able to clarify this?
2) Is a cryptocurrency actually a “stablecoin” if it’s not backed by reserves?
3) Why did this occasion carry extra centered consideration to potential regulation of stablecoins?
B) This will set the stage for a broader dialogue of the aim of cryptocurrencies on the whole and arguments introduced up by critics. Each of the opposite articles are pretty lengthy. There isn’t any want to make use of each, however dialogue questions for each articles have been included.
Warning: The Present Affairs article will get very political, might be strongly worded, and bounces round topically as it’s an interview. The dear parts are the quite a few examples of the issues purportedly solved by cryptocurrencies that have already got an obtainable resolution that’s cheaper and extra environment friendly. Please learn this text fastidiously earlier than assigning it to find out in case your college students are mature sufficient to learn by the hyperbole and give attention to Weaver’s primary arguments. The Vox article typically makes the identical factors in a extra dispassionate manner.
Vox.
1) What are a number of the criticisms of crypto summarized within the first a part of this text?
2) One part of this text is headed with this assertion:
“The strongest case for crypto is that it is cash outdoors the arms of banks and authorities.”
- What subsets of individuals in society do proponents counsel this might assist?
- Who is definitely helped by this function? Is it accessible to these proponents declare it might assist?
- The place crypto gives a profit (hedge in opposition to inflation, hiding funds from a tyrannical authorities), how extensively is it really used?
3) What are the hurdles to proudly owning/utilizing crypto?
4) Title one or two issues crypto supposedly fixes that really have a non-crypto resolution.
Present Affairs
1) What are Weaver’s key criticisms of cryptocurrency?
2) What points come up from attempting to make use of cryptocurrencies for fee/as foreign money?
3) Are you able to describe the inefficiencies Weaver discusses?
4) Title one or two issues crypto supposedly fixes that really have a non-crypto resolution, and the way they work. (M-Pesa is an effective one)
5) After studying this text, what arguments (if any) might you make for the existence of cryptocurrencies?
