Kenneth Rogoff was Chief Economist at the International Monetary Fund and teaches economics at Harvard University.
The epic collapse of prodigy Sam Bankman-Fried’s $32 billion crypto empire FTX will arguably go down in history as one of the greatest financial debacles of all time. With a story full of celebrities, politicians, sex and drugs, producers of feature films and documentaries are already rubbing their hands happily.
Still, to paraphrase Mark Twain, rumors of the demise of cryptocurrency itself are grossly exaggerated. It is true that the loss of confidence in “exchanges” like FTX – which are essentially crypto financial intermediaries – almost certainly means a sustained sharp drop in the price of the underlying assets.
The vast majority of bitcoin transactions are conducted “off-chain” through exchanges, not the bitcoin blockchain itself. These financial intermediaries are far more convenient, require far less sophistication to use, and don’t waste nearly as much energy.
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