On academic accountability and the crypto-meltdown (or academic words matter).
In light of the collapse of FTX & some cryptocurrencies, I have waited to hear academic evangelists of cryptocurrency, NFTs, and blockchain-enabled financial services apologize to investors.
They held up blockchain technologies as secure, immutable, trust-free currency systems.
They argue that bc the technology could track transactions with little error, it was superior to centralized financial systems.
They asserted it was the future of financial services.
Bolstered by these claims, hucksters sold billions of dollars in cryptocurrencies to millions of small investors.
Yet, these academic claims ignored a fundamental problem of human nature and a substantive problem of deregulated financial service systems: bad actors and moral hazard.
While the technology might work, bad actors made cryptocurrencies risky - capable of selling goods, not disclosing critical elements of contracts, nor, for that matter, their actual holdings.
While the technologies might work, absent regulation to hold crypto organizers accountable, small investors are vulnerable to the moral hazard posed by unscrupulous crypto-boys such as Sam Bankman-Fried or Elon Musk.
This is public policy analysis 101 or finance 001.
Yet, the technology evangelists missed it - bc they often don't understand or choose to ignore research on financial markets or regulation.
While hucksters made fortunes, sometimes kicking a few undisclosed bucks to academics, small investors sunk their life savings into extremely risky investment vehicles.
When market volatility surfaced, crypto advocates poo-pooed rapid swings - saying young markets were shaking out - or they said nothing.
(Never mind that their comments countered the conventional logic of markets).
Today, those small investors are suffering.
Today, those hucksters are losing billions.
Today, those academics continue, unapologetic, simply saying markets come with risk.
Yet.
The academics bear some responsibility.
By ignoring the people-risks tied to crypto & blockchain financial services, they helped to mislead investors on the actual risks of investments.
By only focusing on the technology, they ignored the people and regulatory issues that require government intervention in markets.
By doing so, academics helped create this meltdown.
What to do?
Apologize.
Own that they needed to understand the phenomenon fully.
Own that by focusing on technical features and not the peril posed by people behind them; academics failed to fully articulate the risk of crypto, NFT, & the blockchain tech that underpins them.
And in the future, recognizing how technology impacts people, not just what it makes possible, needs to be part of the conversation.
I have no solution to the crypto meltdown. I know we, academics, must do better in the future.
We must always keep in mind that our work does impact the world.
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