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Leaky Fiat And Tight Cryptos

It’s quite clear that many bankers and economists don’t understand the math and technology behind cryptocurrencies. Frequently they fall victim to their own problems that they then blame on cryptocurrencies. For example, UBS global chief economist Paul Donovan says,

“I come to bury Bitcoin, not to praise it”


“Every economist knows the store of value is about balancing supply and demand, and with cryptocurrencies, you cannot control the supply in response to the drop in demand.”

By his logic, the 2008 recession ‘demanded’ more currencies and without any mathematical proof, they printed trillions in response to the demand. In the traditional application development world, if this was an application that was using more memory, we would call that a massive memory leak. This “fiat leak” is a sign of the massive amount of problems that remain with traditional currencies.

These so-called economists that continue to wave the fiat currency flag have not fully understood the mathematical principals and science behind cryptocurrencies. For instance, cryptocurrencies have the full management of the supply and demand more so than fiat currencies. Also, the ‘money’ aspect is just one variable within the overall equation that can be coded into an application solving a real-world problem. This is not something that can be done with traditional fiat currencies. For those reasons, economists such as Paul Donovan should refrain from speaking about something that he demonstrably knows nothing about.


One of the greatest problems that the Federal Reserve has is the total lack of real time information concerning the present state of the economy. The Federal Reserve relies upon reports that take a significant amount of time to process. These sub-reports are then compiled into a “financial stability report” that becomes the basis for the committee to set the rates and to issue policies. By the time that the Federal Reserve takes an action, it could have been months after a failure. This is why the 2008 recession was so severe and for so long. By comparison, cryptocurrencies contain the full dataset of the entire currency for everyone to examine. Analysis of a blockchain can be done immediately and without any delay.

Furthermore, cryptocurrencies are divisible down to smaller and smaller units. The smallest unit of a Bitcoin is a satoshi. By that logic, there are 2,100,000,000,000,000 satoshis. It is a mistake to think that the quantity of cryptocurrencies can be changed. As I discussed in a prior article on market caps, Ripple, TRON and many others have changed their quantities and it is possible for Bitcoin to do so as well. If there is a consensus between miners and nodes, Bitcoin could see a larger maximum number of Bitcoins in the future.

With fiat currencies, money is a stand-alone unit. It is difficult to quantify and track. It is impossible to update and to add new features. Doing so requires complex work arounds, such as with credit cards and so forth. If it were an operating system, it would be closely compared to Microsoft DOS as a ‘command line’ environment. For those reasons, criminals of all sizes love fiat currencies, most recently, Deutsche Bank (money laundering).

Deutsche Bank money laundering probeBloomberg Finance LP

Cryptocurrencies offers a modern solution-oriented environment for its users. In an object-oriented application environment, money is now a container that can be accessed by a variety of applications. With cryptocurrencies, it is now possible to create a complete solution and to have confidence that it will not crash. In the case of the 2008 recession, the variables leading up to the crisis could have been foreseen and worked around with a ‘patch’. In the event that there is another crash, it is not possible to hide the ledger and to lie to everyone about the reasons for the crash. In another words, Inside Job could not happen with a public cryptocurrency ledger. Cryptocurrencies as an operating system is more akin to Windows 10 – rich in features and offering protections against failures.

Paul Donovan and his peers have spent the better part of the last few years speaking out against cryptocurrencies. Ignoring the failures of their own currency platform, they invite the average consumer to ‘trust them’ and their views on their platform. Most unsuspecting consumers are unaware that this platform that has a very high failure rate already. If fiat currencies were a car, there would have been a massive recall on it already.


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